Good Sunday morning. Round out your weekend with some interesting reads you may have missed:
• Need Financial Advice? Ask the Future You (NY Times)
• Vanguard snubs outsiders in digital advice: As firms like Schwab and Vanguard build more online portfolios, money managers face an ‘open architecture’ question (Investment News)
• Activist Investor Bill Ackman Sets a $1 Million Debate Bet (Vanity Fair)
• Does bankruptcy trump privacy? (Digitopoly)
• Piketty’s Three Big Mistakes (Bloomberg View)
• The War Over Who Steve Jobs Was (Medium) see also Becoming Steve Jobs biography: ‘Much of it was chutzpah and self delusion’ (The Register)
• How Poor Are the Poor? (NY Times)
• BBC’s Hypocrisy Shifts Into ‘Top Gear’ (Bloomberg View) see also Top Gear Shouldn’t Go on Without Jeremy Clarkson (Wired)
• Finally, we know how many bloggers live in their parents’ basement (WonkBlog)
• Scientists Divided Over Cosmic Event: Did the highly anticipated clash between a black hole and a gas cloud fall flat? (WSJ) see also Black Hole Fails to Destroy Mystery Cosmic Cloud (National Geographic)
What are you reading?
Source: Know More
I reviewed Schwab’s new online portfolio scheme. I was pleased on two fronts:
1. Costs are amazing low and the portfolio mix for individuals expressing specific needs was impressive. Automatic re-balancing is very helpful.
2. They use fund families like Vanguard in addition to their own, which means they appear to be actually looking at investor satisfaction instead of shilling their own product.
Does this type of portfolio management mean the eventual demise of financial advisers making a hefty living off clients while basically providing a similar service?
Is indexing becoming so common that it could stimulate more violet market crashes?
I looked at it and came to the opposite conclusion:
1) Its filled with hidden costs;
2) Its PSEUDO-ACTIVE with the huge cash component, or alternatively,
3) Its very poorly designed.
Never forget: The fiduciary of a publicly traded company like Schwab is to its SHAREHOLDERS NOT ITS CLIENTS
Adam Nash, founder of Wealthfront, explains it more explicitly.
The media’s response:
http://www.investmentnews.com/article/20150309/FREE/150309913/wealthfront-ceo-accuses-schwab-of-deceiving-investors-with-free-new
http://www.thinkadvisor.com/2015/03/12/robo-advisors-rip-schwabs-new-robo-advisory-over-f
http://nypost.com/2015/03/11/broker-brawl-breaks-out-over-schwabs-wealth-management-robo-advisors/
Re: Wealthfront claiming Charles Schwab is now Merrill Lynch. – Call me when I can invest at Merrill Lynch with all-in costs of 0.5% or less of my portfolio.
Re: Cash in the portfolio – Cullen Roche did an interesting look at it that roughly matched my own opinion – not my approach but it is a valid approach to reduce volatility.http://www.pragcap.com/what-is-cash-in-a-brokerage-account
In the end, I think it is great that the arguments are starting to be about a handful of marginal basis points instead of 100s of basis points. I think my kids are starting to invest at the best time in history for investors. There are many great options available if you look past the traditional model Wall Street firms.
I think a bigger questions about Vanguard’s robo-advisor will be how it will differ from its “all-in-one” funds and why; and also how they will manage their minimums and small account fees. Currently, the Lifestrategy and Target Date funds use four big, low-cost Vanguard index funds to provide diversification. The minimums range from $1k to $3k and small accounts (less than $10k-$30k) pay annual record keeping fees with the number for funds in play for determining total fee.
My guess is that Vanguard’s robo-advisor model will need to be focused on accounts that are bigger than $50k or so given their account philosophy which is quite different from many other financial institutions that are using the robo-advisor model for younger investors with less savings.. Smaller accounts will probably still start in their all-in-one funds until the person’s asset base rises.
The graph above these comments shows that future house price increase are going to be limited until wage increase happens. And I think low wage inflation has limited the growth of the GDP.
Clearly a reason for another tax cut for the wealthy.
Generals tend to fight the last war and policy-makers tend to fight the last problem but can’t just be a question of individual recency bias, it must be a question of cultural practice and herding, otherwise the focus would be on preventing another 2008 rather than another 1978; Alice Rivlin is on the case.
Thoughts about monetary and fiscal policy in a post-inflation world
Before the Economic Policy Conference hosted by the National Association for Business Economics, Alice Rivlin discusses the future of monetary and fiscal policy under the premise that inflation may not be a threat that central bankers need to protect us from.
So here we go, right up there with global warming, and other mind blowing things to come we have the post era of antibiotics. Actually this is nothing new and it has been going on for decades, but I’m sure the market will take care of it. A few hospitals in the Chicago area may be on to something to deal with one kind of super bug, but that doesn’t cover all the rest that are out there. Just remember that 80% of the antibiotics used in this country are fed livestock, usually at very low levels to promote growth.
http://www.businessinsider.com/r-battling-nightmare-infections-us-cdcs-plan-to-beat-supberbugs-2015-3
New tech to disrupt the old tech and the health care industry. I’m going to Walgreens to try this out.
http://www.businessinsider.com/how-the-worlds-youngest-female-self-made-billionaire-is-shaking-up-the-health-care-industry-2015-3
Forbes
3/26/2015
Ravens Offensive Lineman John Urschel Explains His Mathematics Paper
Guest post written by John Urschel
John Urschel received his B.S. and M.S. in Mathematics from Penn State University. He plays football for the Baltimore Ravens.
On first read, I understand that simply the title of my new paper – “A Cascadic Multigrid Algorithm for Computing the Fiedler Vector of Graph Laplacians” – can be quite daunting. Believe me, I am aware that terms such as multigrid, Fiedler, and vector are not words that people use in their daily lives. With that said, if you would like to understand what exactly this paper is about, the title is a good place to start!
A screenshot of John Urschel’s paper as seen on the website of the Journal of Computational Mathematics
First, I need to do some backtracking. I need to define what a graph is.
….
http://www.forbes.com/sites/thelabbench/2015/03/26/ravens-offensive-lineman-john-urschel-explains-his-mathematics-paper/
I like this idea. Perhaps we should have to prove that we continue to understand civic basics by retaking a test, say every 5 years, before being allowed to vote?
————-
Bloomberg
Citizenship Tests Are Good for Citizens, Too
Mar 13, 2015
By The Editors
Americans love democracy and freedom — so long as there’s no quiz involved. The numbers are depressing: One in four Americans do not know that the U.S. declared its independence from England. One in three cannot name a single branch of government. Three in four don’t know why the Civil War was fought.
Late-night comedians and plenty of others have had fun shining a light on the dark corners of the American brain, and when faced with such obliviousness, it’s surely better to laugh than cry. Better yet would be to do something about it.
More than 90 percent of students take a civics class in high school, but on a national test given in 2010, only 27 percent of high school seniors demonstrated proficiency in the subject. A core purpose of public education is to prepare young people not only for college and careers, but also for the responsibilities that come with citizenship, including voting. Schools require students to meet basic standards in math and English. The same should be true of civics.
…
http://www.bloombergview.com/articles/2015-03-13/give-high-school-students-a-citizenship-test
Interesting piece on the relative benefits of mutual funds over ETFs. They match my opinions overall. These benefits are generally limited to very low cost mutual fund providers like Vanguard and Schwab where the difference between the ETFs and mutual funds are only a handful of basis points.http://www.etf.com/sections/index-investor-corner/vanguard%E2%80%99s-mutual-funds-better-its-etfs
I think it is also a concern that, since ETF transactions are like stock transactions, they will be much more complex for the elderly or uninformed to execute than mutual fund transactions, and transaction errors and poor execution will be more likely. Most of our retirement accounts is in mutual funds, not ETFs, precisely because of the simplicity factor in case I am not around. My wife doesn’t follow the markets at all and learning how to navigate ETF transactions would be one more complexity that she would not need to deal with. I plan on the accounts being entirely in mutual funds by the time retirement rolls around.
I think financial professionals who have spent their careers buying and selling more complex products than ETFs underestimate how imposing navigating those transaction interfaces with their own lingo is to a novice.
A 26-year-old MIT graduate is turning heads over his theory that income inequality is actually… — The Ferenstein Wire — Medium http://bit.ly/1F7znNn
Not all fat cats are on Wall Street http://bit.ly/1I4CEgE
hey i’m back in business
i may have been trying to post the same link for two months with banned words, no profanity about a card game, hold em. who knows