One of the hardest questions to answer as an investor is the
following: Am I anchoring to an investment strategy that doesn’t work anymore
or staying disciplined to a good process?
Ben Carlson.
RETIREMENT FINANCE AND PLANNING
My Appreciation of Annuities Has Grown, Dirk Cotton.
Life Cycle Investing and Smart Beta Strategies, Blackrock. we
develop a smart beta glide path which seeks to take advantage of broad,
persistent patterns within asset classes to identify securities with higher
risk-adjusted returns than the market. Within equities, investors can shift
from return-enhancing strategies — like value, momentum, size, and quality — to
risk-reducing strategies like minimum volatility as they move through their life
cycles. Adopting smart beta glide paths may improve Sharpe ratios by up to 20%
over a standard equity-bond glide path.
Approximate Solutions to Retirement Spending Problems and the Optimality of Ruin, Habib, Huaxiong, Milevsky. We solve the retirement income problem when
investment returns are indeed stochastic using numerical PDE methods, assuming
the principles of stochastic control theory and dynamic programming. But then
-- and this is key -- we compare the proper optimal spending rates to the
analytic approach presented in Milevsky and Huang (2011) by updating the
portfolio wealth inputs to current market values. Our main practical conclusion
is that this simplistic approximation when calibrated properly and frequently
can indeed be used as an accurate guide for rational retirement spending
policy.
Quote from Abnormal Returns.
"For a diversified investor, returns will be what they’ll be; the
best you can do is accept that and don’t let your emotions get in the way. A
far better use of your time and energy is to focus on what you can control:
moving forward in your career, living within your means, and saving more."
(Charlie Bilello) [emphasis added]
MARKETS AND INVESTING
The Curious Case of the Missing Credit Premium. Corey Hoffstein. The 2000s were an unprecedented period of
risk and the fact that the ex-post realized credit premium was zero may simply
be an indicator that the market underestimated risk, not that there is no risk
premium to be gained in the future.
Diversification, Adaptation, and Stock Market Valuation. philosophicaleconomics.com Correlation is not causation, but there are
compelling reasons to expect a relationship in this case. Increased availability and popularity of
vehicles that allow for cheap, convenient, well-diversified market exposure
increases the pool of money inclined to bid on equities as an asset class. It’s reasonable to expect that the result
would be upward pressure on valuations, which is exactly what we’ve seen.
ALTERNATIVE RISK
Factor Investing: The Fama French 5-Factor Model On ChineseA-Shares, Wes Gray. based on the
evidence from the Chinese A-share market, the Fama and French 3-factor model
(beta, size, and value) still gets the job done and the 5-factor model lacks
robustness.
Tactical Asset Allocation in March, Allocatesmartly.com [The small population results for March put
me in the 50th percentile of this group right around the median. The march YTD puts me around 21st next to
Faber's IVY. But then again they don’t report
vol so I'm guessing on a risk-adjusted basis I might smoke quite a few of them]
SOCIETY AND CAPITAL
Investors Are Also Working People, Howard Lindzon. investors are working people and I am confident
that capital will continue to crush labor no matter what/how the government
intervenes. [Doesn't this make Picketty's point? This may all be true and I may
personally like being on the capital side of the equation but the social
implications of the trajectory will become unstoppably incendiary at some
point.]
Minding matter -- The closer you look, the more the materialist position in physics appears to rest on shaky metaphysical ground, aeon.co. Materialists appeal to physics to explain
the mind, but in modern physics the particles that make up a brain remain, in
many ways, as mysterious as consciousness itself… The closer you look, the more
it appears that the materialist (or ‘physicalist’) position is not the safe
harbor of metaphysical sobriety that many desire. … Unlike
the Newtonian state, which can be clearly imagined in a commonsense way, the
wave function is an epistemological and ontological mess. … In effect, the bits of matter from
Newtonian physics are smeared out into sets of potentials or possibilities. … in the absence of experimental evidence, we
are left with an irreducible democracy of possibilities. … There is also the
more radical possibility that some rudimentary form of consciousness must be
added to the list of things, such as mass or electric charge, that the world is
built of.
Leniency in Speeding Tickets: Bunching Evidence of Police Bias, Tim Taylor. In the big picture,
one of the reminders from this research is that bias and discrimination doesn't
always involve doing something negative. In the modern United
States , my suspicion is that some of the
most prevalent and hardest-to-spot biases just involve not cutting someone an
equal break, or not being quite as willing to offer an opportunity that would
otherwise have been offered.
Age Makes You Happier - And Poorer. Psyfitec.com By choice older people will habitually avoid
stuff that they find negative. Which goes a long way to explaining a lot of
things, including why older nuns tend to be happier and why we should avoid
having to do anything difficult - like thinking or active investment - after
we've reached 70…So, in summary, the age related positivity effect predicts
that people of seventy and above will generally avoid any news that contradicts
their existing opinions and will make increasingly poor decisions based on
outdated or biased information. The investment impact of such decisions is
significant…you really need to face up to your fears and address the facts as
they are, rather than as you want them to be. The alternative is poverty, or
worse.
What is the federal government worth? FRED blog. this series
follows the series for the federal public debt. It includes some non-financial
assets, such as structures, equipment, and intellectual property, but it does
not include land, mineral rights, and the present value of future taxes. Any of
these three missing elements in isolation would propel federal government net
worth into positive territory. These items aren’t included here because it
wouldn’t make sense in the context of the Integrated Macroeconomic Accounts
(IMA, hence that label in the legend). But these items should be included to
truly determine the full net worth of the federal government.
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