The best traders hold themselves accountable; they hold
themselves to the goals they set and they set their goals in measurable ways. BrettSteenbarger
Markets don't have to go down and stay down to ruin your
retirement. All you need is a bear market at the wrong time, and the
sustainability of your income can be cut in half. Milevsky
PICTURE OF THE DAY
RETIREMENT FINANCE AND PLANNING
Spending Down Your Assets in Retirement – Finding the“Goldilocks” Solution, Ken Steiner. Judiciously
utilizing the Actuarial Approach in combination with a more static approach may
just provide the necessary adjustments that will enable retirees to find their
Goldilocks solution.
What’s the Most Appropriate Planning Age for Retirees?
Pfau. The relationship between how long
you’ll live and your sustainable spending rate is a difficult piece of the
retirement planning puzzle. Ultimately, a longer retirement horizon means
spending less in order to sustain the available resources. [following: my chart interpretation of Wade's table]
The Mental Mistakes We Make With Retirement Spending,
WSJ. Too often, the same personality
traits that facilitate saving for retirement become impediments when it is time
to spend that money.
Floods And Deserts: Why The Dream Of A Secure Pension For Everyone Is Still Unattained, Stephen C. Sexauer and Laurence B. Siegel. Nov 2016.
We argue that the current wave of pensions in crisis is due to
predictable human behavioral shortcomings, not evildoers or a fundamental flaw
in DB pension plans. Specifically, when pension sponsors, employees, and
investment managers “anchored” on an extremely rare event, the 18.5% compound
annual return that the U.S.
stock market enjoyed from 1982 to 1999, they mentally projected these returns forward
into the future. Then, they funded the plans accordingly. In their imagining,
the markets, not the sponsors and employees, were going to pay for the
benefits.
The Role of Long‑Maturity TIPS in Retirement Portfolios. Sapra and Pederson, PIMCO.
Retirement Planning Explained Backwards, Dirk Cotton. This may seem obvious and intuitive but it
isn't uncommon to hear someone say that they have decided to fund retirement
with annuities, a stock portfolio, or even an increasing stock allocation when
they have documented neither their mission nor their objectives. That's a
little like deciding to fly American Airlines and then deciding where you want
to go and then deciding why you want to go there.
Confessions of a VA Critic, Moshe Milevsky (2007) [dated but good cover]
A Small Sample of Literature on Variable Annuities, John
Robinson.
Approximate Solutions to Retirement Spending Problems and the Optimality of Ruin by Faisal Habib, Huang Huaxiong, Moshe A. Milevsky ::
SSRN
MARKETS AND INVESTING
Why Baby Boomers Won’t Destroy the Stock Market in Retirement, Ben Carlson. Maybe I’m wrong. It’s possible that baby boomers will
destroy the stock market as a nice going away present for the next generation.
I don’t necessarily buy this argument but anything is possible in the markets.
Future returns could be lower with or without selling pressure from this
demographic.
Dynamic Asset Allocation with Horizon Risk: Revisiting Glide Path Construction, JWM. We compare the
empirical distributions of equity and fixed-income returns at different time
horizons and find that the risk of equities relative to fixed income is more
acute at short time horizons than long time horizons, confirming previous
research. This creates the opportunity to develop a dynamic asset allocation
process that exploits the reduced horizon risk of equities relative to fixed
income. We highlight key data on changing relative risk with time and leverage
this information to introduce methods and concepts that inform glide path
construction — the building blocks for a dynamic asset allocation process that
can support lifecycle, target date retirement, and goals-based investing
frameworks.
ALTERNATIVE RISK
“Alternative” Facts About Formulaic Value Investing, alpha architect. A new paper, “Facts about Formulaic Value
Investing,” is making the rounds and professes to plunge a dagger directly into
the heart of systematic value investors.
Quants Fire Back at Paul Tudor Jones After His Attack on Risk Parity, Bloomberg. “First you had Leon Cooperman and now it’s a hedge fund
guy,” said Qian. “Any time performance isn’t doing well, they just blame risk
parity.”
Balyasny's Tip to Hedge Funds at Crossroads: Imitate Bezos,
Bloomberg. As for hedge funds, they will
have to either scale down to focus on niche strategies where they can
differentiate themselves or build a diverse business, Chicago-based Balyasny
wrote. The alternative, he said, is shutting up shop.
Factor Investing in Multi-Asset Portfolios, Newfound. While this description might illuminate the
process, it does not explain the why.
Why we perform this process is to align our portfolio as closely as
possible with the factors we’ve explored herein: factors we believe have the
potential to generate excess risk-adjusted returns and introduce beneficial
diversification opportunities into traditionally built portfolios.
The Capacity Of Smart Beta Funds — Larger Than Previously Thought? AlphaArchitect.com Clearly
there have to be some capacity constraints on “smart beta” strategies, but the
real question is how much capacity? A newer paper by Ronald Ratcliffe, Paolo
Miranda, and Andrew Ang titled “Capacity of Smart Beta Strategies: A
Transaction Cost Perspective” examines this issue. It should be noted that the
authors work for Blackrock, and similar to the AQR crew, these authors find
that the capacity of smart beta is larger than most academic model-based
estimated trading costs.
Scenarios for Momentum Investing Sharpereturns.ca. In this post, let's run various scenarios to
see how us momentum investors would fare in each of them.
Factor Investing – Tilting at Windmills. Cullen Roche. I should add a caveat here. I am not against
active deviations from market cap weighting. What I am against is high fee
deviations from market cap weighting. If you can diversify in reasonably priced
factor funds I am not necessarily against that. The real problem here is the
high fee factor funds that purport to generate alpha in exchange for those high
fees.
Swedroe Spotlight: Enhancing Momentum Strategies Via Idiosyncratic Momentum. AlphaArchitect.
"David Blitz, Hanauer, and Vidojevic make a strong case for using
iMOM instead of the conventional total return momentum. It produces only
slightly lower returns, but greatly reduces the crash risk and results in an
almost doubling of the Sharpe ratio. Note that their firm, Robeco Asset
Management, uses iMOM in its strategies, and AQR Capital Management also uses
idiosyncratic momentum as part of its overall momentum strategies."
SOCIETY AND CAPITAL
Cash is king no more, NYT.
In a country as consumed with money as ours is, it is only natural that
money itself should become a collector's item.
Point of No Return: Two Factors Shaping Women and Investing,
CFA Institute. The narrative around
women and money is now one of success.
Bitcoin and the Disintermediation of the State, AIER. Whereas
universities have long taught that money can only be provided by a government
that guarantees it and demands its use in taxation, Bitcoin has thrived for
eight years without any government backing it, tantalizingly offering a glimpse
of a future separation between state and money, starving government of the fuel
that powers its totalitarian impulses and warlike tendencies.
Growing Gaps in College-Attainment Rates, Fed Resv of St.
Louis . This
post is the first of a two-part series on the role that higher education may
play in increasing racial and ethnic disparities in income and wealth. Today’s
post examines the attainment rates of college education among different
demographic groups.
Retail Apocalypse: Everything You Need to Know,
visualcapitalist.com
Adam Smith on Beggar Thy Neighbor, Tim Taylor. "[N]ations have been taught that their
interest consisted in beggaring all their neighbours. Each nation has been made
to look with an invidious eye upon the prosperity of all the nations with which
it trades, and to consider their gain as its own loss. Commerce, which ought
naturally to be, among nations, as among individuals, a bond of union and
friendship, has become the most fertile source of discord and animosity."
No comments:
Post a Comment