Barron's Says The Obvious

A few different things today.

First, the Alberta Investment Management Company, the province's public pension system, cleaned house due to poor performance. I found their asset allocation and wanted to see from the top down if there's a way to mimic them to some extent and get decent results. 

Here's how I built the portfolio. One version has Blackstone for private equity, another has Blackrock and the third has CBOE.

Most of the holdings I used are regulars in blog posts. AMT and PAVE are in my ownership universe.

The kurtosis numbers are odd. For Portfolios 1, 2 and 3 the kurtosis readings are 0.46, 0.44 and for some reason, Portfolio 3 was 1.42. Despite the strong Sharpe Ratios and pretty good standard deviations, the Calmar Ratios of the three are all below 0.50 which is the low end of being "good."

Yahoo Finance had a cleverly titled article; Generation X is gloomy, but their retirement reality may not bite. I don't think I saw the move but the title was clever. I always say to read the comment but this time, there was no value there the last time a looked. They were mostly a mix of I have $5 million dollars and crazy political stuff (from both major parties).

Before the recent election, Bespoke Investment Group astutely predicted that on November 6th, about half the country would wake up disappointed at the election's outcome. Of course that was always going to be correct. Does the change in leadership augur something good for Social Security, bad for Social Security or will it be no different? We probably all have our own opinions but I would take the tone of the article as a call to not bet too heavily on the government getting it right. Maybe they'll get it exactly right but I think it is prudent to plan now for something to go wrong between now and whenever benefits will supposedly be cut, that date is a bit of a moving target ranging 9-11 years from now. 

The only thing I would add to the article would be a reiteration of how important it is to get health and fitness squared away. Taking fewer medications while retaining the ability to bend down a lift heavy things will give us more optionality and resiliency. 

Barron's says Bonds Are In Turmoil. No kidding. One advisor quoted for the article said "Bonds should resume their role as ballast in portfolios." The idea here has been that bonds with duration have become a source of unreliable volatility. They have equity beta and now the relationship to equities is far less predictable than it used to be. 

One of the lines is the S&P 500 and one is iShares 20+ Year Treasury ETF (TLT). This is from quite a few years ago. In terms of volatility they don't look different. Back then, the negative correlation was a little more reliable than it is now. To each his own of course but if you are looking for "ballast" in your portfolio, I think there are far more effective ways than to own bonds with duration. 

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