Friday, February 12, 2021

Short Takes: Wall Street Wins with GameStop, Fee Transparency, and more

More stories are starting to come out about people in positions to influence vaccine rollout abusing their power to vaccinate themselves and their family and friends.  I assume that for every administrator who gets caught, a great many did the same thing but didn’t get caught.  This abuse is reprehensible, but predictable.  Fortunately, unless someone is actually reselling vaccine doses, each abuser’s incentive to break the rules goes away after the first offense.  Hopefully, we’re mostly through the loss of doses to corruption and we can move on with vaccinating health care workers and older people followed by the rest of us.

Here are my posts for the past two weeks:

Early Retirement Extreme

Stock Tapering: Adjusting Your Asset Allocation Based on Market Price-Earnings Ratio

Broke Millennial Talks Money

Declining Spending as We Age

Here are some short takes and some weekend reading:

Josh Brown has one of the better discussions of the clash between Robinhood traders and hedge funds over GameStop stock and other companies.  This will end with Wall Street pros making a pile of money (on average) and Robinhood traders losing that money (on average).  Tom Bradley also had a good take on this saga.  Yet another interesting take came from Preet Banerjee on the gamification of trading.

Tom Bradley at Steadyhand says “The wealth management industry is pathetic when it comes to transparency."  He encourages investors to dig into their recent portfolio statements to see how much they’ve paid in investment fees.

Preet Banerjee interviews Silvio Stroescu, President of BMO InvestorLine to discuss the huge increase in demand for online brokers during the pandemic.  Stroescu explains that the long wait times for their agents is due to the large increase in calls.  Although I’m overall a happy InvestorLine customer, I’d be happier if they stopped charging me interest on phantom short positions that arise because of one-day delays between different parts of their computing platforms.  They always reverse the interest charge, but having to call in each time to fix the problem is annoying.

Boomer and Echo
explains human capital.  People whose incomes are risky have human capital that is “stock-like and therefore they can ill-afford to take on much risk in their financial capital and should hold more cash and guaranteed investments to hedge against a volatile profession.”  When we compare stocks to bonds, stock returns are riskier, but they have a higher expected return than bonds.  With incomes, it’s often the case that an income is risky without the corresponding higher expected return compared to less risky professions.  For this reason, those with risky incomes are likely better off responding with a high saving rate so they can build a large emergency fund.  Then they can seek the higher returns on savings that one gets from stocks instead of letting their savings languish in bonds.

The Rational Reminder Podcast features William Bengen, the original researcher behind the 4% rule.

Kerry Taylor interviews Andrew Hallam to discuss the science behind why more stuff won’t make you happy.

The Blunt Bean Counter points to a number of resources for deciding how much you need to save to be able to retire in Canada.

John Degoey
has a take on future return expectations that are well below historical averages.

Canadian Couch Potato
explains what happened to last quarter’s distribution from the TD e-Series International Index fund.

Big Cajun Man tells the story of how “chutzpah” was an important part of a job interview he once had, but not in the way you might think.

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