Fiduciary, please.

Josh Brown really has this explanation down.  He is 100% correct.  I have bolded the really key parts here:

 

“Private Banker”

 

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be kind to yourself

From Eric Barker:

 

You’re compassionate with others all the time. You need to start showing more self-compassion, and treating yourself the way you would a friend in need.

Self-compassion boosts happiness and reduces stress, makes you less likely to procrastinate, and even improves romantic relationships.

So how do you do it? Next time that voice in your head starts saying critical things, reframe the thoughts into something positive and forgiving.

From Self-Compassion:

The best way to counteract self-criticism, therefore, is to understand it, have compassion for it, and then replace it with a kinder response… Reframe the observations made by your inner critic in a kind, friendly, positive way.

Imagine someone who loves you (like Grandmom) saying the kind words. Research shows this delivers serious results.

From Self-Compassion:

Practitioners first instruct patients to generate an image of a safe place to help counter any fears that may arise. They are then instructed to create an ideal image of a caring and compassionate figure… The training resulted in significant reductions in depression, self-attacking, feelings of inferiority, and shame.

You need to dispute negative thoughts and reframe them into something positive. Every time that critical voice starts yammering, instead imagine Grandmom giving supportive advice.

This is only a small part of his post about how to be your best self.  The whole thing is worth a read.

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Clean Energy from Hydrogen

Great article from Vox.

It is expensive, in both money and energy, to pry hydrogen loose from other elements, store it, and convert it back to useful energy. The value we get out of it has never quite justified what we invest in producing it. It is one of those technologies that seems perpetually on the verge of a breakthrough, but never quite there.

Seattle native Evan Johnson thinks he can change that. He thinks he’s finally figured out how to unlock a hydrogen economy.

Johnson is far from the first or only person with that goal. But after 10 years of tinkering, testing, and preparation, he has worked out a series of technologies and a practical business plan that chart a path to real commercial scale for hydrogen.

The best part is his 3 product plan:

HyTech Power, based in Redmond, Washington, intends to introduce three products over the next year or two.

The first will use hydrogen to clean up existing diesel engines, increasing their fuel efficiency by a third and eliminating over half their air pollution, with an average nine-month payback, the company says. That’s a potentially enormous market with plenty of existing demand, which HyTech hopes will capitalize its second product, a retrofit that will transform any internal combustion vehicle into a zero-emissions vehicle (ZEV) by enabling it to run on pure hydrogen. That will primarily be targeted at large fleets.

And that will tee up the third product — the one Johnson’s had his eye on from the beginning, the one that could revolutionize and decentralize the energy system — a stationary energy-storage product meant to compete with, and eventually outcompete, big batteries like Tesla’s Powerwall.

This is all very exciting.  If ICE can be converted, then that would immediately accelerate the elimination of fossil fuel usage.  The big issue with electric cars isn’t that they won’t happen, but that they can’t happen fast enough.  There are around 270 million cars in the USA, and around 6 million new cars sold each year.  All 3 of these products will have huge impacts on the entire transportation industry.  And there’s plenty of room for electric cars and this.

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Another study on dietary fat

From The Lancet:

 

Background

The relationship between macronutrients and cardiovascular disease and mortality is controversial. Most available data are from European and North American populations where nutrition excess is more likely, so their applicability to other populations is unclear.

Methods

The Prospective Urban Rural Epidemiology (PURE) study is a large, epidemiological cohort study of individuals aged 35–70 years (enrolled between Jan 1, 2003, and March 31, 2013) in 18 countries with a median follow-up of 7·4 years (IQR 5·3–9·3). Dietary intake of 135 335 individuals was recorded using validated food frequency questionnaires. The primary outcomes were total mortality and major cardiovascular events (fatal cardiovascular disease, non-fatal myocardial infarction, stroke, and heart failure). Secondary outcomes were all myocardial infarctions, stroke, cardiovascular disease mortality, and non-cardiovascular disease mortality. Participants were categorised into quintiles of nutrient intake (carbohydrate, fats, and protein) based on percentage of energy provided by nutrients. We assessed the associations between consumption of carbohydrate, total fat, and each type of fat with cardiovascular disease and total mortality. We calculated hazard ratios (HRs) using a multivariable Cox frailty model with random intercepts to account for centre clustering.

Interpretation

High carbohydrate intake was associated with higher risk of total mortality, whereas total fat and individual types of fat were related to lower total mortality. Total fat and types of fat were not associated with cardiovascular disease, myocardial infarction, or cardiovascular disease mortality, whereas saturated fat had an inverse association with stroke. Global dietary guidelines should be reconsidered in light of these findings.

 

and

 

Research in context

Evidence before this study

We did a systematic search in PubMed for relevant articles published between Jan 1, 1960, and May 1, 2017, restricted to the English language. Our search terms included “carbohydrate”, “total fat”, “saturated fatty acid”, “monounsaturated fatty acid”, “polyunsaturated fatty acid”, “total mortality”, and “cardiovascular disease”. We searched published articles by title and abstract to identify relevant studies. We also hand-searched reference lists of eligible studies. We considered studies if they evaluated association between macronutrient intake and total mortality or cardiovascular disease. The studies cited in this report are not an exhaustive list of existing research. Existing evidence on the associations of fats and carbohydrate intake with cardiovascular disease and mortality are mainly from North America and Europe.

Added value of this study

Current guidelines recommend a low fat diet (<30% of energy) and limiting saturated fatty acids to less than 10% of energy intake by replacing them with unsaturated fatty acids. The recommendation is based on findings from some North American and European countries where nutrition excess is of concern. It is not clear whether this can be extrapolated to other countries where undernutrition is common. Moreover, North American and European populations consume a lower carbohydrate diet than populations elsewhere where most people consume very high carbohydrate diets mainly from refined sources. Consistent with most data, but in contrast to dietary guidelines, we found fats, including saturated fatty acids, are not harmful and diets high in carbohydrate have adverse effects on total mortality. We did not observe any detrimental effect of higher fat intake on cardiovascular events. Our data across 18 countries adds to the large and growing body of evidence that increased fats are not associated with higher cardiovascular disease or mortality.

Implications of all the available evidence

Removing current restrictions on fat intake but limiting carbohydrate intake (when high) might improve health. Dietary guidelines might need to be reconsidered in light of consistent findings from the present study, especially in countries outside of Europe and North America.

The study appears mainly to have been funded by Canadian health organizations.

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China tidbits

From the New York Times.

This article is discussing goings-on at Davos, January 2018.

 

At one end of town, President Michel Temer of Brazil welcomed an unexpected offer from Beijing for Latin American nations to work closely with a Chinese initiative, known as the Belt and Road, intended to spread its economic and diplomatic influence abroad.

At the other end of town, a senior Chinese diplomat helped introduce the prime minister of Pakistan at a breakfast meeting. Prime Minister Shahid Khaqan Abbasi used his talk to praise the rapidly expanding Chinese investments in his country, including to build power stations and a large port.

“The China One Belt, One Road is going to be the new W.T.O. — like it or not,” said Joe Kaeser, chief executive of Siemens, the German industrial giant, referring to the World Trade Organization.

On Friday, the Chinese government used a policy document issued in Beijing to call for a “Polar Silk Road” that would link China to Europe and the Atlantic via a shipping route past the melting Arctic ice cap.

These are very important developments internationally.

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Cancer Vaccine

This latest great report on a cancer cure comes from Stanford Medicine, which I consider a reputable source.

 

Injecting minute amounts of two immune-stimulating agents directly into solid tumors in mice can eliminate all traces of cancer in the animals, including distant, untreated metastases, according to a study by researchers at the Stanford University School of Medicine.

The approach works for many different types of cancers, including those that arise spontaneously, the study found.

The researchers believe the local application of very small amounts of the agents could serve as a rapid and relatively inexpensive cancer therapy that is unlikely to cause the adverse side effects often seen with bodywide immune stimulation.

“When we use these two agents together, we see the elimination of tumors all over the body,” said Ronald Levy, MD, professor of oncology. “This approach bypasses the need to identify tumor-specific immune targets and doesn’t require wholesale activation of the immune system or customization of a patient’s immune cells.”

One agent is currently already approved for use in humans; the other has been tested for human use in several unrelated clinical trials. A clinical trial was launched in January to test the effect of the treatment in patients with lymphoma.

Here’s how it works:

Levy’s method works to reactivate the cancer-specific T cells by injecting microgram amounts of two agents directly into the tumor site. (A microgram is one-millionth of a gram). One, a short stretch of DNA called a CpG oligonucleotide, works with other nearby immune cells to amplify the expression of an activating receptor called OX40 on the surface of the T cells. The other, an antibody that binds to OX40, activates the T cells to lead the charge against the cancer cells. Because the two agents are injected directly into the tumor, only T cells that have infiltrated it are activated. In effect, these T cells are “prescreened” by the body to recognize only cancer-specific proteins.

Some of these tumor-specific, activated T cells then leave the original tumor to find and destroy other identical tumors throughout the body.

The approach worked startlingly well in laboratory mice with transplanted mouse lymphoma tumors in two sites on their bodies. Injecting one tumor site with the two agents caused the regression not just of the treated tumor, but also of the second, untreated tumor. In this way, 87 of 90 mice were cured of the cancer. Although the cancer recurred in three of the mice, the tumors again regressed after a second treatment. The researchers saw similar results in mice bearing breast, colon and melanoma tumors.

“I don’t think there’s a limit to the type of tumor we could potentially treat, as long as it has been infiltrated by the immune system.”

Mice genetically engineered to spontaneously develop breast cancers in all 10 of their mammary pads also responded to the treatment. Treating the first tumor that arose often prevented the occurrence of future tumors and significantly increased the animals’ life span, the researchers found.

Finally, Sagiv-Barfi explored the specificity of the T cells by transplanting two types of tumors into the mice. She transplanted the same lymphoma cancer cells in two locations, and she transplanted a colon cancer cell line in a third location. Treatment of one of the lymphoma sites caused the regression of both lymphoma tumors but did not affect the growth of the colon cancer cells.

“This is a very targeted approach,” Levy said. “Only the tumor that shares the protein targets displayed by the treated site is affected. We’re attacking specific targets without having to identify exactly what proteins the T cells are recognizing.”

So we can’t all go get a shot and never get cancer.  But if a tumor is detected, and this works out in trials, we could get a shot and all of that type of cancer within our body would be killed by our own T cells.  If we got some other cancer, we would have to go get another shot for that one.

 

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Dylan Grice on Value Investing

From Advisor Perspectives, by Robert Huebscher:

Grice is a portfolio manager at Switzerland-based Calibrium AG. He previously served as an investment strategist at Societe Generale, and he spoke at that firm’s annual investment conference in London on July 9.

1. Value investing is an intellectual fraud

“What is investing if not for value?” Grice asked, rhetorically. He defined traditional value investing as betting with the odds in your favor or buying dollars for $.75.

The “value” adjective is not necessary, Grice said. “It is like fast sprinting or wet swimming.”

Grice then drew a distinction between fundamental, Graham and Dodd-style value investing, and factor, or quantitatively-based, strategies. He acknowledged that the 1992 Fama-French research showed that you could exploit statistical patterns of cheapness.

He then presented data comparing the small-cap Russell 2000 index relative to its value counterpart, going back 15 years. The annual value premium has been -44 basis points, Grice said. It is not just the Russell indices where value has failed. He said that using the MSCI world index data, the value premium has been -38 basis points over the same period; with emerging markets it was -12 basis points.

It is widely known that growth stocks have outperformed value in the U.S. over most of the last decade, and that value has been the winning strategy over longer time frames. Grice’s analysis was important because he compared value to a broader index and over multiple markets, using only the last 15 years.

But what he said next should be carefully considered by devotees of quantitative investing.

The value premium is not like the liquidity premium, Grice said, which inherently justifies a higher return for its risk. The same is true of the premia associated with credit risk or duration.

“Why should I get persistent risk premium for a cheap multiple?” Grice asked.

“Value investing is far too easy,” he said. “Anyone with a Bloomberg for Factset terminal can do this. It was a historical anomaly because it was cheap.”

“It’s now gone,” Grice said. “The value anomaly has been arbed [arbitraged] out. Value does not equal cheap.”

Quantitatively-based value investing is not the same as fundamental research, he said. Fundamentally-based investing is “hard,” he said, “and it’s got to be harder than quantitative analysis.”

The challenge for advisors is that there is no way to conclusively prove Grice’s claim. We know that quantitatively-based value strategies, unlike the broad capitalization-weighted index, cannot be pursued by all investors. Eventually capital flows to value strategies must erode returns, but we have no way to know for sure when this will happen – or if it already has.

Grice’s assertion should not be dismissed. One cannot be certain that value will “revert to the mean” and resume its long-term outperformance relative to growth the broader market. We’ll have to await further research to see the extent to which asset flows to value strategies, which have been substantial over the 15-year period he studied, have eroded returns.

This is really an interesting claim, and one that I (and I’m sure many others) have wondered for years  now.  There’s another important piece of this claim that is not discussed in this piece – idk if Grice addressed it or not.  That is, what if the value premium is gone? What does that mean for investments based on that premise? What should an investor expect from that portfolio relative to a growth portfolio or a balanced portfolio?  My question really concerns forward looking returns.  If the value premium is gone, does that mean value stocks and all the rest of the stocks now have the same forward looking return? If this is the case, then value investing may not be an advantage, but it may also not be harmful.

2. Absolute return is a myth (everything is relative)

It is generally understood that valuations, using metrics such as the Shiller CAPE ratio, are predictive of returns over long time horizons. The U.S. market is in the top quintile of historical valuations, Grice said, implying a sub-2% real return over the next decade.

“That seems clear cut and obvious,” he said, “but look closer and you see cracks.”

Grice provided data on the range of those return forecasts. Top decile valuations imply returns ranging from -2.4% to 8.7%. Thus, for the next 10 years one could “quite reasonably” make 8.7%, he said. “So how practically useful is this information? It should be a warning sign.”

Using U.S. equities, Grice then compared a buy-and-hold strategy to one based on market timing. His timing model was based on the CAPE ratio and it adjusted allocations depending on the quintile of historical valuations (he did not provide more specific details). His market timing model beat buy-and-hold, he said, but the bulk of the returns came in 1920s.

“There was no value added in the last 70 years,” he said. In addition to the S&P 500, Grice said that finding held for the FTSE 100, DAX 30 and Nikkei 225.

“Valuations matter,” Grice said, “but they’re difficult to measure and get right.”

Forward-looking return estimates are better than naïve extrapolations, he said. But the problem with focusing on U.S. equities is that there have been only seven signals in 100 years, based on valuations being in the top or bottom quintile. “There is not enough data to have statistically significant results,” he said. “The problem is that we don’t get enough movement.”

But if you look at signals across multiple asset classes, you get more useful data. Grice has analyzed valuation-based strategies using bonds and equities. He constructed a model that determines the equity-bond allocation based on the relative valuations of the two asset classes, and said that it outperforms a naïve buy-and-hold strategy. (He said his model used mean-variance optimization based on Sharpe ratios, but did not provide additional details.) Indeed, he said, his relative performance-driven portfolio “did very well.”

“The importance of valuation reveals itself when you add more asset classes to the portfolio,” he said. He has tested his findings for markets in Japan, across Europe and in different European countries. “Valuation is phenomenally powerful but only on a relative basis,” Grice said.

Right now, he said, equities are attractive relative to bonds. “Equities are not that bad,” he said, “given the unattractiveness of the opportunity set.”

OMG I could not love this more.  I had the same issue trying to make an investment model out of CAPE.  My conclusion was that 7 signals in 100 years can only lead to a model that is data-mining, in addition to being basically useless.  I wonder how this compares to Meb Faber’s dynamic allocation model?

His third point is “there is no bond bubble.”  You can click on the link to read that part, bonds are boring.

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