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I re-ran the analysis that Michael and I did in our initial article, but I switched to the new capital market assumptions I use which allow for increasing bond yields over time while keeping a fixed average equity premium over bonds. ... It does indeed seem that retiring at times with particularly low bond yields, which can be expected to increase over time, may not favor rising equity glidepaths during retirement. It essentially causes the retiree to lock in low bond returns and even capital losses on a bond fund as bond yields gradually increase (on average) over time.
This is not to say that rising equity glidepaths are never a good idea. ... If interest rates were at a higher initial starting point, I’m guessing that rising glidepaths would look much better in his analysis.
Another reference:I have also seen activity attributed to sports bettors with no place to go.
barstool-sports-dave-portnoyRobinhood added more than three million funded accounts in the first four months of 2020, and half of customers who opened accounts this year said they were first-time investors, according to Nora Chan, a spokeswoman for the Menlo Park, California-based firm. E*Trade Financial Corp. had 329,000 net new accounts in the first three months of the year, with 260,000 added in March alone, the firm said in its first-quarter earnings statement. That was more than the company’s previous best annual net record.
While day trading can be risky and Portnoy might not be the best role model for young investors, Emanuel and Geraci said they think younger investors entering the market is positive for the long-term.
“The danger to the accessibility of it is very clear because you are bringing people in who may not be terribly qualified,” Emanuel said. “You learn more when you’re losing.”
As I noted in my linked-to post, correcting for the same type errors in April makes the reduction in the unemployment rate even larger. It goes from the official 1.4% improvement to 3.4%. Though total unemployment is, of course, higher than officially reported for both months. So while the absolute number is not so rosy as the president announced, the trend surpassed the president's rosy picture.How do we know the published job numbers are not fabricated?
It appeared there is a miscalculation from BLS, and the actual number reported is 3% higher than that of April number. Taken that in its totality, the employment picture is not so rosy as the president announced...The special note said that if this misclassification error had not occurred, the "overall unemployment rate would have been about 3 percentage points higher than reported," meaning the unemployment rate would be about 16.3 percent for May.
https://www.greenwichtime.com/business/article/The-May-jobs-report-had-misclassification-error-15320999.php
This is the same article published in Washington Post last night by Heather Long, a long respected financial reporter. ...
Question is how can this error released pre-maturely? And this get back to TheShadow's question...
As a special added bonus, note that PK is also on record as having made the same statement. (In the words of Warner Wolf, let's go to the videotape. Check the 37 minute mark. "I'm mostly on the side of fast recovery ... IF the coronavirus is under control.")“You can 100% discount the possibility that Trump got to the BLS. Not 98% discount, not 99.9% discount, but 100% discount,” tweeted Jason Furman, the former top economist for former president Barack Obama. “BLS has 2,400 career staff of enormous integrity and one political appointee with no scope to change this number.”
It appeared there is a miscalculation from BLS, and the actual number reported is 3% higher than that of April number. Taken that in its totality, the employment picture is not so rosy as the president announced...How do we know the published job numbers are not fabricated?
https://www.greenwichtime.com/business/article/The-May-jobs-report-had-misclassification-error-15320999.phpThe special note said that if this misclassification error had not occurred, the "overall unemployment rate would have been about 3 percentage points higher than reported," meaning the unemployment rate would be about 16.3 percent for May.
Question is how can this error released pre-maturely? And this get back to @TheShadow's question...
While looking at a year's worth of performance versus the benchmark isn't very meaningful, it is actually over the long-term that active funds struggle the most to beat their benchmarks, and many financial articles have made that point. In fact, I think it is far more common to have an active fund beat a benchmark in the short-term, have an excellent year but struggle over the long-term as the cumulative hurdle effect of its fees gets harder and harder to overcome. Also, while there are many passive ETFs that don't match their benchmarks either, in the main categories like large cap, mid-cap and small-cap, they often do and sometimes even beat their benchmarks because of securities lending, or only lag a minuscule amount. Also, the long-term record of many funds versus their benchmarks doesn't necessarily improve when adjusted for risk. The SPIVA data on funds versus their benchmarks has risk-adjusted returns over the last fifteen years:They have not been repeatedly defamed by self-interested marketers and lazy financial journalists looking for cheap stories. “80% of mutual funds failed to beat the market last year” is utterly fatuous – beating the market isn’t the goal, one year is an irrelevant time period, risk matters as much as returns, very nearly all passive products also trail the market – but has made it hard to approach investors, young, professional or otherwise. The term “skunked” comes to mind. The repackage offers a clean slate.
The risk-adjusted performance of active funds obviously improves on a gross-of-fees basis, but even then, outperformance is scarce. Only Real Estate (over the 5- and 15-year periods), Large-Cap Value (over the 15-year period), and Mid-Cap Growth funds (over the 5-year period) saw a majority of active managers outperform their benchmarks. Overall, most active domestic equity managers in most categories underperformed their benchmarks, even on a gross-of-fees basis.
As in the U.S., the majority of international equity funds across all categories generated lower risk-adjusted returns than their benchmarks when using net-of-fees returns. On a gross-of-fees basis, only International Small-Cap funds outperformed on a risk-adjusted basis over the 10- and 15-year periods.
When using net-of-fees risk-adjusted returns, the majority of actively managed fixed income funds in most categories underperformed over all three investment horizons. The exceptions were Government Long, Investment Grade Long, and Loan Participation funds (over the 5- and 10-year periods), as well as Investment Grade Short funds (over the 5-year period).
However, unlike their equity counterparts, most fixed income funds outperformed their respective benchmarks gross of fees. This highlights the critical role of fees in fixed income fund performance. In general, more active fixed income managers underperformed over the long term (15 years) than over the intermediate term (5 years).
On a net-of-fee basis, asset-weighted return/volatility ratios for active portfolios were higher than the corresponding equal-weighted ratios, indicating that larger firms have taken on better-compensated risk than smaller ones.
One important saving grace I think is that SPIVA only considers risk as volatility and not downside capture or Sortino ratios. So that should be considered. All of that said, the threat from passive ETFs is most certainly real and should not be underestimated.
how-larry-fink-s-blackrock-is-helping-the-fed-with-bond-buyingWhen the Federal Reserve needed Wall Street’s help with its pandemic rescue mission, it went straight to Larry Fink. The BlackRock Inc. co-founder, chairman, and chief executive officer has become one of the industry’s most important government whisperers. In contrast to other influential financiers who’ve built on ties to President Trump, Fink possesses a power that’s more technocratic. BlackRock, the world’s largest money manager, can do the things governments need right now.
The company’s new assignment is a much bigger version of one it took on after the 2008 financial crisis, when the Federal Reserve enlisted it to dispose of toxic mortgage securities from Bear Stearns & Co. and American International Group Inc. This time it will help the Fed prop up the entire corporate bond market by purchasing, on the central bank’s behalf, what could become a $750 billion portfolio of debt.
One part of the Fed’s plan is to buy bond exchange-traded funds. BlackRock itself runs ETFs under the iShares brand, and could end up buying funds it manages. There are rules in place to avoid conflicts of interest—for example, it won’t charge the Fed management fees on ETF shares. “BlackRock is acting as a fiduciary to the Federal Reserve Bank of New York,” says a spokesman for the company.
“It’s impossible to think of BlackRock without thinking of them as a fourth branch of government,” says William Birdthistle, a professor at the Chicago-Kent College of Law who studies the fund industry.
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