Top 10 default retirement age risks for employers

The abolition of the default retirement age will have several knock-on effects for employers. What is most at risk?

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Don’t Stop Thinking About Tomorrow

“A short quiz:
If you plan to eat hamburgers throughout your life and
are not a cattle producer, should you wish for higher or
lower prices for beef? Likewise, if you are going to buy a
car from time to time but are not an auto manufacturer,
should you prefer higher or lower car prices? These
questions, of course, answer themselves. But now for the
final exam: If you expect to be a net saver during the
next five years, should you hope for a higher or lower
stock market during that period? Many investors get this
one wrong. Even though they are going to be net buyers
of stocks for many years to come, they are elated when
stock prices rise and depressed when they fall. In effect,
they rejoice because prices have risen for the
“hamburgers” they will soon be buying. This reaction
makes no sense. Only those who will be sellers of equities
in the near future should be happy at seeing stocks rise.
Prospective purchasers should much prefer sinking
prices.”

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Stocks Are Less Risky Than Bonds

It is not stock investing that is risky. It is valuation-uninformed stock investing strategies that are risky. The risks of stocks can be largely avoided by those willing to give consideration to the effect of valuations on long-term returns. It is much harder for investors to avoid the risks of bonds, since inflation is unpredictable and constitutes the biggest risk for bond investors. For the valuation-informed investor, bonds are more risky than stocks.

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Create your own retirement paycheck

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Hedgefunds selling Alpha as Beta?

In a desperate market everything seems possible.
Even selling Alpha as Beta...

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Patron saint of actuaries

St. Buster is the patron saint of actuaries.

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What is Risk?

Peter L. Berstein, author of Against the Gods: The Remarkable Story of Risk, explains it pretty well.  He says by definition risk is a measure of the unknown, and because of that it is silly to presume and act as if we know what the future holds.  Risk management really is understanding that the future is uncertain, and preparing ourselves and our institutions to deal with the times when things are different from our expectations.

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A survey of migration

Despite a growing backlash, the boom in migration has been mostly good for both sending and recipient countries, says Adam Roberts (interviewed here)

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Happiness extends life expectancy

World life expectancy has risen by around 20 years in the last 50 years. This period has also witnessed rising happiness levels around the world suggesting that happiness might be one of the causes behind the decline in mortality. We investigate the relationship between happiness and mortality using the German Socio-Economic Panel. We consider doctor visits, self-reported health, and presence of chronic illness as health measures. After controlling for initial health conditions, we find that happiness extends life expectancy. 10 percent increase in happiness decreases probability of death by four percent, and this effect is more pronounced for men and younger people. Happiness plays a more important role for chronically ill people in decreasing mortality than for those who are not chronically ill. The positive influence of happiness on mortality can offset the negative impact of chronic illness. Marriage decreases mortality and this effect appears to work through increased happiness.

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Frequency of Severe Terrorist Events

In the spirit of Richardson’s original (1948) study of the statistics of deadly conflicts,we study the frequency and severity of terrorist attacks worldwide since 1968.

We show that these events are uniformly characterized by the phenomenon of scale invariance, i.e., the frequency scales as an inverse power of the severity.

We find that this property is a robust feature of terrorism, persisting when we control for economic development of the target country, the type of weapon used, and even for short time-scales. Further, we show that the center of the distribution oscillates slightly with a period of roughly ≈ 13 years, that there exist significant temporal correlations in the frequency of severe events, and that current models of event incidence cannot account for these variations or the scale invariance property of global terrorism.

It has been suggested that the ≈ 13 value may be related to the modal life-expectancy of the average terrorist group. However, we caution against such conclusions for now, as these aforementioned variations on our analysis can shift the peak by several years.


Our analysis suggests that the changes in event frequencies have not been evenly distributed with respect to their severity, but rather that less severe
attacks are now relatively more frequent, while the frequency of “major” or tail events has remained unchanged.

Finally, we describe a simple toy model for the generation of these statistics, and briefly discuss its implications.

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Pension Fund: Just Bonds please.....

"My message is simple: Almost every corporate pension fund should be entirely in fixed dollar investments. A pension fund has special tax status, but this tax status has no value if the pension fund is invested in stocks. On the other hand, a pension fund’s special tax status has great value if the pension fund is invested in short-term paper, long-term bonds or insurance contracts."
–Fischer Black1

Source: Back to Black