The Stingy News Weekly: 09/05/2021
The wealthiest generation
"In this version, Gen X is now richer (30% richer!) than Boomers were at the same age (late 40s). Millennials don't yet have a year of overlap with Boomers, but they are tracking Gen X almost exactly. There is no reason they won't continue to track Gen X, and therefore exceed Boomers as well when they are in their late 40s" [Economics]
Future housing returns are stark
"I wouldn't have the success of my financial plan be wholly dependent on further prices increases on residential real estate. Speculating on prices increases in real estate is fine - so long as if the amount at stake isn't material to the success of your financial plan." [Real Estate]
Death of the starter home
"If we take this to the extreme - the monthly payment for a $1,000,000 home is now $520 lower than the monthly payment for a $750,000 home in 2002. Add in fewer homes being built, a touch of inflation, scarred homebuilders, HGTV messing with our expectations and it's no wonder new home sales prices have risen over the past 20 years." [Real Estate]
"People can exhibit their status by the consumption of particular goods or experiential purchases; this is known as 'conspicuous consumption'; the practice is widespread and explains the market characteristics of a whole class of goods, Veblen goods, demand for which increase in tandem with their price. The value of such positional goods lies in their distribution among the population - the rarer they are, the more desirable they become. At the same time, higher income, often associated with higher status, has been studied in its relation to unethical behavior. Here we present research that shows how a particular Veblen good, illicit behavior, and wealth, combine to produce the display of illegality as a status symbol. We gathered evidence at a large, country-level, scale of a particular form of consumption of an illictly acquired good for status purposes. We show that in Greece, a developed middle-income country, where authorities cannot issue custom vanity license plates, people acquire distinguishing plate numbers that act as vanity plate surrogates. We found that such license plates are more common in cars with bigger engines and in luxury brands, and are therefore associated with higher value vehicles. This cannot be explained under the lawful procedures for allocating license plates and must therefore be the result of illegal activities, such as graft. This suggests a pattern of 'conspicuous corruption', where individuals break the law and use their gains as status symbols, knowing that the symbols hint at rule-breaking, as long as the unlawful practice cannot be incontestably established." [Crime]
Avoid 'breaking the buck'
"Why penalize those who exit in a crisis? They are causing the crisis. Liquidity is not a free good, and certainly not in a crisis. This will make them think twice about liquidating, because they will absorb a disproportionate amount of the loss." [Funds]
Inflation portfolio using asset classes
"Finally, we calculate the correlation of the portfolio to inflation. Although the asset classes were selected based on their correlation to inflation, the average correlation to inflation was only 0.4 during the period from 2006 to 2021. Investors might regard this as low, but the correlation of TIPS, which are popular inflation instruments, was approximately 0." [Markets]
Are value stocks cheap for a reason?
"The value spread remains unusually high, which has led investors to be concerned that value may be cheap for a reason. In this short presentation, our Portfolio Solutions Group (PSG) explains how we evaluate this spread and illustrates our view that the current high value spread is forecasting higher expected returns, and not low fundamental growth rates." [Value Investing]
What we know about waning immunity
"Right now, some forms of vaccine effectiveness are slipping, but the most important ones aren't. Unless that changes, widespread boosters in already vaccinated countries are likely to provide diminishing returns, like topping off a drink that's already on the verge of spilling over." [Health]
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