1/ Fun with capital gains tax proposal quick computation I might expound on later:
Let’s assume that the new rate on capital gains taxes is 50% for fed and state, stocks return 7% per year with 2% in dividends and 5% growth.
2/ There is a value to deferring taxes as it’s a negative interest rate loan (equal to your after tax rate of return) on the tax bill.
The larger the tax rate, the longer the time and the higher your after tax compounding rate, the more valuable deferral.
Mar 5, 2021 • 9 tweets • 2 min read
The new paper (aqr.com/Insights/Persp…) by @CliffordAsness blew me away and might be one of the best ones I have read in a long time. I wanted to share some of my thoughts, questions and takeaways:
1/ There are a lot of implications in this paper for asset allocators. For example, he demonstrates that a good estimate of stocks excess return over cash is about 5.2% plus or minus the change in valuation level.
Nov 25, 2020 • 8 tweets • 2 min read
1/ Let me share a bit of a personal journey and it’s implications for investing/personal finance:
In the last 5 months I have lost 25 pounds: 2/ This has always been a struggle of mine and have finally found things that worked.
I hired some advisors and professional help (weight watchers and a personal trainer).
Lesson learned: for something as emotional as money or weight, it can pay to hire professional help.
Nov 22, 2020 • 14 tweets • 2 min read
I think that Vanguard’s Advisors Alpha has meaningfully overstated the stated value.
However, here are some thoughts on value that advisors can/do provide starting from a baseline of a 100% allocation to a target date fund:
1/ customizing an asset allocation on an individualized basis.
Some examples: TDF makes assumptions about savings rates, retirement dates and ignores other sources of income (pensions, business sales, etc).
Nov 20, 2020 • 8 tweets • 2 min read
One thing that has come up often in recent client meetings is investing (or specifically not investing) while afraid. Though I would share some thoughts:
1/ Fear is often created from uncertainty. How many times have you not opened an investment statement afraid of how big a loss might be (or excited to open it because of how big the gain might be). This is like Schroedinger’s loss - it both exists and doesn’t until you see it.
Sep 22, 2020 • 11 tweets • 2 min read
Just how crazy are risk parity investors that are leveraging negative real yielding treasuries? A thread:
1/ The current interest rate environment is atrocious from a yield perspective with treasuries having a negative real yield:
Aug 19, 2020 • 17 tweets • 3 min read
Just how crazy are current interest rates? A quick thread:
1/ A quick look at the US Treasury website gives us the following picture of the current yield curve
Aug 4, 2020 • 8 tweets • 1 min read
1/ Quick thread on insight from a number of recent financial plans with clients:
2/ We test all plans for what spending leads to an 80% success rate (picked as it blends trade off between having a high success rate and also spending during lifetime. See Blanchett's work on this).
Jul 28, 2020 • 10 tweets • 3 min read
1/ Market cap weighting is the approach to use if you don't have an edge or a hypothesis (and its OK not to have one).
However, if you have an edge or a hypothesis, then you should deviate from market cap in proportion to your edge and be humble about what that edge might be.
2/ An edge can be as simple as the belief that p/b is a broken value signal.
Quick thread on the importance of knowing index methodology (yes, you might even need to understand academic literature when selecting indices!):
1/ I am going to look at a similar index (large cap growth) from two major index providers S&P and Russell and their differences and what that might imply.
Jun 3, 2020 • 8 tweets • 1 min read
A short thread on risk:
1/ The declines in March seemed to be largely liquidity driven and declines due to liquidity reasons tend to be short lived.
May 28, 2020 • 6 tweets • 2 min read
I think this will be the great challenge of the next 10-20 years. Some thoughts below:
1/ One needs to evaluate complexity and it’s potential returns with simplicity and its implicit acceptance of lowered returns.
May 8, 2020 • 8 tweets • 2 min read
Value is really cheap...now what? A thread:
1/ Go read @CliffordAsness new blog post if you aren't convinced how cheap value is: aqr.com/Insights/Persp…
Mar 20, 2020 • 8 tweets • 2 min read
I have been thinking a lot about hidden optionality lately (thanks @choffstein for listening to one thought thread) and I wanted to share - early debt payoff and optionality.
1/n2/n The decision to paydown debt early is an investment decision - you are effectively deciding that the rate of return on the debt is attractive and it beats what you could otherwise earn. This has to be adjusted for risk also as paying off debt is a risk free return.
Jan 24, 2020 • 14 tweets • 5 min read
1/n Social Security, Target Date Funds & Asset Allocation: A Thread (this is for you @jasonzweigwsj ):
@jasonzweigwsj 2/n Let's start with some assumptions: 1) The average Social Security claiming age is 65 2) The average social security payment is about $18,000 per year 3) Average life expectancy of a 65 year old is 19 years.
Jan 23, 2020 • 4 tweets • 1 min read
I HATE this kind of silly analysis...BNDX is currency hedged and the currency hedge provides a positive return. On a hedged basis, most developed currencies yield more than the UST. This is shit analysis!
For those looking for more, here are some quotes on Euro futures. You can sell euros in June for about 1% more than they are worth now...annualized that is more than a 2%+ on price appreciation.
Jan 11, 2020 • 4 tweets • 1 min read
Alright, quick takeover from the kids for dad jokes:
What room in your house is safe from a zombie apocalypse? The living room.
Dec 19, 2019 • 10 tweets • 2 min read
1/ Quick thread on simplicity vs. complexity and tax location optimization:
2/ We have to use some capital market assumptions (sorry can't get around this) so here are some working assumptions that will be wrong but are arguably reasonable:
Dec 12, 2019 • 12 tweets • 3 min read
Warning - Pretty geeky thread on equity vs. credit:
1/The relationship between the credit risk premium and equity risk premium has been on my mind a lot recently and wanted to share some thoughts/questions of mine:
2/ The credit risk premium should exist, in theory, as you are letting someone borrow money for a period of time who may not pay you back...you charge a higher interest rate to account for this risk and some extra to earn the premium.
Nov 19, 2019 • 13 tweets • 2 min read
DCA, Market Timing & Glidepaths - A thread:
1/ Glidepaths are created under a wholeistic planning assumption that someone's net worth is a combination of their current portfolio and the present value of all their future savings.
Sep 19, 2019 • 4 tweets • 1 min read
For several clients, planning software has shown that claiming SS early is better than @ FRA or age 70. Anyone else seen similar results?
Here is general fact pattern - single individual with only funds in qualified accounts so any withdrawals are 100% taxable for federal and state. The results seem to be insensitive to assumed rate of return (but all have been fairly moderate allocations).
