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Starting Dates

The post I did just now on luck got me thinking about the role of luck in trading – specifically the luck of your starting date. This ties in with a bit of playing around with annualised returns I have been doing in markets that have been rubbish. One of the issues with looking at returns for various funds and other investment strategies is that they are distorted by the start date and the start date for each individual is a function of luck. This is an issue that bedevils those who are required to undertake investment strategies such as industry based superannuation scheme. To get a sense of the impact of timing on longer term investment returns  consider the chart below of  annualised returns for the Nikkei.

nikkeiIf I had started my investment journey 5 years ago I would be reasonably happy with the results to date, if I had started 30 years ago I would view it as a disaster.  Although I was surprised at the 5 year return of the Nikkei. The same is true when we look at a variety of markets – the period through which you invest shapes your return and your perception of how successful that period had been.returnsThe question then becomes how do we overcome this as a factor within our own trading/investment and I think the answer lies on the chart above. Passive investors do rely upon external circumstances to achieve whatever return they get. Whereas. those who are more active look for returns wherever they may – simply being able to map the returns of various markets is a good starting point.

Luck

luck

This is a photo of Jimmy Nicol sitting by himself at Essendon airport on June 15 1964. For those who are not up with their music history Nicol sat in for Ringo Starr for eight concerts whilst Starr was ill with tonsillitis. Apparently he played the drums as well as Starr – the only thing he couldn’t do was sing Starrs vocal spot on I Wanna Be Your Man. For 10 days he lived the  life of a Beatle with all the trappings that such super stardom brought with. Once Nicol left Melbourne he flew back into obscurity. In every successful persons life luck plays a role in determining its trajectory.  Our own personal arrogance shields us from accepting that.

Fair Enough

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Get Off Ya Bum

A new study of over 1 million people finds that doing at least one hour of physical activity per day, such as brisk walking or cycling for pleasure, may eliminate the increased risk of death associated with sitting for 8h a day.

Physical inactivity is linked to an increased risk of heart disease, diabetes and some cancers and is associated with more than 5 million deaths per year [1] and, as the first global economic analysis of physical inactivity shows, costs the world economy over US$67.5 billion per year in health care costs and lost productivity.

The findings come from a new four-paper Series published today in The Lancet and launched in London ahead of the Summer Olympic Games. The authors of the Series warn there has been too little progress in tackling the global pandemic of physical inactivity since the 2012 Olympics, with a quarter of adults worldwide still failing to meet current recommendations on physical activity.

More here – The Lancet

ARE CEOS PAID FOR PERFORMANCE?

The quick answer from the paper embedded below is no. The executive summary is very enlightening in that it states –

Has CEO pay reflected long-term stock performance? In a word, “no.”

Companies that awarded their Chief Executive Officers (CEOs) higher equity incentives had below-median returns based on a sample of 429 large-cap U.S. companies observed from 2006 to 2015.

On a 10-year cumulative basis, total shareholder returns of those companies whose total summary pay (the level that must be disclosed in the summary tables of proxy statements) was below their sector median outperformed those companies where pay exceeded the sector median by as much as 39%.1

For long-term institutional investors, this potential misalignment of interests between CEOs and shareholders may undermine the adoption of equity-based incentive pay that has dominated executive pay practices in the U.S. for the past three decades. During the observed period, long-term incentive pay was the largest element of CEO pay, accounting for more than 70% of compensation for both summary pay and realized pay (which incorporates stocks gains realized during the course of the year), according to our calculations

 

Much of the data from the piece is summed up beautifully in this graphic from the WSJ –

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More Money, More Success, More Stuff? Don’t Count on More Happiness

What is the one thing that, if you could just get your hands on it, would make you much happier?

Go ahead. Get out a piece of paper and write down the first thing that pops into your head. 

Got it?

O.K., now fess up. Who wrote something about a new car? How about a promotion? A bigger house? A raise? A yacht? But if you wrote down almost anything at all (except a wish for deeper and more long-lasting relationships), you’re probably wrong. 

It turns out that happiness doesn’t come from more money, more stuff or even big life events like getting a raise or landing that dream job. 

A study from the 1970s by Philip Brickman, Dan Coates and Ronnie Janoff-Bulman for the Journal of Personality and Social Psychology even found that lottery winners took less satisfaction than nonlottery winners in everyday events, and in general, they were not any happier than those who didn’t win the lottery.

More here – The New York Times

PS: Carl Richards also authors the excellent Behaviour Gap blog

Ferrari FF

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