Clippings 2018

Recommended reading, economic debates, predictions and opinions.
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Park
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Clippings 2018

Post by Park »

http://news.morningstar.com/articlenet/ ... ?id=842605

The above link compares index providers:

"The highest-rated ETFs that track S&P, Dow Jones, and CRSP indexes earn Gold ratings, except for the mega-cap offerings from S&P and CRSP, which earn Bronze and Silver ratings, respectively (Dow Jones does not offer a separate mega-cap index). Notably, the funds that track the Russell family of indexes don't earn marks as high as their peers.
Vanguard Russell 2000 ETF (VTWO) and iShares Russell 2000 ETF (IWM) suffer from higher transaction costs than index peers because the Russell 2000 Index doesn't apply buffer rules to mitigate turnover among the smallest, most illiquid stocks. The index will add or remove a security if its market-cap ranking barely crosses the 3,000-count selection threshold, even if the change does not have a material impact on the portfolio's characteristics. Compounding the issue, the Russell 2000 is a popular small-cap index with a lot of money following it, so the demand for liquidity is higher. These concerns limit the Analyst Ratings of the cheapest Russell 2000-tracking ETFs to Bronze."

When you look at Exhibit 3 in the link, the differences are stark. If you ignore megacap ETFs, which most investors don't use, morningstar rates S&P, Dow Jones and CRSP well. But Russell gets consistently rated below the other 3. My guess is that the lack of buffer rules that applies to Russell 2000 funds also applies to funds tracking other Russell indices.
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Re: Clippings 2018

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Rising income inequality within countries is not just a North American and European problem, according to Jeffrey Bernstein. It's happening world-wide.
Rising income inequality.png
Of course, income inequality between countries is declining quickly. If you look at the world as a whole, income inequality is actually declining.

Bernstein argues that the cause of rising inequality is not (or not primarily) globalization. He thinks that automation and "winner-take-all" economies are more important.

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Re: Clippings 2018

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Minimum wage and the Economy
* Impact of wage hikes small.
The article includes information about minimum wage across the country and the effects on the economy.
And the someone who serves you coffee still deserves a decent wage.

Starbucks plans to change nothing.

"At Starbucks Canada we are not cutting shifts or hours, and have no planned price changes as a result of the minimum wage increase in Ontario," the chain said in a statement, boasting of a "comprehensive" employee package that remains the same.
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Re: Clippings 2018

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StatCan is trying to measure the size of the cannabis economy.
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Re: Clippings 2018

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http://awealthofcommonsense.com/2018/01 ... t-in-2018/

"The average peak-to-trough drawdown in stocks over the past 70 years or so is a loss of 13-14% in a given calendar year."
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Re: Clippings 2018

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http://www.etf.com/sections/index-inves ... nopaging=1

"average stock-price volatility—measured by finding the standard deviation of monthly percentage changes in real stock prices for the preceding year—is an extremely low 1.2%. Between 1872 and 2017, volatility was nearly three times as high, at 3.5%. Yet again, this does not mean a bear market isn’t approaching. In fact, stock-price volatility was lower than average in the year leading up to the peak month preceding the 13 previous U.S. bear markets, though today’s level is lower than the 3.1% average for those periods. At the peak month for the stock market before the 1929 crash, volatility was only 2.8%...

from the second quarter of 2016 to the second quarter of 2017, real earnings growth was 13.2%, well above the 1.8% historical annual rate)..peak months before past bear markets also tended to show high real earnings growth: 13.3% per year, on average, for all 13 episodes. Moreover, at the market peak just before the biggest ever stock-market drop, in 1929-32, 12-month real earnings growth stood at 18.3%.”

http://www.etf.com/sections/index-inves ... nopaging=1

"while the S&P 500 returned 21.8% for the year, including dividends, in terms of price-only returns, 182 of the companies in the index were up more than 25%, 49 were up at least 50%, 10 were up at least 80.9%, and three more than doubled in value...

there were 125 stocks within the index that, on a price-only basis, were down for the year. Fifty-nine stocks lost at least 10%, 20 were down at least 25%, and the 10 largest losers (see the following table) lost at least 44.2%."

Best performing stock up 132.3%, worst performing stock down 53.9%, both price return only.

You can see why stock markets elicit behavior similar to those buying lottery tickets; I doubt that will change.
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Re: Clippings 2018

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Re: Clippings 2018

Post by gaspr »

Here is a posting about regret minimization by Dirk Cotton...I love the part about Harry Markowitz's asset allocation decision. Hard to argue with...

http://www.theretirementcafe.com/2018/0 ... nt+Cafe%29
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Re: Clippings 2018

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http://www.etf.com/sections/index-inves ... nopaging=1

Supposedly, 2017 was the first year ever that the S&P500 didn't have at least one month with a negative return.
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ETFs

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https://www.cfapubs.org/doi/pdf/10.2470/rf.v2015.n3.1

If you want to read a book about ETFs, the following 202 page link from the CFA Institute is recommended.

http://ieor.columbia.edu/files/seasieor ... v_2009.pdf

If you want to hold leveraged ETFs long term, I don't recommend that, but the above link would be good to read.
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Recommended Book

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The following assumes you enjoyed reading "The Intelligent Asset Allocator" by William Bernstein. If you're looking for a more recent book, which is somewhat more complicated, I recommend "Smart Portfolios" by Robert Carver.
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Re: Clippings 2018

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https://www.amazon.ca/Financial-Market- ... SZPCQ5CR3E

Financial Market History: Reflections on the Past for Investors Today
by David Chambers (Author),‎ Elroy Dimson (Editor)

"The book’s editors, David Chambers and Elroy Dimson, are the academic leaders of the Newton Centre for Endowment Asset Management at the University of Cambridge in the United Kingdom."

I haven't read the book, but I do note the authors. Paperback is $40.17. At a price of $0.00, I'd suggest getting the kindle version.
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Market Timing

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There are those who advocate small changes in one's asset allocation. This is really a modest form of market timing. The following is from the book "Simple But Not Easy" by Richard Oldfield:

"assume that the future will be something like the long-term past, but not so good when it has just been very good in the short-term, and not so bad when it has just been very bad. Basing actual allocation on the long-term weightings, but aiming off, in particular by adding an assumption that returns revert to the mean and searching for value, is less dangerous than sticking inflexibly, instead, to long-term policy weightings derived from extrapolation of sometimes abnormal movements."

That's the best defense of a modest amount of market timing that I've read. He''s making the case for it being a form of risk management.
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Gender Pay Gap

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An interesting freaknomics episode that talks about research on the gender pay gap that was performed using uber data.
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Re: Clippings 2018

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An article on the key elements of a well-managed portfolio
However, what (almost) everyone needs and wants is for the overall portfolio to generate the best return possible. No portfolio should simply be left to grow on its own like an oak tree; you can choose to tame it any way you like, just make sure you are happy with the result.
Hmmm, I don't know. We've left our portfolio to grow like an oak tree for 12 years without any intervention, and it's worked out pretty well. :)
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Re: Clippings 2018

Post by twa2w »

True and not everyone wants to get the best return possible. Some folks are more concerned with preservation of capital or having low volatility or generating an income.
Perhaps the best return given a certain risk level (and perhaps tax comes into play here as well )
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Re: Clippings 2018

Post by ghariton »

twa2w wrote: 16 Feb 2018 13:00 Perhaps the best return given a certain risk level (and perhaps tax comes into play here as well )
I assume that we are talking after tax returns. To me, pre-tax returns are not very meaningful. For example, think of comparing a bond and an equivalent number of preferred shares. How meaningful is a comparison of the pre-tax returns?

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Inflation Risk

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I'm reading "The Foolish Corner" by John Howe.

He mentions that a US dollar in 2017 has lost 83% of its purchasing power compared to 1976. People take about hyperinflation, such as the Weimar Republic in the 1920s. But the cumulative impact of small amounts of inflation is impressive and relevant to someone retiring at 60. And that disregards the risk of a temporary spike in inflation. The long term US inflation rate is 3.22%, based on an cursory internet search. But it was a bit more than 13% in 1979. Inflation can increase dramatically, and there really isn't much of a limit, as to how high it can go. With fiat currencies, the effects of inflation are likely permanent. A period of higher than average inflation is not necessarily followed by a period of lower than average inflation. I 'm not aware of any reversion to the mean, when it comes to inflation. It tends to be the policy of central banks to have a chronic low rate of inflation. Finally, governments profit from inflation, as one pays tax on nominal income and not real income.
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Re: Inflation Risk

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Park wrote: 03 Mar 2018 10:33 Finally, governments profit from inflation, as one pays tax on nominal income and not real income.
But they lose more on the interest they pay on their debt.
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Re: Inflation Risk

Post by ghariton »

adrian2 wrote: 03 Mar 2018 12:49
Park wrote: 03 Mar 2018 10:33 Finally, governments profit from inflation, as one pays tax on nominal income and not real income.
But they lose more on the interest they pay on their debt.
You're assuming that interest rates will track inflation. They usually do, but with a lag that sometime is measured in years.

By and large, inflation benefits borrowers and hurts lenders. It's one of the ways that some governments solve overhanging debt issues.

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Re: Clippings 2018

Post by randomwalker »

WestJet flight attendants claim they're paid less than minimum wage
Cabin crew members want to be compensated for all hours worked, not just those spent flying

By Kyle Bakx, CBC News, March 16, 2018

"It's industry standard for flight attendants' pay to be based on the time from wheels up to wheels down, although most airlines also provide some compensation for the time flight attendants spend at airports before and after flights. WestJet does not..."

http://www.cbc.ca/news/business/westjet ... -1.4575681
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Re: Clippings 2018

Post by AltaRed »

IMO. WestJet is off-base in its methodology and will ultimately cause unionization.
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Re: Clippings 2018

Post by CROCKD »

HEALTH CARE

An article on the costs of health care in Canada, the US and Internationally.

How does Canada’s health spending hold up to international scrutiny?
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Re: Clippings 2018

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https://drnetworth.com/howtobuyanewcarincanada/

Nice blog post on buying a new car in Canada. Other than reading the blog, I have no relationship with the blogger.
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