[patience is] a subversive act. On the other side of
impatience – if you can learn to wait out that jitteriness – lies power. OliverBurkeman
RETIREMENT FINANCE AND PLANNING
Research and Reality - A Literature Review on Drawing Down Retirement Financial Savings, 5 PhDs from the SOA.
[I thought this was a really good synoptic cover of the
universe of literature on retirement drawdown, self-managed strategies, and the
annuitization paradox. By 5 PhDs from the society of actuaries but very
readable. ]
we believe selection of an appropriate discount rate is
critical for many personal financial decisions.
Philosophy of Retirement Income Planning, Part 2, Pfau
The fundamental nature of risk for retirees is the threat
that poor market returns will permanently lower their standard of living.
Retirees must decide how much risk to their lifestyle they are willing to
accept. Spending more today based on assumed future earnings is risky business.
It may be reasonable behavior for the more risk tolerant among us, but most
people aren’t comfortable with it. The consequences must be considered in
advance.
Dependent risk analysis is a staple of many fields from
nuclear power plant design to insurance to aerospace engineering but it appears
to be rarely referenced in retirement literature. A Google search of
"dependent risk and retirement" turned up a single reference
including both terms and it's from the field of political science research[7]
referring to retiring from an election. Dr. Thorne's analysis of elder
bankruptcy data tells us that retirees should also be should be concerned about
it. …
This also raises the issue of how we can best deploy our retirement
assets to mitigate retirement risk. It appears that our goal should be to first
avoid the worst case, a chain reaction leading to ruin. A chain reaction will
likely have far worse outcomes than any individual risk.
MARKETS AND INVESTING
Managing Capital Market Assumption Risk, NewFound
Rather than looking for the optimal portfolio, finding a
robust portfolio that is close to optimal may be a better long-run investment. [he doesn't say it but this is either the
same or a close relative of resampling frontiers as laid out by R Michaud.
Either way, he is correct]
Plausibility and empirical evidence suggest that the market
portfolio is not efficient.
ALTERNATIVE RISK
The proper comparison/benchmark for these strategies is to
look at a passively rebalanced asset mix that is invested equal to the average
exposure of the momentum or trend-following strategy… Results show that while
momentum and trend-following strategies outperform their benchmarks, they do
not -contrary to popular wisdom- reduce volatility. However, most importantly
they do significantly reduce the most important investor measure which is
downside risk or maximum drawdowns. Careful analysis shows that these
strategies exhibit an asymmetric returns profile: historically they have actually
underperformed their benchmarks in bull markets but more than make up for this
by significantly outperforming in bear markets.
A true understanding of the nature of these strategies is necessary as
an investor or as an advisor in order to know what you can expect going
forward.
MLPs as an artifact of the tax code, sl-advisors
Price history will show that KMI and the MLP sector endured
a terrible operating environment during the 2015 crash in crude oil. Most
investors even today regard the worst bear market in the sector’s history (see
The 2015 MLP Crash; Why and What’s Next) as an oil-induced fall in operating
results. The reality for KMI was that growth plans driven by the Shale
Revolution exceeded the financing capacity of a specialized investor base. This
is pretty much the case for midstream in general. It’s not obvious from a price
chart, but if you followed developments real time it’s the real story.
There are economies of scale for managing a hedge fund
business as a firm grows, but there are potential diseconomies of scale
associated with the investment management of the business. You may get firms to
be much more competitive on price as the assets under management grow or as it
prices a large new inflow, but there may also be higher investment costs with
running the money. One way to combat this higher liquidity cost is to increase
expenditure and resources on trading and execution algorithms. [this indirectly
makes my point that small scale individual investors have an edge when it comes
to trading semi-liquid instruments]
Low-cost demands spurring managed futures evolution,
pionline.com
Demand for lower fees and customization is pushing the small
cadre of institutional systematic trend-followers to offer more affordable
versions of their flagship strategies.
The beta battle of what portion of returns can be explained
by systematic factors continues across the asset management world. However, it
is not so much a battle of performance breakdown between beta and alpha skill
but of definition. What used to be called alpha in a simple one-factor world
can now be partially described as a beta. The alpha manager of yesterday is
partially the alternative or smart beta manager of today not by design but from
construction. The incredible shrinking alpha is associated with the incredible
growing betas.
SOCIETY AND CAPITAL
an increasing body of research and criticism suggests that
algorithms and artificial intelligence aren’t necessarily a panacea for ending
prejudice, and they can have disproportionate impacts on groups that are
already socially disadvantaged, particularly people of color. Instead of
offering a workaround for human biases, the tools we designed to help us
predict the future may be dooming us to repeat the past by replicating and even
amplifying societal inequalities that already exist.
A Four Thousand Year Old Bond, marginalrevolution
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