Welcome to our Two-for-Tuesday morning train reads:
• The Hierarchy of Investor Needs (Motley Fool)
• So you’re a leveraged stock market investor with poor timing in China? (FT Alphaville) see also Hedge Funds Reassess China After Market Free Fall (NYT)
• The world is getting better all the time, in 11 maps and charts (Vox)
• Greece — time to look on the bright side (Medium) see also The Greek Crisis: A selection of research by NBER associates relevant to the problems of the eurozone. (NBER)
• How Big Is Pluto? New Horizons Settles Decades-Long Debate (NASA/New Horizons) see also These Are The Most Jaw-Dropping Space Photos Of The Year (Huffington Post)
An interesting article on financial innovation and the relevance of back-testing: http://www.marketwatch.com/story/in-the-investing-world-new-rarely-means-improved-2015-07-13?page=1
Speaking of back-testing, I have always found it annoying when everybody is comparing things to long-term investments in an index and chastising people for not getting that historically. Until the 1970s, it wasn’t even possible to buy an index without having a personal team of brokers buying and selling for you with high commissions. Vanguard and others changed that paradigm utterly and the growth of electronic trading and discount brokerages in the 1980s forced costs to plummet. So the “stocks rose 10% with dividends reinvested” over the past century is essentially BS from the small investors standpoint. Any true back-testing of that would have to strip out 2% or more of returns to account for the friction that was everywhere in the system, especially for small investors until the last couple of decades. In a real-world application, the ability to truly compare yourself against the overall market without accounting for large frictions has only been practical for the past 20 years when low transaction costs have become the norm in the markets and products have become available so that it has been possible to build a low-cost diversified index portfolio.
So my benchmark today for a diversified portfolio is the Vanguard Lifestrategy funds which allow you to pick the level of volatility you are comfortable with. . If your portfolio isn’t beating that real-world, readily available low cost product over several years, then you are wasting time, money, and effort. Advisory fees that include things other than just portfolio selection shouldn’t be factored in to that evaluation because you are buying actual lifestyle, life management, tax, and estate advice, which is very different from just optimizing a portfolio for long-term returns.
BTW – it appears that Calpers should just invest in Vanguard index funds: http://awealthofcommonsense.com/my-advice-for-calpers/
Heh CalPERS is like many of the rest of us – they have to try the whore until they find out what a herpetic dead end that is. They went with the Masters of the Universe and ended up with the clap. Duly chastened they are returning to the sensible investor fold…
Four straight gains back to within 1% of all-time highs on the SPY. How unexpected.
I’m sure the same clowns calling the “market” oversold (when it was down 2-3% from all-time highs) will be rushing to say it’s overbought.
Could Trump be angling for Vice President?
When the GOP primary winner inevitably cuts taxes on the rich and allows banks to over-leverage and wrecks the economy won’t it be a great moment for the nation when he says to the departing, mid-cycle Commander-in-Chief, “Carly, Your Fired.”
Trump would make Biden’s faux pas’s seem like non-events. I can’t see Trump playing 2nd fiddle to anyone…
Look at this image:
http://www.bbc.com/news/science-environment-33524589
It turns out Pluto is like America. It has a heart – although it is a little wilted and broken on the right.
LYING NEW YORK TIMES LIARS LIE ABOUT TED CRUZ!!!!
”..HarperCollins, the publisher of Cruz’s book, has also denied that bulk purchases were driving the book’s sales figures…”
“..HarperCollins last week pointed to the book’s high ranking on lists from Nielsen BookScan, the Wall Street Journal and Barnes & Noble, each of which “omit bulk orders books from their rankings.”
A Barnes & Noble spokesperson told CNNMoney that the company has seen no evidence of bulk sales for “A Time for Truth.”
http://money.cnn.com/2015/07/13/media/ted-cruz-new-york-times-bestseller-list/
I AM CANCELLING MY SUBSCRIPTION TO THE NEW YORK TIMES AND WILL NOW LONGER READ IT EVERY DAY COVER-TO-COVER EVERYDAY AFTER THIS!!! OUTRAGE!!!!!!
This was always more of a political fight than an economic one and the fat lady isn’t even half way through her aria yet; lot’s more excitement to come.
Exclusive: Greece needs debt relief far beyond EU plans – Secret IMF report
Greece will need far bigger debt relief than euro zone partners have been prepared to envisage so far due to the devastation of its economy and banks in the last two weeks, a confidential study by the International Monetary Fund seen by Reuters shows. ….
and i really wonder how long the greeks will meekly go into the night before they tear up the agreement?
Not just the Greeks I think. Now that other members of the EU as well as international players like the IMF see how the Austerian play is going (and the reaction to it) I wouldn’t be surprised to see revulsion and outright rejection of the self-righteous (and self-serving) Teutonic position fairly soon.