...when you’re dealing with uncertainty and complexity, simple ideas are not dumbed-down ideas. They are often complex solutions gift wrapped for you in a way that makes their application practical and sustainable. . Morgan Housel
RETIREMENT FINANCE AND PLANNING
The Best Strategy for Retiring Without Adequate Savings. Joe
Tomlinson
Most research on retirement strategies assumes that people
have saved adequately. But data on household savings shows that many households
fall short, and will need to call on relatives or other sources for support.
This raises questions about the best withdrawal or annuity strategies when
savings are insufficient. It turns out that which strategy works best is
different than for adequately funded retirements.
The Modern Tontine: An Innovative Instrument for Longevity Risk Management in an Aging Society; Weinert & Gründl. Goethe U
We show that partial tontinization of retirement wealth can
serve as a reliable supplement to existing pension products.
LDI Misapplied - Income Portfolios and Liability-Driven Investing, David Blanchett
Liability-driven investing (LDI)—in particular
liability-relative optimization—represents a fundamental improvement over more
common asset-only portfolio optimization techniques, such as mean-variance
optimization. Almost all portfolios exist to pay for some future form of
consumption, so liability-relative optimization is almost always more
appropriate than asset-only approaches. By considering liability
characteristics when solving for the asset allocation, LDI techniques take
advantage of the natural hedging quality of certain investments.
But my views have been tempered and refined somewhat. Last
year I wrote One Retirement Number You Can’t Afford to Get Wrong about the
difficulty of estimating accurate effective tax rates. At this point I would
say that, while taxation in retirement is not a primary concern for frugal retirees,
there are still situations and reasons when it makes sense to insist on the
most accurate possible tax calculations in your retirement planning. Here are
some of them:
Retiring Early Just Might Kill You, Says New Research,
Bloomberg
We already know you’re better off financially the later you
begin claiming Social Security. Now it seems there’s another reason to hold off
on collecting those checks: If you retire early you’re more likely to die early
as well.
The Mortality Effects of Retirement: Evidence from Social Security Eligibility at Age 62 NBER. [paywall]
MARKETS AND INVESTING
“I think the bond market is on drugs… It’s hard to take the
yield curve seriously as a recession indicator.”
The Practical Implications of Modern Portfolio Theory, Crack
and Grieves
we dub the “Markowitz uncertainty principle” implies that
mean-variance efficient portfolios are a practical impossibility, and that
attaining “pragmatic diversification” should instead be the goal of investors.
We also argue that MPT is silent as to whether any fund manager can or should
be able to beat his or her benchmark consistently. We can, however, combine the
MPT framework with existing empirical evidence to generate practical advice
about active investment for retail investors. For capital budgeting, we argue
that the literature implies that the original single-beta capital asset pricing
model (CAPM) should typically be implemented using a multi-beta framework.
ALTERNATIVE RISK
The Pros & Cons of Momentum Investing, Ben Carlson
One of the biggest issues with momentum investing is that it
requires a high amount of turnover as the best-performing assets tend to change
rapidly over any of the standard lookback periods. It’s also true that for any
investment strategy to “work” (3) it must go through extended periods of time
when it doesn’t. If these premiums always outperformed there would be so much
capital invested in them that they would become so crowded that they would lose
their advantages.
SOCIETY AND CAPITAL
Happiness By Age: Stay Away From 35-60 Year Olds, financial
samurai
The next time a 35 – 60 year old makes you feel bad, give
them a pass, including myself. And if you want to really get a happiness boost,
find some 70+ year olds to hang out with. They might even teach you a thing or
two about living a wonderful life.
Our lives are not stocks. But expectations matter. The evidence on the U-curve in life satisfaction is overwhelming. If it doesn’t hit you smack dab between the eyes consider yourself lucky. We spend so much time planning our financial lives: saving, working, spending. We do little to plan for life’s inevitable shocks whether they be in middle age or in retirement. Just knowing about the existence of the U-curve will remind you that you are not unique and there is a reason for optimism on the other side.
Another bubble right under our nose : Never Ending Grain Pain, themacrotourist
As long as subsidies exist, it seems that too much money
will be allocated to agriculture loans, and will therefore, keep grain prices
lower.
Nadolnyak, Harrarska, Shen
In this paper, we evaluate the impact of the ENSO anomalies on the performance of agricultural loan portfolios of the Farm Credit System FCS institutions - the largest agricultural lender in this region. We find that, compared to neutral years, the share of delinquent loans in the FCS portfolio decreases by 1.5 to 2 percentage points following La Nina years and increases by 1.5 to 2 percentage points following El Nino years. These delinquencies are generally resolved because the impact on loan write-offs is much smaller, although statistically significant which suggests that the FCS institutions have well-diversified portfolios. The results also suggest that agricultural insurance markets are complementary to credit markets, that land values at loan origination have a positive impact on delinquencies, and that loan write-offs decrease with the lender’s size.
Jen Brown
Small businesses – especially sole proprietors – are a large
portion of the American workforce. With the explosive growth of the on-demand
economy – which creates a number of new self-employed, sole proprietors each
day – an estimated 2.5 million new small businesses are expected to be created
each year. Yet, saving for retirement as a small business owner and especially
as a sole proprietor is a challenge, as only 38.7% of small business owners
participated in a retirement plan in 2014.
Tests reveal that institutions have significantly reduced
equity ownership of polluters.
Consistent with expectations of increasing environmentalism
and climate change awareness,
institutional ownership of polluters is linearly decreasing over the
sample period, ceteris paribus…I test the performance of polluters with a
long-short portfolio strategy, which fails to provide evidence of abnormal
performance of polluter stocks.
The east and west coasts have lots of high earners; the
south east farming belt fell way behind . . .
The Biggest Financial Concerns Of Affluent Investors,
financialsamurai.com
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