Jack’s Links

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It’s been two months since my last post, but with the exception of a trip to the Grand Canyon, Zion, & Bryce, I have been collecting links the whole time.

 

Instead of dumping all of the links, here are just the highlights:

Chinese Recession: This was from almost two months ago, and I don’t think it’s clear yet if Scott or Tyler is more correct.

WSJ: Don’t Raise Rates Yet: This was before the non-rate increase.

Psychological Studies & Reproducability: (Hint: you usually can’t). I wonder if there is some gold standard other than something totally without human error like CS for setting up procedures that will make a result reproducable as often as you’d expect (i.e., as often as you’d expect without biases).

Shorter Titles Get More Citations: ‘Nuff said.

Investing All At Once vs. Averaging In: Schwab gave their article a much more provocative title, but an interesting article nonetheless.

Sanders on Immigration: He is Ron Paul.

Why Investment Bankers Work Long Hours: Pretty easy to extrapolate this to other professions that do as well.

On Abolishing Capital Gains Taxes: What does a progressive consumption tax look like in the real world?

A Tale of Two Housing Inflations: Really fun to read article — cities should pay heed if they don’t want to end up with a bunch of San Franciscan housing problems.

Don’t Raise Rates to Cut Them Later:  A rare article that I found good important enough to send around my office. It seems obvious, but somehow gets lost that just leaving rates low is a better strategy than raising them to cut them later in the case of ‘headwinds’.

Congratulations to Angus Deaton!: I’ve started to make a habit of reading at least a small selection of Nobel winners’ work — Tyler makes this really easy with his great review.

Tasks Are More Pleasurable Once You Start: This lines up with my own experience, interesting implications for how efficiently people are actually spending their time.

Insider Trading Reviewed: Great treatment of insider trading rulings/norms from bloomberg.

And one terrible article, extra points if you can find the problems before reading them in the comments:

An Interview with a Tax Strategist: To be fair, this is a guest post, but this has to be the worst thing ever posted to WCI. With the frequency of guest posts (seemingly) increasing, they are going to need to tighten up quality control or risk losing some of WCI’s reputation for high standards.

Patriotism is Killing Your Portfolio

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Unless you’re an American, in which case you are still too patriotic, but much less patriotic than people from other countries.

The tendency to invest in your own country’s assets is known as home bias.

I’m writing about home bias because recently, when I was on vacation in Seattle (and watching the best DotA players in the world), it occurred to me that I have no idea how much of a portfolio a person in a country not called America is supposed to have in their home market versus the rest of the world. Americans routinely have foreign equity exposure of something like 20-40% of their equity portfolios. That strikes me as very reasonable from a gut-check level. On the other hand, I have no idea how much people from, for instance, England, France, Japan, or Australia have in their portfolios, I have no idea what is recommended by professional advisors, and I have no idea what is theoretically optimal.

I pondered for a few weeks after I got back, then I started looking. As far as google — about all I could find was a bunch of USA-centric portfolios that were ‘adapted’ for other countries (replacing the S&P 500 with the FTSE 100, for instance), something struck me as obviously inappropriate given the relative sizes of our economies.

A little further research provided me with almost nothing in the way of recommendations from professionals (although it was incredibly easy to find free high quality advice for Americans). I’ll disclaim now — while I’m usually pretty good at interneting, it is possible I missed some obvious sources or that the sources I was seeking did not show up because I’m in America.

However, fortunately for us mortals, what financial advisors have seriously neglected, economists have been puzzling over for years.
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Jack’s Links

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It’s been a month, but here are the links. Try not to panic tomorrow if things are kinda downish.

Free > Paid when paid doesn’t adapt.

A dozen things: Charlie Munger

Bason Asset dropping the best statistic of the weekend. 46 times.

See if you can spot all of the terrible logic errors in this article about social security. If you can make it through without saying “that’s not how that works” to yourself at least three times, you need to try again.

WCI with a good post on whether you should buy whole life insurance. And asset location. And bonds. Okay I’m going pretty far back on these, but great posts.

Rate cuts? QE IV? I don’t know – been seeing some smart people get confused on this lately.

Give the people what they want.

This pope is extremely confused and confusing. He makes me very uncomfortable.

Good 538 article on dating. Probably applicable to other stuff.

 

  • The simple pattern: People who display a certain trait prefer other people who display that trait; people who don’t prefer people who don’t.
  • The subtler pattern: Everyone prefers people with a certain trait, but people who have the trait themselves display a stronger preference for other people with that trait.

Somehow poisoning the horns of rhinos doesn’t feel like the easiest answer.

Rent control always seems to have the same result. v. Stockholm

 

Jack’s Links

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I have no idea when people will stop saying that rates are being [insert devious sounding adverb-ly depressed], but if they read this post they might stop sooner.

Interesting article about the hot-hand. I don’t really get it.

I was incredibly confused by the Greek referendum -> austerity measures, the vote was some sort of political theater?

Bernie Sanders is the left’s Ron Paul.

Interesting dissection of dueling editorials.

Why people who pick fund managers based off of track record are probably wasting their time.

(near) Octogenarians say some things I don’t think they would have said 20 years before – reminiscent of Jack Bogle railing against foreign stocks a few months (years?) ago.

A dozen things – VC – Sam Altman

Wade Pfau on whether it makes sense to pay a financial advisor.

What I’m Listening To (Podcasts)

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I walk a lot of places. Sometimes I want to listen to music, but sometimes I want to learn something. When I want to learn something, I turn to my trusty podcasts. I’ve got about 5 that I listen to pretty much every podcast from during the week.

When it comes to podcasts, I’m a firm believer that diversity is king, only one of the podcasts I regularly listen to is related to what I do day to day, and none of them are related to each other. They do have a few things in common, notably; high quality content, smart guests (only one doesn’t regularly have guests), and most of all, they all have a clear identity.

In no particular order:

a16z – Tech/start-up podcast that casts a pretty wide net – Thanks Andreessen Horowitz

Econtalk – An absolutely incredible amount of content out of Russ Roberts – top notch guests

The Tim Ferriss Show – Tim’s stated goal is to interview top performers and find out ‘how they do it’. He’s a hugely talented interviewer

Fireside Markets – I couldn’t actually find a link to the podcast area of the website, anyway… James Osborne, a financial planner, hosts this podcast mostly focused on the planning industry. He’s just starting out (maybe 8 episodes), lots of interesting content, hope it keeps going.

Jalen & Jacoby – Basketball podcast, they give the people what they want.

Honorable mention to the two fivethirtyeight podcasts, hot takedown and what’s the point (I think the latter is brand new), which I’ve enjoyed in the few listens I’ve given them.

I’m sure in time the podcasts will fall victim to the same cycle as the blogs I read — I’ll add more and more that I like until I can’t read them as much as I want, then the reckoning will come and I’ll unfollow 80%. For now, <10 feels like the sweet spot.

Jack’s Links

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Grexit is all the rage, but all of the smart money seems to be focusing on the Chinese stock market. Do either of these matter? I don’t know.

Government steals raisins for the good of the raisin farmers. This sounds like a hypothetical problem from an econ class, but it’s real.

A dozen things: Peter Fenton — focuses a lot on VCs, which is very cool

California drought – El Nino for real this time?

ROE – Portfolio Turnover. Conventional wisdom should always come with the caveats of when it doesn’t work. There is always a condition that makes ‘common sense’ wrong.

Pitchdecks – Really interesting that NDAs are going away

Dyslexia and visual-spacial abilities – Everyone (including me) likes the idea that people with one disadvantage have an equal and opposite advantage. It might even be cooler if people with dyslexia develop visual-spacial skills through working them more often.

File under ‘unintended consequences of regulation’ – Health care edition

European commission in 2009 – They wrote a white paper gloating about how wrong economists were about the Euro. Hilarious. Starts with “The euro: It can’t happen, It’s a bad idea, It won’t last. US economists on the EMU, 1989 – 2002”

Critique of Mr. Money Mustache – definitely sums up many of my feelings when friends ask me about him

Finally, Grexit (login-wall, my apologies, it’s free, though!)- A nice piece by Niall Ferguson, takes a very Louis CK “everything’s amazing and nobody’s happy” line

Jack’s Links

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Interesting article about social security and the broader implications of innumeracy among Americans. I for one can’t believe that “100% of your social security benefit” isn’t the age 62 or age 70 amount. Borderline ridiculous that it is a moving target in the middle of the range. Completely confuses everyone.

Apparently it takes a whole generation for a dominant strategy to emerge in basketball.

Between restrictive building codes and the ubiquity of negative gearing (when everyone you meet from an area knows about a sure-fire way to build wealth you know it can’t last forever), Australia seems to be in for some pain sooner or later.

It seems I’m a trendsetter. The Bank of England has started a blog.

Fireside Markets has a new episode. Not sure if the positive indicator that I’m still listening to it outweighs the negative one of having guest #8 be a repeat. A fun listen.

An article about custodians going into the advice business. The most interesting section is the part about the huge firms finally making a clear career path for financial advisors. I’m not sure if the comparison to the big 4 accounting firms is brilliant or has no chance of ever happening.

Great read about DAFs from Kitces. Nothing earth shattering, but definitely the basis for communicating the time, place, and value of them to interested clients.

A dozen things from Mario Gabelli. Fascinating how all of the uber-successful investors say the same 25 or so things and everyone seems to hear the 25 things that they are doing.

The more I read of the white coat investor the more I’m intrigued. It really is a pleasure seeing someone truly focus on a niche group, funny that it takes someone outside the financial advisory profession to do it.

Jack’s Links

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Drought in California, overpriced corn, farm subsidy reform is coming

You can increase your withdrawal rate if you have a good start

The new newsletter writers

Sharing economy sounds better

So stocks aren’t expensive?

The Blackhawks won me a sandwich in a bet on game 6, I’ll go with clutch

I probably read 5 awesome pieces about the life of John Nash, incredible guy – RIP

How to interpret results

All hail the rise of the nurse practitioner

How to hire

 

NAPFA Spring 2015 Conference Review

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NAPFA’s Spring conference was the second conference for financial planners that I’ve been to (after last year’s FPA BE in Seattle).

Some general thoughts:

  • I found the people to be friendlier (maybe they were just more dressed down?) than FPA BE
  • The vast majority of the sessions were extremely broad/not highly technical
  • The event was run extremely smoothly (kudos to the Grand Hyatt Staff – sorry about that guac I dropped)
  • Lots of sessions hosted by people pimping out their fund/product

I missed both of Kitces’ talks, however, he’s blogged about them before:

  • Longevity Annuities
    • This one is really interesting, I don’t think many people have wrapped their heads around the mortality credits idea
  • Reverse Mortgages (not sure if this is the latest he’s written)
    • I think the put option value of the reverse mortgage is really interesting, especially if there is a zero-cost mortgage – unfortunately houses around here are way too expensive for that option to have much value

A few (extremely simplified and occasionally poorly represented) reviews of selected sessions (in no particular order):

  • Keynote from Daymond John
    • To his credit, his speech was very entertaining and he made an effort to connect with the crowd
    • That said, his speech, which included a DJ (to play music and sound effects for him to speak over) and a slideshow that contained about a million pictures of himself and his famous friends, was pretty much the antithesis of NAPFA
    • I’m pretty sure everyone was confused by the choice of keynote speaker
  • Putting a Value on Your Value: Quantifying Vanguard Advisor’s Alpha – James Rowley
    • Pretty good session that focused for the most part on how people with advisors do vs. people without advisors
      • There is some interesting self-selection bias here
    • His best point was that advisors that do a good job will typically be undervalued because there is no available parallel universe where the client can see where she’d have ended up without an advisor
      • My interpretation of his point, I don’t think he mentioned parallel universes
    • To Vanguard’s credit, this presentation was all about the info and not about their offerings
  • Women in NextGen – Panel Discussion
    • Four young (27-35?) women on a panel, two who work as solo practitioners and two who are parts of larger firms
    • Was very interesting to hear about their career paths / what their businesses (especially the SPs) are like
    • Discussion only went toward their gender when the moderator realllllly steered it toward there, when asked about it, I’m pretty sure most/all of them said their age was a bigger problem for ‘older generation’ clients than their gender
  • Building Family Legacies Through Philanthropy – Sally Alspaugh
    • Most of the talk was about the statistic that dynastic wealth dissipates some really high % of the time within 3 generations
    • She believes that the way to prevent the dissipation is by having shared family values that transcend money, especially re: philanthropy
    • All of the things she said about ‘typical’ spendthrift inheritors/2nd/3rd generations is pretty much the opposite of what I’ve seen in my experience
  • The Gen-Savvy Financial Advisor – Cam Marston
    • Great speech, clearly an excellent speaker who has given this one more than a couple of times
    • Boomers+ want to hear your background/where you came from/letters after your name
    • Millennials/Gen Xers want to hear what you’re about/what you’re going to do for them
    • He seemed pretty spot on with most of the Gen X and older stuff – maybe it’s my bias or the fact that he was running out of time, but his piece about millennials seemed underdeveloped/not as accurate
  • Behavioral Finance and Investor Decision Making – Gregory La Blanc
    • Good speaker
    • Speech was essentially a run-through of a bunch of cognitive biases with the occasional reminder that it isn’t just clients, but also (especially) advisors that can suffer from these
  • Learning from History
    • This one was an unabashed plug for a fund
  • Chips, Jets, Myths, and Miles Davis – Neil Patel
    • Engaging throughout
    • Mostly boiled down to the need to adapt and have tight OODA loops
  • Tech Demo – Advizr
    • Slick financial plan creation software
      • Separate portal for advisor and client
    • Said their goal was “delivering more financial plans”
    • From a technical planning/customization point of view, the software should probably still be in beta
      • e.g., no way to (even manually, much less automatically) include file/suspend social security benefits, no AMT tax calculations
    • May be a good fit for planners working with very young clientele that don’t need ultra-accurate projections because their time horizons are long enough that there is more noise than signal anyway

I’d probably be interested in attending another NAPFA event in a couple of years, but I’d love to see some more technical planning sessions and fewer sessions that are nothing more than infomercials.