I haven’t had many people ask me whether I’d consider hosting a podcast, but it’s come up enough to make me think about it.  I have some solid reasons for not doing a podcast: it’s way more work than I’m willing to do, and my voice isn’t good.  To illustrate the best reason, though, consider this hypothetical exchange: MJ : Welcome to the podcast, Dr. G. Guest : I’m happy to be here. MJ : Let’s get right to it.  Please describe your research interests. Guest : I work on retirement decumulation strategies, safe withdrawal rates, and risk levels of equities. MJ : From what data do you draw your conclusions? Guest : I use worldwide historical returns of stocks and bonds. MJ : How do you deal with the challenge that we don’t have enough historical return data to directly draw statistically significant conclusions? Guest : Uh … I perform simulations drawing from the available pool of data. MJ : So, you create seemingly plausible return histories to extrapolate from the small p...

In his book Bullshift: How Optimism Bias Threatens Your Finances , Certified Financial Planner and portfolio manager John De Goey makes a strong case that investors and their advisors have a bias for optimistic return expectations that leads them to take on too much risk.  However, his conviction that we are headed into a prolonged bear market shows similar overconfidence in the other direction.  Readers would do well to recognize that actual results could be anywhere between these extremes and plan accordingly. Problems in the financial advice industry The following examples of De Goey’s criticism of the financial advice industry are spot-on. “Investors often accept the advice of their advisers not because the logic put forward is so compelling but because it is based on a viewpoint that everyone seems to prefer. People simply want happy explanations to be true and are more likely to act if they buy into the happy ending being promised.”  We prefer to work with those who...

My portfolio lost 4.9% in 2022, while my benchmark return was a loss of 6.2%.  This small gap came from my decision to shift to bonds based on a formula using the blended Cyclically-Adjusted Price-to-Earnings (CAPE) ratio of the world’s stocks .  After deciding on this CAPE-based approach, all the portfolio adjustments were decided by a spreadsheet, not my own hunches.  I started the year 20% in fixed income, it grew to a high of 27% as the spreadsheet told me to sell stocks, and now it’s back to 20% after the spreadsheet said to buy back stocks.  This cut my losses in 2022 by 1.3 percentage points. My return also looks good compared to most stock/bond portfolios because I avoided the rout in long-term bonds.  My fixed income consists of high-interest savings accounts (not at big banks), a couple of GICs, and short-term bonds.  If long-term bonds ever look attractive enough, I may choose to own them.  My thinking for now is that I prefer the safe part ...

What a difference a year makes.  During the COVID-19 lockdowns, many people saved a lot of money, either from their pay (if they were lucky enough to keep their jobs) or from government payments.  As the world opened up, people started spending this money and businesses couldn’t keep up.  These businesses still can’t get all the new employees they want but the problem has eased considerably compared to a year ago.  I saw a small example in Florida recently.  I was in a burger chain restaurant and saw a sign saying they were looking for employees at $12 per hour.  Last March, the sign in this same restaurant offered $18 per hour and implored workers to “START RIGHT NOW!” Here are some short takes and some weekend reading: Cliff Asness accuses private equity investors and managers of “volatility laundering.”  Failing to value private equity frequently and accurately creates the illusion of smooth returns. Scotiabank’s new President and CEO Scott Thomson...