Abnormal Returns is on hiatus this week. However that does not mean that we are content-free. As we did last year, and the year before, we asked a panel of independent finance bloggers a series of (hopefully) provocative questions. We hope you enjoy these posts as much as we do putting them together. Feel free to jump in the comments with your own answers to the questions.

Question: This post argues that John Bogle, i.e. low-cost indexing, has already won. Has he? What comes next? (Answers in no particular order.)

David Merkel, Aleph Blog, @alephblog: No, Jack Bogle has not won yet, and I think he would agree with me. ETFs for the most part have low costs, but from my limited observations they lose in a bigger way than fees. People using them to aggressively trade end up losing far more than the difference in fees. Those in open-end mutual funds trade far less, and lose less as a result.  We need to look at dollar-weighted returns, not time-weighted returns. ETFs lose more than a buy-and-hold investor would experience.

Brian Lund, bclund, @bclund: Yes. What is next is the total and final destruction of the broker model and a move towards “co-directed” investing, where the customers leverages the experience of an seasoned market participant to trade/invest.

Tom Brakke, tjb research, @researchpuzzler: Given the predominance of active management, it is hard to say that Bogle has won, but at the margin he is clearly winning.  As I noted in a recent piece on the investment management industry, active managers now have to step up, by offering truly differentiated methods and results (no more closet indexing, or playing the game in a way that effectively results in that), and, yes, lowering fees.

Bill Luby, VIX and More,  @VIXandMore: There is a general downward trend in all fees related to the investment world, as more firms are forced to compete on cost and as more investors become comfortable with a self-directed approach.  Index funds were the leaders in the area of low fees, with actively managed funds sticking more stubbornly to higher fees.  No load mutual funds began the revolution and more recently brokers have extended this war on fees to include commission-free exchange-traded products.  Asset management fees are also trending lower for both hedge funds and registered investment advisors.

With continued advances in technology as well as the breadth and depth of information available to retail investors, the rise of the self-directed investor should continue, but the size of this market segment has a limit, as many investors do not have the time, inclination, knowledge and confidence in their own ability to manage their investments.  Eventually, I see three customer segments being defined in a more distinct manner:  (1) self-directed investors; (2) investors who partner with an investment manager; and (3) investors who outsource the investment management process and often also the emotional and intellectual component of managing their assets.

Investors with a higher sensitivity to price and costs (particularly self-directed investors) will place a strong emphasis on cost and that should keep fees trending down.  There will be pockets where fees will be stickier, particularly those in alternative asset classes, complex strategies or more specialized areas of focus.  Ultimately, the ability to add value through a targeted focus or in dealing with increased complexity will be a requirement for maintaining higher fees, but the trend in this direction may be slow as short-term and intermediate-term performance and correlation data make it difficult to draw conclusions about the long-term value of these investment approaches.

Along the way, I expect that the trend toward ETPs and away from mutual funds will pick up steam.  ETPs that embrace the index fund approach will continue to lead the way, but the rise of actively-managed ETPs will begin to undermine mutual funds more dramatically going forward.  Whether investors continue to embrace an index-based approach or seek out active management products in an effort to beat the indices, it is just a matter of time before ETPs nudge aside mutual funds and rule the financial world.

Jared Woodard, Condor Options, @condoroptions: How many 40-something professionals still pick stocks? Bogle has definitely won, in that sense. People hate high fees, complex strategies, and hedge funds so much that they’d rather take cheap beta than reach for any alpha. What comes next is a quiet resurgence of alpha opportunities for smart managers.

Wesley R. Gray, Ph.D., TurnkeyAnalyst & Empiritrage, @turnkeyanalyst & @empiritrage: There are few broad category descriptions in my mind: passive, closet-passive, and active. Passive would be the S&P 500 index, closet-passive would be “active” managers that have very little tracking error, and then there are genuine active managers that have more concentrated portfolios and are less concerned about tracking a passive benchmark (i.e., rare).

Bogle has certainly won the hearts and minds of the passive and closet-passive investors, as evidenced by fund flows and the data on the performance of active managers relative to passive benchmarks. That said, there are still large pools of capital allocated to genuine “active” managers via mutual funds and other asset structures (hedge funds, SMA, and so forth). The next revolution will be transitioning these high-tracking error active portfolios into lower-cost and tax-efficient ETFs. Our firm is creating an active ETF platform to facilitate Vanguard 2.0 and transition the high-tracking error, high-cost active strategies into low-cost, low-tax drag investment vehicles. We’re excited about changing the industry.

Josh Brown, The Reformed Broker, @reformedbroker: What comes next, hilariously, is a flat market where the index does nothing – once the last investment dollar is the world is finally thrown at a passive product. That’s when alpha strategies begin to gain some traction again – precisely when no one is in them. This will, of course, frustrate the maximum amount of participants which is what the market has been designed to do.

Look for a boom as the pendulum swings back in hedge fund strategies adopting the mutual fund/ETF wrapper and other so-called “Liquid Alts” coming out. They will have dramatically lower fees than these strategies typically have had in their hedge fund lives. Bogle will end up “winning” all over again as the bulk of these disappoint circa 2015, 2017. Then we’ll all go back to indexing.

I can see for miles and miles.

Michael Kitces, Nerd’s Eye View & Pinnacle Advisory Group, @MichaelKitces: The caveat that this article misses is the rise of tactical asset allocation, overlay managers, and other portfolio management approaches that use passive pooled vehicles (e.g., ETFs) as a tool to implement what are actually active strategies (and for which there’s a separate active fee). Cerulli’s research notes that ETF managed portfolio providers are “flourishing” (see http://www.financial-planning.com/news/advisors-to-ramp-up-etf-allocations-cerulli-2685079-1.html). You can believe that that trend is good or bad, but to say the least it’s not exactly the buy-and-hold indexing focus of Bogle, and suggestions that the growth of ETF index funds mean Bogle has won miss the point of how ETFs are being used by a large segment of investors. There’s a difference between the passive vs active debate – a la Bogle – and the strategic versus tactical implementation, which can be done with active OR passive funds, as I wrote a few years ago (see http://www.kitces.com/blog/archives/103-Is-The-Passive-Vs-Active-Debate-Different-Than-Strategic-Vs-Tactical.html).

Jeff Carter, Points and Figures, @pointsnfigures: Of course Bogle won. So did David Booth. He used a similar theory and returned billions-they even named the best business school in the world after him. Efficient Market Theory works. You can’t beat the market.

Robert Seawright, Above the Market, @rpseawright: Despite the enormous growth of passive investing, Jack’s arguments have been much more successful within the marketplace of ideas than in the markets themselves.  Based upon the supporting data, I have consistently argued that those in the active management business ought to be able to defend their processes with more than just a sales pitch — y’know, with data and stuff. Sadly, that isn’t often attempted much less achieved. While I don’t think that Jack’s argument extends nearly as far as he does (I think that active management is a valuable and appropriate tool), I also think that passive management is the appropriate investment default and that the situations of the majority of individual investors would be improved by their using passively managed investments. I don’t think Jack has won or even that his position is like that of the Allies after D-Day (the outcome seems decided but there is still a lot of work to do).  That said, Jack is clearly ahead.

Morgan Housel, The Motley Fool, @TMFHousel: He’s clearly won.

Josh Brown once quipped that the definition of a hedge fund is “a vehicle that turns investor capital into Greenwich real estate.” That’s as relevant to mutual funds as it is hedge funds. The evidence is overwhelming that the vast majority of active managers can’t beat an index, which is actually a certainty given the size of the industry. Their justification of fees is now that they offer risk management and lower volatility, but that’s questionable, too — and no one asked investors if they signed up for such an arrangement.

Active managers can hide during a 1990′s boom when their fund earns 30% while the S&P returns 32%. No one cares about underperformance when they’re still getting rich. But when investors realize they paid a manager 150 basis points a year for a lost decade, they wake up.

Individual investors have gotten the message. The next to move will be company 401(k) administrators. My guess is that ten years from now there will be a third fewer actively managed equity funds, 2-and-20 will become 1-and-5, Vanguard will gain another $1 trillion in AUM above market returns, and most investors will be better off because of it.

——

Thanks to everyone for their participation. Stay tuned for another question tomorrow.

The post Finance blogger wisdom: a post-Bogle world appeared first on Abnormal Returns.

Thanks for checking in with us this weekend.  Here are the items our readers clicked most frequently on Abnormal Returns for the week ended Saturday, June 15th, 2013. The description reads as it does in the relevant linkfest:

1. Buy cheap stuff (around the world).  (Turnkey Analyst)
2. The 3 worst financial predictions of the past 5 years.  (Pragmatic Capitalism)
3. The tape is exhausted.  (The Reformed Broker)
4. Equities are the new bonds and bonds are the new equities.  (David Rosenberg)
5. Why learning to swim is so important.  (Well)
6. The greatest myth about trading is that it is inherently risky.  (Brian Lund)
7. The bear case for equities: signs of growing risk aversion.  (Humble Student)
8. Here’s what to do if you missed the market’s big post-crisis rally.  (Barry Ritholtz)
9. Why many retirees could outlive a $1 million nest egg.  (NYTimes)
10. Chances are you are washing your hands incorrectly.  (The Atlantic)

Here is a look at what else you may have missed on the site:

1. Check out a wide-ranging interview with Tadas Viskanta.  (See It Market)
2. Does the US need a mandatory retirement savings program?  (Abnormal Returns)
3. I was recently a guest on Andrew Horowitz’s The Disciplined Investor podcast.  (TDI)

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The weekend is a great time to catch up on some long form items that we passed up on during the week. Thanks for checking in.

Investing

Here’s what to do if you missed the market’s big post-crisis rally.  (Barry Ritholtz)

The upside of the global market correction.  (Jason Zweig)

On the importance of expectations for value investors.  (Oddball Stocks)

The sequence of returns matters a great deal for investors.  (Monevator)

Investors who did the least did the best.  (Vanguard)

Finance

John Bogle’s speech on the “commercialization of the mutual fund industry.”  (John Bogle also RIABiz, Morningstar)

The most and least effective stock buyback programs.  (Institutional Investor)

A profile of non-investment grade investors GSO Capital.  (Institutional Investor)

Retirement

Meir Statman on why we need a mandatory retirement savings program.  (Financial Analysts Journal)

Why the creator of the 401(k) plan thinks it is a failure.  (Marketplace)

Essential reading on the US retirement crisis.  (Enterprising Investor)

Economics

The biggest threat to the global economy could come from outer space.  (The Atlantic)

Fiscalists vs. monetarists: a bloggy taxonomy.  (FT Alphaville)

What is ‘neoclassical economics‘ anyway ?  (Noahpinion)

Business

LinkedIn ($LNKD) is becoming integral to business these days.  (Fortune)

Was Kodak doomed to bankruptcy?  (Medium via @longreads)

Cities

Why cities are centers for innovation: more human connections.  (The Atlantic)

Can New York City really put in place real flood protection?  (Scientific American)

The future of the American cities: suburbs are no longer the destination they were.  (FT)

Society

A look at the long-term decline in marriage.  (The Atlantic)

Nicaragua’s long history of trying to build a canal across the country.  (Quartz)

Science

Childhood concussions are often missed or misdiagnosed.  (Scientific American also ScienceBlog)

What men and women are trying to get out of speed dating: a data analysis.  (Flowing Data)

Must cats die so birds can live?  (New York)

Our unconscious prevents us from seeing a whole lot.  (Scientific American)

Technology

Five reasons why social media won’t consolidate.  (HBR)

Examples of the power of “connecting people to information previously unavailable to them.”  (Wired)

How startups can look for a new way out.  (Pando Daily)

Media

Why Netflix ($NFLX) is producing original content.  (Felix Salmon)

Everything is fast, fast, fast in media today. Maybe it is time for “slow media.”  (Pando Daily)

Shocked to hear that all is not as it seems on a reality TV, the Shark Tank edition.  (NYTimes also Forbes)

Books

A few notes on Happy Money: The Science of Smarter Spending by Elizabeth Dunn and Michael Norton.  (CXO Advisory Group)

An excerpt from Drew Magary’s Someone Could Get Hurt: A Memoir of Twenty-First Century Parenthood.  (Deadspin)

An excerpt from Inside the Box: A Proven System of Creativity for Breakthrough Results by Drew Boyd and Jacob Goldenberg.  (WSJ)

Mixed media

A look inside the weird world of SkyMall.  (The Atlantic)

Seven myths about cooking steak.  (Serious Eats via kottke)

Want more home runs? Juice the ball.  (WSJ)

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Quote of the day

James Picerno, “The point is that rebalancing when you’ve earned a year or two worth of gains in a few months is usually a smart decision.”  (Capital Spectator)

Chart of the day

No inflation to see here.  (Big Picture)

Markets

Where did all the bond sales go?  (FT)

Are Millenials coming back to the stock market?  (Term Sheet)

It is hard to see where earnings growth is going to come from.  (MoneyBeat)

Strategy

Traders can only control their own actions/reactions.  (Trader Habits, Dragonfly Capital)

Wes Gray, “Arbitrage-like strategies always look easy on paper, but the devil is in the details.”  (Turnkey Analyst)

On the difference between the possible and probable.  (Big Picture)

Finance

Automated block trading is now a thing.  (Reuters)

Everything you need to know about floating rate Treasury notes.  (Institutional Investor)

Can we use a new securitization model to transform the drug discovery business?  (Buttonwood)

Selling early access to data is not illegal.  (Prof. Bainbridge)

Funds

What is behind Bruce Berkowitz’s big bet on Fannie and Freddie.  (Term Sheet)

Blackrock ($BLK) can’t seem to get its equity unit right.  (WSJ)

Global

Emerging market bonds are still held hostage to US rates.  (HedgeWorld)

Why you can’t treat all emerging markets as the same.  (The Telegraph)

Economy

Industrial production was flat in May.  (Calculated Risk, Capital Spectator)

The markets too Bernanke’s May comments to heart. Now the Fed is walking them back a bit.  (Dealbook, Real Time Economics)

Signs are now pointing towards a tapering decision in September.  (Tim Duy)

Rail traffic is stagnating.  (Pragmatic Capitalism)

Mortgages

Jumbo mortgage rates are now lower than conforming loans.  (The Basis Point)

Mortgage refis have screeched to a halt.  (WSJ)

Earlier on Abnormal Returns

Check out a wide-ranging interview with Tadas Viskanta.  (See It Market)

What you may have missed in our Thursday linkfest.  (Abnormal Returns)

Mixed media

People are drinking a lot less orange juice these days.  (Quartz)

Beverage containers are going high tech.  (Time)

Corn is the new wheat.  (WSJ)

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The post Friday links: rebalancing decisions appeared first on Abnormal Returns.

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Quote of the day

Rick Ferri, “ The numbers shift around a bit from one period to another, but in total, the link between past performance and future return is almost nonexistent. The best way to treat past performance is as random.”  (Rick Ferri)

Chart of the day

Improving economic fundamentals suggest higher yields ahead.  (Mebane Faber)

Markets

The tape is exhausted.  (The Reformed Broker)

Keep an eye on tech stocks.  (Charts etc.)

Beware e-mail stock spammers are out in full force.  (InvestmentNews)

When a You Can Be a Stock Market Genius trade goes awry.  (Market Folly)

They call it the carry TRADE for a reason: things reverse.  (MoneyBeat, FT Alphaville)

Strategy

Is cash finally now an underinvested asset class?  (Minyanville)

The greatest myth about trading is that it is inherently risky.  (Brian Lund)

Why you need to learn to embrace losses.  (SMB Training)

Financial pornography often drowns out real investment advice.  (Huffington Post)

What kind of risk gets compensated: volatility or tail-risk?  (SSRN via CXOAG)

What Helaine Olen’s Pound Foolish: The Dark Side of the Personal Finance Industry gets right. (Aleph Blog)

Apple

OS X and iOS are converging.  (Pando Daily)

Sounds like Apple ($AAPL) is going to cave on a phablet.  (Reuters, Quartz)

Preferential access

Thompson Reuters provides paying clients early access to data.  (CNBC, WSJ)

On the legality of preferential data releases.  (CNBC, FT, Dealbreaker)

How average investors lose in the preferential data game.  (Modeled Behavior)

Finance

Are forex markets really rigged?  (Kid Dynamite, FT Alphaville, Felix Salmon)

Haircuts on defaulted muni bonds are growing.  (MuniLand)

A sad fact for equity investors: value is being created pre-IPO.  (Xconomy)

Funds

The ETF Deathwatch for June.  (Invest With an Edge)

Blackstone Group ($BX) is getting into the mutual fund business.  (Bloomberg)

Global

Just how bad is the emerging market sell-off?  (FT Alphaville, Horan Capital)

There is still hot money to come out of the emerging markets.  (Quartz)

Economy

Weekly initial unemployment claims continue to trend lower.  (Calculated Risk)

The payroll tax hike did not kill the economy.  (Quartz also Bonddad Blog)

The US consumer is hanging in there: retail sales were higher in May.  (Calculated Risk)

State budgets are on the mend.  (Washington Post)

Earlier on Abnormal Returns

What you may have missed in our Wednesday linkfest.  (Abnormal Returns)

Mixed media

Dads are not availing themselves of paternity leave.  (WSJ)

Peter Orszag, In retirement, “Your job may be saving your life.”  (Bloomberg)

Brick by Brick: How Lego Rewrote the Rules of Innovation and Conquered the Global Toy Industry by David Robertson with Bill Breen.  (FT)

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The post Thursday links: a lost performance link appeared first on Abnormal Returns.

Quote of the day

Morgan Housel, “Good investors read a tremendous amount of information, of course. They’re just more selective with what they read and pay attention to.”  (Motley Fool)

Chart of the day

Preferred stocks don’t like the jump in interest rates.  (Bespoke also Horan Capital)

Markets

Checking in on the health of the cyclical bull market.  (Big Picture)

Global market correlations are dropping.  (WSJ)

Volatility is back.  (Points and Figures)

On the “violent and extreme” drop in emerging market assets.  (FT)

Bonds

Do old-timers know how to manage in a bond bear market?  (Felix Salmon)

Would a 4% 10-year Treasury yield be a disaster for markets?  (Bloomberg)

On the end of the generational bond bull market.  (Dealbook)

High yield bond spreads are finally ticking up.  (Learn Bonds)

Muni bonds

July is a historically good month for  muni bonds.  (Bloomberg)

How to buy muni bonds.  (Total Return)

Target date bond ETFs are receiving inflows in light of fears about higher rates.  (FT)

Strategy

On the myth of the “American retirement crisis.”  (Rekenthaler Report)

Data consumers should check out Keeping Up with the Quants: Your Guide to Understanding and Using Analytics by Davenport and Kim. (Reading the Markets)

Companies

Why isn’t Booz Allen Hamilton ($BAH) stock down more?  (Daniel Gross also Term Sheet)

Why Pandora ($P) bought a terrestrial radio station.  (The Hill)

Finance

It’s now the forex market’s turn to experience a pricing scandal.  (Bloomberg, Dealbreaker)

Quantitative hedge funds are taking it on the chin.  (FT)

ETFs

More than $100 billion has flowed into ETPs year-to-date.  (FT)

Here they come: non-transparent, actively managed ETFs.  (IndexUniverse)

Emerging markets+high yield=bad combination.  (ETF Trends)

Global

Will Abenomics work?  (SurlyTrader)

Runaway inflation is a distant worry at present.  (Martin Wolf)

Tracking the carry trade as a measure of investor risk aversion.  (VIX and More)

Greece is once again an emerging market.  (Quartz)

Economy

Put your “recession watch” on hold for now.  (Calculated Risk)

Checking in on the predictive value of the slope of the yield curve.  (Econbrowser)

Rising real yields are a good thing.  (Calafia Beach Pundit also MoneyBeat)

Will the money multiplier ever recover?  (FT Alphaville)

Macro market risk is ticking up.  (Capital Spectator)

Earlier on Abnormal Returns

What you may have missed in our Tuesday linkfest.  (Abnormal Returns)

Mixed media

“How they will make money?” is the wrong question.  (Medium)

Voice-activated technology isn’t all that safe when driving.  (NYTimes)

When did Lego characters get so angry?  (PopSci via @danprimack)

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The post Wednesday links: being more selective appeared first on Abnormal Returns.

Quote of the day

Bryan Goldberg, “The secret of SEO is to… create content that people want to read. That’s it. That is the deep, dark secret.”  (Pando Daily)

Chart of the day

TIPS yields have turned positive.  (The Tell, Crossing Wall Street)

Bonds

Investors are fleeing bond funds.  (Quartz)

How to take advantage of bargains in muni bond CEFs.  (Morningstar)

The bad news of rising real yields.  (Buttonwood)

Shorts are jumping on high yield bond ETFs.  (Focus on Funds)

Markets

Equities are the new bonds and bonds are the new equities.  (David Rosenberg)

Discount brokers are rallying. Is that a good sign?  (Bloomberg)

It’s time for the cyclicals to start outperforming.  (Charts etc.)

REITs look rich.  (Institutional Imperative)

The market’s PEG ratio is pretty much in line with historical averages.  (Dr. Ed’s Blog)

Emerging markets

Emerging markets are tanking. (Money Game,

Are emerging market uniquely liquidity-driven?  (MoneyBeat)

On the chance of a reversal.  (Dragonfly Capital)

A number of overseas markets look none too hot.  (The Short Side of Long)

Strategy

The real underpinning of the global equity markets.  (Gavyn Davies)

Is the AAII survey a contrarian indicator?  (Greenbackd)

Why is Vanguard such an ‘anomaly’ in the fund world?  (Rekenthaler Report)

Savings

Start saving now!  (Vanguard)

We need a new retirement savings system.  (Helaine Olen)

Your two investing goals in retirement.  (Monevator)

Technology

Reactions, largely positive, to Apple’s ($AAPL) “confident” announcements at WWDC.  (The Loop, Quartz, Pando Daily, GigaOM, Daring Fireball, The Wirecutter)

It’s now Apple’s turn to “borrow from” Microsoft ($MSFT).  (Slate)

What kind of innovative does Apple need to be?  (Justin Fox)

The future of maps is social as Google ($GOOG) closes the Waze deal. (NYTimes, AllThingsD)

Finance

Funding costs are super low but finding assets to buy is difficult.  (FT)

Shady brokers are getting their slates cleaned.  (Dealbook)

Thinking about different ways to fund renewable energy.  (Institutional Investor, Bloomberg)

The IPO window is open for PE-backed firms. (peHUB)

Does the small cap market need wider tick sizes to survive?  (peHUB)

Global

Putting an estimate on world shale oil reserves.  (FT, ibid)

The shift from oil to natural gas is now inevitable.  (Reuters via Money Game)

Don’t mention the ‘R-word’ in Australia.  (FT Alphaville)

Economy

Are higher mortgage rates affecting housing?  (Sober Look)

The private economy is doing just fine.  (Todd Sullivan)

Small businesses are finally turning a bit more optimistic.  (Calculated Risk)

Mixed media

On the challenges of quitting coffee.  (WSJ)

Chances are you are washing your hands incorrectly.  (The Atlantic)

How critical all the early years of life?  (Marginal Revolution)

Why learning to swim is so important.  (Well)

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The post Tuesday links: the secret of SEO appeared first on Abnormal Returns.

Quote of the day

Ali Meshkati, “Allowing any and all forms of information to enter the mind on a continuous basis is a modern day malady that will not only degrade investment results but human results.”  (Zenpenny)

Chart of the day

Negative earnings guidance soared in Q2.  (AlphaNow)

Markets

Low vol strategies were crushed in May.  (Falkenblog)

The bear case for equities: signs of growing risk aversion.  (Humble Student)

Adaptive trading systems have changed the market.  (Price Action Lab via @chicagosean)

Meredith Whitney, “I never focused on the municipal bond market. I more focused on state arbitrage if anything.”  (Bond Buyer)

Strategy

Volatility isn’t the enemy.  (WSJ)

The 3 worst financial predictions of the past 5 years.  (Pragmatic Capitalism)

Buy cheap stuff (around the world).  (Turnkey Analyst)

What I Learned Losing a Million Dollars by Jim Paul and Brendan Moynihan is definitely worth a read. (Reading the Markets)

Taxes

In what kind of account should you hold MLPs?  (WSJ)

The challenges of taxes in retirement.  (Rick Ferri)

Companies

Booz Allen Hamilton ($BAH) has a huge PR problem (among other things).  (Daniel Gross, CNNMoney)

Google ($GOOG)+Waze is unbeatable.  (Quartz, WSJ)

Finance

Hedge fund advertising is coming. Pay no heed.  (Economist)

Hedge fund of funds are hanging on by a thread.  (FT)

Are money market mutual funds going to be fixed before the next crisis?  (Chuck Jaffe)

Economy

Just how big is the equity market-related wealth effect?  (FT Alphaville)

The US economic expansion is slow but steady.  (Bloomberg)

Japan was growing at a 4.1% rate in Q1.  (FT, Bloomberg)

Earlier on Abnormal Returns

Does the US need a mandatory retirement savings program?  (Abnormal Returns)

I was recently a guest on Andrew Horowitz’s The Disciplined Investor podcast.  (TDI)

Mixed media

Where did all the startups go?  (Points and Figures)

Want to be more productive? Get more sleep.  (FT)

When did sunscreens get so complicated?  (Slate)

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The post Monday links: a modern day malady appeared first on Abnormal Returns.

In light of recent news it may not be fashionable to talk about giving the federal government additional powers. However it is hard to look at the question of retirement savings in the US and not think there is a huge, multi-generational problem. In part you could argue that it is a function of financial illiteracy. One potential solution to the issue of financial illiteracy is to design savings products that are “..cheap, transparent, simple and free of the ill-effects of leverage.”

However that may not be enough. It may be the case that individuals, even if they avoid the worst traps of the personal finance industry, are simply unable to voluntarily save enough to provide for themselves a comfortable retirement. Helaine Olen in her book Pound Foolish: Exposing the Dark Side of the Personal Finance Industry notes how the shift from defined benefit to defined contribution programs has by and large been a disaster for the American saver.

An article by Jeff Sommer in the New York Times this weekend looks at the tough times retirees are going to have replacing their income. In part that has to do with the extraordinarily low interest rates one can garner these days. The other reason has to do with undersaving. From the article:

“The bottom line is that people at nearly all levels of the income distribution have undersaved,” Professor Wolff said. “Social Security is going to be a major, and maybe primary, source of income for people, even for some of those close to the top.”

There are some things an investor can do including ramping up the risk of their portfolio through increased equity holdings to try and generate higher returns. However the past decade or so has shown us that the stock market is not an ATM machine from which one can extract guaranteed returns. It may be the case that Americans need to recalibrate that expectations for retirement including working longer and delaying their Social Security payments.

The big picture question is whether we as a society can do anything to help future generations avoid the tough trade-offs the next few generations will face as reach the traditional retirement age? Larry Fink the head of investment management giant Blackrock ($BLK) has called for a mandatory savings to be a big part of a “comprehensive solution to retirement savings.”

Many analysts look to the Australian “superannuation” system that has since 1992 has changed the way Australians save for retirement. By forcing workers to put 9% of their pre-tax income into retirement accounts Australia has amassed $1.5 trillion in savings which is roughly 7 times more per worker than in the US. There are other ways of handling retirement savings as this article shows but it is hard to see how you can generate substantially higher savings rates without some form of mandatory component.

It would be great if individuals stepped their own savings but that habit is simply not there for many. Cliff Goldstein at Marketwatch notes how a mandatory savings program could help change attitudes and habits along the way:

When planning for retirement, one of the main questions you should always ask yourself is: “Am I saving enough?” The implementation of a mandatory savings system with automatic escalation could potentially take much of the mystery out of answering that question. By automatically setting employees up with good savings habits at the start of their careers, future generations would likely find themselves much better prepared for retirement success.

In an ideal world everyone would generate sufficient savings on their own to help fund their own retirement. However most of the data shows that Americans are simply unable to do this on their own. Nor is the current system of savings consisting of 401(k)s and IRAs doing the job either. The next few generations may now be facing increasingly difficult retirement scenarios. The question is whether instituting real changes now can help save future generations from a similar fate.

UPDATE: Meir Statman writing at the Financial Analysts Journal looks at the issue of mandatory retirement savings and comes out in favor and lays out six criteria that should be used in setting any such system.

Items mentioned above:

Modest encroachments on privacy.  (The Reformed Broker)

The mirage that is financial literacy.  (Abnormal Returns)

Pound Foolish: Exposing the Dark Side of the Personal Finance Industry by Helaine Olen.

Why many retirees could outlive a $1 million nest egg.  (NYTimes)

Mandatory savings accounts are coming your way.  (Time)

In Australia, retirement savings done right.  (Businessweek)

How they do it elsewhere. (NYTimes)

Should retirement savings be mandatory?  (Marketwatch)

The post Does the US need a mandatory retirement savings program? appeared first on Abnormal Returns.

Quote of the day

Richard Bernstein, “The Standard & Poor’s 500 has outperformed emerging markets now for five years. Nobody cares, and it pains people to admit that the U.S. market has been outperforming.”  (Barron’s)

Chart of the day

IVV Total Return Price data by YCharts

Are utilities a buy now after a pullback?  (Barron’s)

Markets

Country stock market performance year-to-date.  (Bespoke)

The US dollar took it on the chin last week.  (Ivanhoff Capital)

On the dangers of the Yen carry trade.  (Dynamic Hedge)

A review of current market sentiment.  (The Short Side of Long)

How is the equity premium puzzle going to get resolved?  (A Dash of Insight also Investing Caffeine)

Muni bonds

Buying (and selling) individual municipal bonds can be a costly endeavor.  (Jason Zweig)

Investors are abandoning muni bond CEFs.  (Barron’s)

Strategy

Why a low vol strategy works: investors are drawn to stocks that catch their attention.  (Mark Hulbert)

Jose de la Vega’s investing rules circa 1688.  (Crossing Wall Street)

It’s hard to see where acceptable long-term returns come from.  (Long Short)

Companies

Amazon ($AMZN) wants to be in every room in your house.  (Pando Daily)

Is Google ($GOOG) the GE ($GE) of the 21st century?  (FT)

Is Snapchat a $1 billion company?  (TechCrunch)

Finance

Seven reasons why stock buybacks are often disappointing.  (Quartz)

The hedge fund herd has ‘been culled.’  (FT)

ETFs

John Bogle has won. What next?  (InvestmentNews)

On the dangers of back-tested ETFs.  (Clear Eyes Investing via @monevator)

Global

Canada’s economy is too real-estate dependent.  (Sober Look)

Labor’s share of the economy is falling around the developed world.  (Conversable Economist via @markthoma)

Investors are abandoning emerging market bonds.  (beyondbrics)

Economy

Why the Fed hates the word ‘tapering.’  (Real Time Economics)

Bubbles have not been a bad thing for the super-rich.  (The Reformed Broker)

Can you save enough to live in retirement for twenty years?  (NYTimes via @mooerhn)

A look back at the economic week that was.  (Bonddad Blog)

The economic schedule for the coming week.  (Calculated Risk)

Earlier on Abnormal Returns

What you may have missed in our long form Saturday linkfest.  (Abnormal Returns)

Top clicks this week on the site.  (Abnormal Returns)

Mixed media

Why don’t schools teach typing?  (Worthwhile Canadian Initiative)

Everyone would benefit from reading It’s All About Who You Hire, How They Lead…and Other Essential Advice from a Self-Made Leader by Morton Mandel.  (Aleph BLog)

Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.

The post Sunday links: nobody cares edition appeared first on Abnormal Returns.

Thanks for checking in with us this weekend.  Here are the items our readers clicked most frequently on Abnormal Returns for the week ended Saturday, June 8th, 2013. The description reads as it does in the relevant linkfest:

1. How much money do you need to trade for a living?  (Brian Lund)
2. Check out the stunning move in REITs.  (chessNwine)
3. This is your brain on coffee.  (Well)
4. Are emerging markets telling us something?  (The Reformed Broker)
5. Three tips to help avoid the easy trap of buying high.  (Bucks Blog)
6. Welcome to the rolling correction.  (The Reformed Broker)
7. Is it crazy to be 100% in stocks?  (Total Return)
8. This is the perfect Pinterest picture.  (Wired)
9. Joe D., “Friday left a mark.”  (UpsideTrader)
10. Why interest rates are rising.  (Buttonwood)

Here is a look at what else you may have missed on the site:

1. The media has turned on the low vol effect. Should you?  (Abnormal Returns)
2. What books Abnormal Returns readers purchased at Amazon in May.  (Abnormal Returns)
3. Asset allocation and the challenge of avoiding tunnel vision.  (Abnormal Returns)

Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.

The post Top clicks this week on Abnormal Returns appeared first on Abnormal Returns.

The weekend is a great time to catch up on some long form items that we passed up on during the week. Thanks for checking in.

Investing

Are you trying to get rich or stay rich?  (Big Picture)

Ten things a good financial advisor does besides pick funds.  (Above the Market, ibid)

Howard Lindzon’s lessons for traders.  (Trader Planet)

Finance

A look at the Adaptive Markets Hypothesis.  (Credit Writedowns)

A brief defense of Wall Street.  (Chris Hernandez via @newrulesinvest)

How can we decrease insider trading? More openness.  (New Yorker also Felix Salmon)

Money management

How the money management business can move beyond ‘useless extraction.’  (the research puzzle)

Stock picker Wally Weitz is fighting against the low-cost investing tide.  (WSJ also Dealbreaker)

Technology

Nobody’s job is safe these days from technology.  (TechCrunch)

It’s time to start prosecuting patent trolls.  (Felix Salmon)

How social media is changing disaster response.  (Scientific American)

The secret to online safety.  (ArsTechnica)

Are apps helping drive a housing boom?  (FT)

Companies

100 brilliant companies.  (Entrepreneur)

A profile of Costco ($COST) CEO Craig Jelink.  (Businessweek)

Truly great companies add more value than they extract.  (Dealbook)

Business models

Don’t rush a business model: focus on product and strategy first.  (A VC)

Can anyone get same-day grocery delivery right?  (Slate)

StubHub is killing scalpers.  (NYTimes)

Society

The economic case to legalize drugs.  (Quartz)

Why do Finnish babies sleep in government-provided cardboard boxes?  (BBC via @thebrowser)

Diet

How hunter-gatherers really ate.  (Scientific American)

Vegetarians apparently live longer.  (WSJ)

Science

Drowning doesn’t look like drowning: the signs.  (Slate)

Negative emotions are the key to mental health.  (Scientific American)

Sports

A look at the nasty world of Italian soccer.  (ESPN)

Why is ESPN so good at televising stuff like spelling bees?  (Quartz)

Now barefoot running isn’t all that good for you.  (NYTimes)

Entertainment

The 101 best written TV series.  (WGA)

Why leaving a book half-read is so difficult.  (WSJ)

Books

An except from Barbara T. Dreyfuss’ Hedge Hogs: The Cowboy Traders Behind Wall Street’s Largest Hedge Fund Disaster.  (Salon)

Turney Duff author of The Buy Side: A Wall Street Trader’s Tale of Spectacular Excess isn’t surprised by insider trading indictments.  (Dealbook)

Daniel Kahneman, author of Thinking Fast and Slow, has a problem with behavioral economics.  (The Daily Beast)

10 tips from John Freeman’s The Tyranny of E-mail: The Four Thousand Year Journey to Your Inbox.  (Farnam Street)

Eight books to make the innovator smarter this Summer including To Save Everything Click Here by Eugene Morozov.  (WashingtonPost)

Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.

The post Saturday links: getting vs. staying rich appeared first on Abnormal Returns.

Quote of the day

Ashby Monk, “The sad reality, however, is that fees and expenses tend to be one of the more overlooked aspects of institutional money management.  (Institutional Investor)

Chart of the day

Are the homebuilding stocks ahead of themselves?  (BCA Research)

Markets

The US dollar and stocks are moving together of late.  (Bespoke)

The yield curve has steepened.  (StockCharts Blog)

Hot money is gushing out of junk bond funds.  (FT, Income Investing)

Are some funds going to blow up based on the big Japan reversal?  (Buttonwood)

The rush to risk is over for now.  (FT Alphaville)

A bullish sign for oil equities.  (Charts etc.)

Strategy

Building a better moving average.  (Empiritrage)

Why you need a ‘trading cave.’  (StockCharts Blog)

Is there an explanation for the ‘Sell in May’ phenomenon?  (Brett Arends)

Low risk investing without industry bets.  (SSRN via Pragmatic Capitalism)

Physics is not the right model for Wall Street: a review of James Owen Weatherall’s The Physics of Wall Street.  (Aleph Blog)

Companies

What is Apple ($AAPL) spending all that money on?  (Minyanville)

France Telecom ($FTE) is cheap.  (SumZero)

Finance

The number of TBTF institutions keeps growing.  (Economist)

Q2 is shaping up well for the investment banks.  (MoneyBeat)

John Paulson wants you to stop talking about his big gold bet.  (WSJ)

Global

Japan’s national pension fund is loading up on stocks.  (WSJ, Bloomberg)

The ECB is reluctant to go negative.  (Gavyn Davies)

Canada had a blowout employment report for May.  (Globe and Mail)

Economy

The May NFP report shows a healthy jump in unemployment.  (Calculated Risk, Quartz, Capital Spectator, Real Time Economics, Wonkblog, Daniel Gross, Tim Duy, FT Alphaville)

What kind of jobs growth do we need to keep the unemployment rate flat?  (Real Time Economics)

The mortgage refi boom is likely over.  (FT Alphaville)

Earlier on Abnormal Returns

Asset allocation and the challenge of avoiding tunnel vision.  (Abnormal Returns)

Mixed media

Startups are increasingly advertising on television.  (Pando Daily)

A good library is filled mostly with unread books.  (Farnam Street)

Why no one reads to the end of articles online any more.  (Slate)

The (music) world still needs human editors.  (Fast Company)

Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.

The post Friday links: the sad reality of high fees appeared first on Abnormal Returns.

It’s really easy to get sidetracked when it comes to investing. Indeed investors can get tunnel vision focusing on some small matter to the exclusion of others. All that matters in the end for investors are the real, after-tax returns on their portfolio. However we spend most of our time obsessing about the latest economic release or the performance of the latest hot new stock.

Josh Brown at the Reformed Broker notes many examples of strategies that have captured investor’s attentions only to fall by the wayside. There is never a shortage of these strategies because there is always something working. For the vast majority of investors these strategies end up being a distraction from the things that matter most for their performance.

James Picerno at the Capital Spectator looks at this phenomena in relation to asset allocation. The purpose of any asset allocation program is to try and generate acceptable risk-adjusted returns. As we have seen investors like to get off track and focus on either the best (or worst) performing asset class. Picerno writes:

The allure of focusing on one asset class at a time, and obsessing over its outlook, keeps us from concentrating on those variables over which we have some limited influence, namely, asset allocation and rebalancing. In fact, most of your success (or failure) will be closely tied to how and when you rebalance across time…It’s easier, of course, to obsess over individual securities and asset classes, one day at a time, in isolation. But don’t confuse intellectually comforting preferences with strategic wisdom.

Which begs the question: how are you spending your time? Are you obsessing over some small matter or are you focused on the big picture of overall portfolio design? The honest answer to that that question might surprise you.

The post Asset allocation and the challenge of avoiding tunnel vision appeared first on Abnormal Returns.

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Quote of the day

E.S. Browning, “Mr. Bernanke’s challenge is to move the Fed back to a more normal role in financial markets and the economy, while avoiding the disastrous errors of 1936 and 1937.”  (MoneyBeat)

Chart of the day

The US market has been ignoring unhappy economic surprises.  (Charts etc.)

Markets

Bullish sentiment falls again.  (Bespoke)

Are emerging markets telling us something?  (The Reformed Broker)

High dividend stocks still seem expensive.  (LearnBonds)

Check out the stunning move in REITs.  (chessNwine)

Strategy

Pay attention when female directors buy stock.  (Buttonwood)

Three tips to help avoid the easy trap of buying high.  (Bucks Blog)

Value investors can benefit from The Art of Value Investing: How the World’s Best Investors Beat the Market.  (Aleph Blog)

Business models

Can anyone make money on home grocery delivery?  (Slate)

Will books eventually move towards a Netflix ($NFLX)-type model?  (Marketwatch)

Finance

Just how big a deal are new rules for the prime money market fund industry?  (Dealbreaker)

High frequency trading is losing its profitability.  (Businessweek)

Regulators are increasingly focusing on dark pools.  (WSJ)

Six big Wall Street memoir cliches in The Buy Side: A Wall Street Trader’s Tale of Spectacular Excess .  (BuzzFeed)

ETFs

Investors continue to shift towards low cost, core ETFs.  (IndexUniverse)

Will credit default swap ETFs take off?  (Sober Look)

The cost of high mutual fund fees.  (NPR via Carpe Diem)

Economy

Initial weekly unemployment claims dropped.  (Calculated Risk, Capital Spectator)

Falling inflation expectations are going to make things more complicated for the Fed.  (Economist’s View)

Earlier on Abnormal Returns

Hurry for a chance to win some recently published finance books.  (Abnormal Returns)

Social finance

What can you get out of StockTwits?  (Thoughtful Bull)

The Estimize community keeps growing.  (Inside Investor Relations)

Mixed media

Why MLB needs suspend Biogenesis clientele.  (The Daily Beast)

Reading health-related news will make you feel sick.  (Fast Company)

This is your brain on coffee.  (Well)

Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.

The post Thursday links: a more normal role appeared first on Abnormal Returns.

We are big book fans here at Abnormal Returns. For instance here our latest post on the books most purchased by Abnormal Returns readers in May 2013. Recently we just tweeted the following

Hey tweeps, Daniel Kahneman’s big book “Thinking Fast and Slow” is presently only $4.99 for the Kindle. amzn.to/17rgVRy

— Tadas Viskanta (@abnormalreturns) June 6, 2013

So as a way of saying thanks to our readers on this random Summer day we are giving away copies of four new(ish) finance books including a copy of Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere. However we are not messing around this time. Send an e-mail to tadas–at–abnormalreturns–dot–com expressing your interest by 3PM Eastern time today, Thursday June 6th with “Flash book giveaway” in the Subject line.* We will contact the winners with additional details. Thanks and good luck!

*US mailing addresses only. Sorry international readers.

UPDATE: The contest giveaway is closed. The winner have been notified. Thanks for playing!

The post Flash book giveaway appeared first on Abnormal Returns.

Quote of the day

Noah Smith, “No matter how much we might wish they were, economists are not go-to experts who know just how the world works or how to fine tune it. They are not car mechanics. And if they act like they are car mechanics, you should instantly be suspicious.”  (The Atlantic)

Chart of the day

Where did all the policy uncertainty go?  (Wonkblog)

Markets

The advance-decline line is cooling off.  (The Reformed Broker)

Individual investors are coming back to stocks.  (Pragmatic Capitalism)

Where did all the stock splits go?  (MoneyBeat)

How has the performance of the 100 largest ETFs done year-to-date?  (ETF Replay)

Why is everyone so quick to make a call based on one month’s performance?  (Mark Hulbert)

Is consumer confidence indicative of anything?  (A Dash of Insight)

Why interest rates are rising.  (Buttonwood)

Strategy

We build up mechanical investing strategies just to knock them down again.  (The Reformed Broker)

Trading mistakes are an inevitability.  (Brian Lund)

In praise of optimism.  (Motley Fool)

Beware of headlines that claim to explain markets.  (AdvisorOne)

Especially ones that ignore recency bias.  (Pragmatic Capitalism)

It’s tough to know “where coincidence ends and causality begins.”  (Adam Warner)

Companies

Amazon ($AMZN) is getting into the grocery business.  (Reuters, Slate)

What is Salesforce.com ($CRM) going to do with ExactTarget ($ET)?  (GigaOM)

It’s hard to see how things get a lot better for Zynga ($ZNGA).  (Slate, Buzzfeed)

Why Wall Street isn’t all that keen about Facebook ($FB).  (Wired)

Putting Dell ($DELL) out of its misery.  (Dealbreaker)

Finance

Symthetic CDOs are back, baby.  (WSJ)

Hedge funds are envious of those firms with ‘permanent capital.’  (Businessweek)

Quant hedge funds are taking a hit on bonds.  (FT)

Algorithmic investment managers Betterment and Wealthfront are capturing assets.  (Quartz, Wealthfront)

Where is all that M&A activity?  (Sober Look)

ETFs

A guide to free ETF trading.  (Morningstar)

Vanguard’s international bond funds have launched.  (IndexUniverse)

High yield vs. bank loan funds: which is better?  (LearnBonds)

Global

What does anyone ever invest in emerging market equities?  (research puzzle pix contra iShares Blog)

Frontier markets are beating the pants off of the rest of the emerging markets.  (beyondbrics)

Economy

ADP payroll numbers were okay, at best.  (Capital Spectator, Wall Street Social)

ISM services shows continued expansion.  (Calculated Risk, Bespoke)

More signs of weakness in manufacturing.  (Real Time Economics)

Three myths about the housing recovery debunked.  (Real Time Economics)

Are markets so out of control that QE needs to be reeled in?  (It’s Not That Simple)

Earlier on Abnormal Returns

The media has turned on the low vol effect. Should you?  (Abnormal Returns)

Mixed media

A review of Bloomberg Black.  (I Heart Wall Street)

Kickstarter is tightening things up a bit.  (Quartz)

Why a college education is getting more expensive.  (Slate)

Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.

The post Wednesday links: not go-to experts appeared first on Abnormal Returns.

Last week I wrote a post on ETFs have been a catalyst for the widespread adoption of broadly diversified, low cost portfolios. However that does not mean that exchange traded funds are an unalloyed good. In my book I spend as much time talking about the benefits of ETFs than I do the potential downsides.

One potential downside is that once an ETF on a novel strategy come to market investor expectations can get affected and not in a good way. Take for instance the area of low volatility ETFs. I have been writing about the low volatility anomaly for some time now. A dozen (or so) ETFs have been released that track in various ways low volatility strategies on the US, developed and emerging markets. These funds were released in large part because of the academic research showing that, paradoxically, low volatility (or low beta) equities tend to outperform the market on a risk-adjusted basis.

This evidence of course flies in the face of the CAPM. Eric Falkenstein author of The Missing Risk Premium recently co-authored a paper looking at various explanations for this anomaly. Indeed one could argue that the low volatility anomaly is better described as the high volatility anomaly because of the historically poor performance of high volatility equities.

The research on low vol is pretty convincing. What this research also shows is that the low volatility effect is seen over full market cycles. Indeed one of the biggest arguments against trying to implement a low vol strategy is that it can dramatically underperform the broad market for extended periods of time.

In the meantime the financial media has gone into nuts over the recent underperformance of low vol strategies after an extended period of outperformance. This recent outperformance was the catalyst for sizable inflows into the two largest low vol ETFs: the PowerShares S&P 500 Low Volatility ETF ($SPLV) and the iShares MSCI USA Minimum Volatility Index ETF ($USMV). This performance also attracted a fair amount of ‘hot money’ as well and this hot money has begun to jump ship.  This reversal has prompted a wave of breathless headlines like:

Is the “low-beta bubble” deflating? and

When low volatility bites back and

A ‘low risk’ trade is getting less safe.

Given the coverage you would think that the outperformance of low vol was a one-time thing has been played out. First a reading of history would show that low vol strategies can underperform, like any other strategy, for periods of time. Second you would have to think that a few billion of inflows into some ETFs would somehow offset the behavioral and structural effects underlying the low vol anomaly. There is a big mismatch between the time frame of the coverage and the underlying dynamics of the low vol effect.

The bottom line is that we would not be seeing this coverage were it not for the existence of these low vol ETFs. The existence of these ETFs has been a boon for investors because it provides them with easy, relatively low cost access to these still novel strategies. However it also allows for investors to jump ship at the first sign of trouble. Investors who think they can time the low vol effect, or any other effect, are acting as de facto market timers, not long-term investors seeking to exploit a market anomaly.

The media isn’t helping in this regard. A little bit of perspective would do investors a greater service than focusing on weekly fund inflows and outflows and short-term performance. As I have written before: alpha is promised to no one, not even the low volatility crowd despite the impressive track record. Once you stray beyond broadly diversified index funds the risk (and anxiety) of underperformance is always there. Any one looking to take advantage of this effect or any other has to have a time horizon longer than that of a financial media.

Items mentioned above:

Financial innovation for once works for the investor.  (Abnormal Returns)

Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere by Tadas Viskanta.  (Amazon)

Low volatility, high interest.  (Abnormal Returns)

The low volatility effect in the spotlight.  (Abnormal Returns)

Low volatility ETF list.  (ETFdb)

The Missing Risk Premium by Eric Falkenstein. (Amazon)

Explanation for the Volatility Effect: An Overview Based on the CAPM Assumptions by Biltz, Falkenstein and Vliet.  (SSRN)

The low volatility anomaly and the CAPM.  (Portfolio Probe)

Why low volatility is losing its alpha.  (IndexUniverse)

Bandwagoners jump off the ‘low volatility’ ETF.  (Focus on Funds)

Is the “low-beta bubble” deflating?  (Barron’s)

When low volatility bites back.  (IndexUniverse)

A ‘low risk’ trade is getting less safe.  (WSJ)

No, it’s not a minimum variance bubble.  (iShares Blog)

Alpha is promised to no one.  (Abnormal Returns)

Peace of mind and active management do not go together.  (Abnormal Returns)

The post The low vol effect and time frame mismatches appeared first on Abnormal Returns.

This is an early and abbreviated edition of the linkfest. We will catch up with you tomorrow.

Scott Simon, “The road to hell is paved with positive carry.” (WSJ)

Breaking down global bond market allocations.  (Capital Spectator)

Debunking the Hindenberg Omen.  (MoneyBeat)

What are we to make of higher margin debt numbers?  (Greenbackd)

Is it crazy to be 100% in stocks?  (Total Return)

Promoted stocks stink.  (Aleph Blog)

The key to finding the next Berkshire Hathaway ($BRKB): capital allocation.   (BeyondProxy)

Hedge funds are ramping up their emerging market exposure in the face of QE tapering talk.  (Money Game also FT)

Hedge fund returns data gets revised all the time.  (John Rekenthaler)

Is investor buying of homes now a problem?  (NYTimes)

Journalists are now jumping to startups.  (BuzzFeed)

Another not-so positive review of Meredith Whitney’s The Fate of States: The New Geography of American Prosperity.  (Muniland)

This is the perfect Pinterest picture.  (Wired)

Another reason to slather on the sunscreen.  (Well, WSJ)

Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.

The post Tuesday links: positive carry potholes appeared first on Abnormal Returns.

Quote of the day

Ben Bernanke, “Life is amazingly unpredictable; any 22-year-old who thinks he or she knows where they will be in 10 years, much less in 30, is simply lacking imagination.”  (Calculated Risk)

Chart of the day

Unrest in the streets has put a damper on the Turkish stock market.  (beyondbrics)

Markets

A look at the no-to-hot May asset class returns.  (Capital Spectator)

Retail investors are still scared of equities.  (Reuters)

Welcome to the rolling correction.  (The Reformed Broker)

Cyclicals are breaking out versus consumer staples.  (All Star Charts)

Gold market timers have awful track records.  (Mark Hulbert)

Rates

How to play agency mortgage REITs.  (Mark Dow)

Why is everyone so freaked out about Fed tapering?  (LearnBonds, Pragmatic Capitalism)

Why it is time for the Fed to stop QE.  (Inside Investing)

Active vs. passive

The argument for doing too little vs. too much when it comes to active management.  (The Reformed Broker)

Investors always want the best of both worlds.  (Joe Fahmy)

Endowment funds would do well to ditch alternatives.  (Rick Ferri)

Strategy

How much money do you need to trade for a living?  (Brian Lund)

A look at Bob Rice’s new book pitched to retail investors The Alternative Answer: The Nontraditional Investments That Drive the World’s Best-Performing Portfolios.  (All About Alpha)

Companies

Google’s Android is set to pass Apple’s iOS as an app platform.  (FT)

Microsoft ($MSFT) is thinking about shaking things up.  (AllThingsD)

Muddy Waters wants to make a splash in Silicon Valley.  (WSJ)

Enterprise investments are “the bread and butter” of VCs.  (Tomasz Tunguz)

Hedge funds

Big US hedge funds are giving up on Europe.  (FT)

Institutional investors are increasingly giving up on hedge funds.  (Institutional Investor)

Hedge funds have more access to company managements.  (FT)

Alternatives have been a disaster for pension funds.  (Cassandra Does Tokyo)

Low vol investing

A deep dive into recent low vol underperformance.  (IndexUniverse)

The low vol effect is better described as the high vol anomaly.  (Portfolio Probe)

Funds

Check out the “ghost ship” of the fund world.  (WSJ)

Brokers don’t always pass along mutual fund communications.  (WSJ)

You are overpaying for money management.  (Marketwatch)

Global

Chinese companies are bullish on Europe.  (Time also beyondbrics)

European manufacturing is improving albeit slowly.  (MoneyBeat)

Is Greece stabilizing?  (Sober Look)

Economy

The May ISM manufacturing report falls below 50.  (Calculated Risk)

Is US business now too risk-averse?  (WSJ)

Why September is important to the Fed.  (Tim Duy also MoneyBeat)

Does QE just make the rich, richer?  (Buttonwood)

Earlier on Abnormal Returns

What books Abnormal Returns readers purchased at Amazon in May.  (Abnormal Returns)

Mixed media

Fact checking Meredith Whitney’s The Fate of States: The New Geography of American Prosperity.  (Bloomberg)

On the bear market in law school applications.  (WashingtonPost)

The benefits of free-riders.  (Seth Godin)

Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.

The post Monday links: amazingly unpredictable appeared first on Abnormal Returns.