As an investor you don’t have to be brilliant. Just not stupid. abnormalreturns.com
VISUALIZATION OF THE WEEK
RETIREMENT FINANCE AND PLANNING
Retirement is Risky Business – Here's a List, Dirk
Cotton. there are a large number of
financial risks that every plan should contemplate. Many of these won't come to
mind when we consider a list of major retirement goals for our mission
statement, but one major goal of the mission could be to mitigate as many
applicable common retirement risks as we can identify.
Does Monte Carlo Analysis Actually Overstate Fat Tail Risk In Retirement Projections? Derek Tharp at Kitces.com While
already included in most financial planning software solutions, Monte
Carlo analysis remains a somewhat controversial projection tool
for financial planners, due to the fact that it commonly relies on a normal
distribution to project the probability of future returns in a world where many
have suggested that returns are not actually normally distributed. Which raises
the question of whether or to what extent Monte Carlo
analysis projections might be understating the risk of a retirement plan? [my thoughts here ]
Planning for Retirement? The Importance of Time Preferences,
SSRN. The findings indicate that the way
that individuals discount future consumption is associated with the extent of
their retirement planning and preparedness. We find that individuals who engage
in retirement planning are better prepared to meet their retirement goals upon
leaving their career jobs.
MARKETS AND INVESTING
The Economic Trend Usually Looks Positive When Recessions Start,
Capital Spector. As I’ve written
previously, calling the start of the last recession in real time – with a high
degree of confidence – wasn’t possible until March 2008, or thereabout, based
on analysis of vintage data. But if you were looking at Big Four levels, as
opposed to rates of change, a reliable warning would come later, too late, in
fact, to be of practical value compared with other methodologies.
Are REITs a Distinct Asset Class? Kizer and Grover,
Buckingham Asset Management. [the short
answer looks like no to them].
The Best Strategies for the Worst Crises, Cook et al. Man AHL.
In contrast to these passive investments, we investigate two dynamic
strategies that appear to have generated positive performance in both the
long-run but also particularly during historical crises: futures time-series
momentum and quality stock factors. Futures momentum has parallels with long
option straddle strategies, allowing it to benefit during extended equity
sell-offs. The quality stock strategy takes long positions in highest-quality
and short positions in lowest-quality company stocks, benefitting from a
‘flight-to-quality’ effect during crises. These two dynamic strategies
historically have uncorrelated return profiles, making them complementary
crisis risk hedges. We examine both strategies and discuss how different
variations may have performed in crises, as well as normal times, over the
years 1985 to 2016.
Growth Optimal Portfolios, Corey Hoffstein. … we explore geometric mean maximization, an
alternative to the traditional Sharpe ratio maximization that seeks to maximize
the long-term growth rate of a portfolio. Due to compounding effects,
volatility plays a critical role in the growth of wealth. Seemingly lower
return portfolios may actually lead to higher expected terminal wealth if
volatility is low enough. Maximizing for long-term growth rates may be incompatible
with short-term investor needs. More explicit accounting for horizon risk may
be prudent. [Thoughts here]
ALTERNATIVE RISK
Buying Cliff Asness, Institutional Investor.
A Century of Evidence on Trend-Following Investing, Hurst ,
Ooi, Pedersen, AQR. They find that in
each decade since 1880, time series momentum has delivered positive average
returns with low correlations to traditional asset classes. Further,
time-series momentum has performed well in 8 out of 10 of the largest crisis
periods over the century, defined as the largest drawdowns for a 60/40
stock/bond portfolio. Lastly, time series momentum has performed well across
different macro environments, including recessions and booms, war and
peacetime, high- and low-interest rate regimes, and high- and low-inflation
periods.
SOCIETY AND CAPITAL
Over $200,000 in Income: What Income Taxes Paid? Tim Taylor.
The small number of those who have high incomes but no income tax don't bother
me much. It's a big country. A few rich people will put all their wealth into
tax-free bonds. Some will have a few years of making very large charitable
contributions, or very high medical expenses. Some will have earned much of
their income in another country, and so pay income taxes there. When you hear
about high-income people who don't pay income tax, it's pretty much always a
situation with exceptional circumstances, and certainly not a general rule.
World’s Largest Pension Fund Selects Three ESG Indices for$9 Billion Investments, CIO. Japan ’s
Government Pension Investment Fund (GPIF), the world’s largest pension fund,
announced Monday that it will shift 3% of its passive domestic equity investments
(roughly $8.8 billion) into environmental, social, and governance (ESG)
indices.
Who Came to America,and When? Visualcapitalist.com Here are
three maps and data visualizations that give us some history of who came to America ,
and when it all happened.
Dem vs GOP 2008-2016 visualization by county. MetricMaps
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