Finance sites

In a recent episode, the Freakanomics podcast talks about why you should index.  It's a great show - check it out:  http://freakonomics.com/podcast/stupidest-money/ Interestingly, Anthony Scaramucci is interviewed as being an advocate of active management (he's the guy who ended up being fired by Trump after 10 days).  Scaramucci's arguments for active management don't really make any sense - they are based on the idea that financial advisors and active management are the same thing.   They are not.  A good financial advisor who understands indexing is well worth the fees.  Such an advisor can help in tax planning, retirement, college savings etc and provide real value to clients without ever selling an actively managed product.

I am quoted today in an article on Bloomberg.com about the Connecticut pension fund return assumptions.  The article is here:   https://www.bloomberg.com/news/articles/2017-07-20/connecticut-sinks-deeper-in-debt-as-pension-returns-lag-target So why is an 8.5% return assumption delusional? It's pretty simply really.  Assume that your fund is 50% bonds, 50% stocks.  Currently 10-year Treasuries are yielding about 2.3%.  Let's round that up to say 3% to be generous.  Assume an equity risk premium of 5%, and equities will return about 8%.  So our hypothetical pension fund is going to earn:              50% bonds + 50% equities = 0.5*3 + 0.5*8 = 5.5% Even with a tweaking the bonds to 4%, and using a risk premium of say 6%, you are looking at:             0.5*4 + 0.5*10 = 7% I think 7% is still pretty optimistic, but if we use today's numbers, 8.5% implies stock returns of: ...

In an article yesterday in the News and Observer ( http://www.newsobserver.com/news/business/article161425553.html ), David Ranii explores whether fee cutting by the pension fund might hurt future returns. It's a good article, I was interviewed for it, and I recommend that you read it.  I would, however, like to add a small comment/clarification with regard to my comments within the article. While I strongly support attempts by the pension fund to reduce fees, this has to be done in a sensible manner.  When high cost equity managers are liquidated, the proceeds should be put into an equivalent low cost index fund.  What the pension fund has been doing is to put these proceeds into cash and fixed income.  In the article, I am quoted as noting that this action will likely result in lower returns for the pension fund going forward.   The article incorrectly portrays me as in conflict with critics of the pension fund's strategy.  This is inaccurate.  I ful...

Some good news from the Treasurer's office.  Apparently our new Treasurer has reduced fees by $50 million so far.  He reports that he's on track to hit $200 million by the end of his first term. http://www.newsobserver.com/news/business/article155868344.html This is great news.   I am sure we will be digging into the numbers when the annual report comes out, but for now, this is a great start.

What does this mean? Ummm. Not much.   https://www.bloomberg.com/news/articles/2017-01-25/-time-to-get-out-as-dow-milestone-a-call-for-caution-pros-say Some will say that you need to get out once a milestone is met.   Trouble is - when do you get back in?   Oh - that's right - before the market goes back up. Of course, 20,000 is no 36,000 .  We're still waiting for that one.

I was recently interviewed by Mark Hulbert for this article in Barrons: http://www.barrons.com/articles/whats-the-best-way-to-protect-against-inflation-1482943455