Asset Allocation Books

“The Intelligent Asset Allocator” – William Bernstein.  Good grounding, but the 2001 edition doesn’t have the dreadful equity returns of the last 10 years nor the surprising bond returns.  How much would newer ‘recency’ affect the recommendations?  I need the new returns and standard deviations which include the 1st decade of the 21st century.  Bernstein gives a good analysis of the shaky underpinnings of DOW 36000 (p. 127-132)

“Lifecycle Investing” – Ayres and Nalebuff.  Published 2010.  I expected a great deal, but their main emphasis was younger investors using leverage to time-shift for diversification.  I almost read more just out of contrariness, but it had nothing to offer me so I didn’t waste more than another hour hopscotching through it.

“The Informed Investor” – Frank Armstrong III.  Published in 2002, this covers much of the same territory as Bernstein’s “Intelligent Asset Allocator.”  It was easy to skim and focus on the action points that apply to my situation.  Armstrong has a nice methodical style.  He has useful factoids on what reward-risk combinations to expect (real GDP growth = 2%/yr; inflation 3.1%). He explains the various ways different people experience risk.  Unfortunately he uses a 10% return as his baseline for examples (too optimistic by a yard).

He does mention Monte Carlo simulations which give you a chance to observe the significance of order of growth and loss in a portfolio’s size.  I need to update my spreadsheet to cover the last decade’s return.

Armstrong makes economic observations which in the light of subsequent events give the opportunity to assess the worth of his economic maxims.  P. 262-263 “… not exactly an Oliver Stone-type thing, there is a loose conspiracy to keep investors in the dark … but the cost is small.”

Armstrong has a chapter specifically on investing during retirement – Yea!

p. 146 “Capitalism is the greatest wealth-creating mechanism ever devised.  As we serve our own interests, the value of the world’s economy increases.”  The first sentence is surely right, but the second has constraints that are ignored.  E.g. we have the housing crisis, the liquidity squeeze, subsequent market drop, and bailouts and economic stimuluses.  The net result was a subtraction from the world’s economy.  Unfettered capitalism allows abuse which undercuts its virtues.

It is also worth remembering that the value of competition is to the aggregate market, not to the individual company.  The benefit of an individual company is maximized when they subvert competition.

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