Aaron Brask, PhD

TWEETS ≠ ADVICE | Fiduciary | Retirement Planner | Annuity research | Mathematical Finance PhD | Adjunct prof @ UF MSF | Author:

[Aaron Brask, PhD @aaronbrask]

Wrapping up my (3) previous threads on the good, bad, and ugly aspects of annuities, I now highlight one last aspect of the UGLY side.

This topic is a bit technical. So I've tried to make it as intuitive as I can.

Note: This topic also applies to life insurance (e.g., IUL).

[Aaron Brask, PhD @aaronbrask]

Following up on my two previous discussions, this thread will start to focus on the UGLY side of annuities.

Given the length of my previous annuity threads and the plentiful negative press on annuities that is already out there, I will try to keep this section brief.

[Aaron Brask, PhD @aaronbrask]

@DaveNadig @NateGeraci My bad. I misunderstood the adjustment (darn it, can't trust every tweet on here). Still makes me wonder if tracking funds are too big for their own good when we need adjustments like this.

Is a company really public when only 10% is public? Is that 10% accurate?

[Aaron Brask, PhD @aaronbrask]

@DasWreck @sindap A+

[Aaron Brask, PhD @aaronbrask]

@LandonExplr @bp22 @kofinas My thoughts exactly, but maybe Bill owns 10,000 houses?!

[Aaron Brask, PhD @aaronbrask]

@DaveNadig @NateGeraci Probably not a coincidence, knowing Elon.

[Aaron Brask, PhD @aaronbrask]

@Rick_Ferri @cullenroche Do you make any adjustment for different investors' tolerance to risk, or is it one size fits all?

Fwiw: I ask about risk tolerance, and then I ask about risk tolerance *if I provide them with evidence/data to let them know they can afford the risk*.

[Aaron Brask, PhD @aaronbrask]

@NateGeraci @DaveNadig Perhaps an unpopular view (+ slight digression), but I'd also question the adoption of free float weights a couple decades ago (reduced exposure to owner-operators w skin in the game?). I figure we're trying to have too much of a good thing, but we shouldn't Band-Aid bottlenecks.

[Aaron Brask, PhD @aaronbrask]

@theficouple @Budgetdog_ That is a bit apples and oranges. A fixed payment for the rest of your life I should be compared to a bond ladder based on your actuarial life expectancy (or an annuity) - not a balanced portfolio. Sidenote: The 4% rule, which has been adjusted higher, and accounts for inflation.

[Aaron Brask, PhD @aaronbrask]

@HegedusAero @EconstratPB @MarketsPuke This is all spot on and rhymes with what I see in retirement planning. Despite having record wealth, it's very hard to get depression-era mindsets to spend, let alone on themselves. @bp22 is doing his part to educate and advocate an alternative mindset: https://t.co/TXp3Jgb5LK

[Aaron Brask, PhD @aaronbrask]

@dampedspring @CliffordAsness @ptuomov @HML_Compounder @NickNemo17 Has anyone read his articles/substack? Not quant finance, but interesting and eloquent ... pretty stark contrast to his Twitter presence, from what I've seen.

[Aaron Brask, PhD @aaronbrask]

@StojBoj @MichaelKitces I think the bulk of outperformance he observed is due to having more $ in stocks *on average* + markets having gone up, no? Similar to Kitces' observation. I'm in agreement, but still find myself regularly catering to clients' behavioral sides (ie, weak stomachs for volatility).

[Aaron Brask, PhD @aaronbrask]

@Rick_Ferri @irfnali1 @MichaelKitces Agreed, but rebalancing also targets optics around risk (eg, your retirement is a lock, but you don't sleep w too much volatility). I also suspect they (Kitces/Mak) make fundamentally diff assumptions, as most advisors prob assume/believe stocks outperform over longer periods.

[Aaron Brask, PhD @aaronbrask]

@JBSDC @AdviserCounsel ASCII should get us to 128 rounds (7-bit version). The opening square bracket "[" would follow "Z." This ("Round [") would be interesting to see, as it feels weird to me (round vs square ... bracket).

[Aaron Brask, PhD @aaronbrask]

@HayekAndKeynes I think people learned math better when they had to learn how to use a sldie rule. I also still know all of my closest friends' phone numbers from childhood, but would struggle with my closest adult friends now. We're dumbing ourselves down.

[Aaron Brask, PhD @aaronbrask]

@jbulltard1 The CFTC used to require new products be tangible and add transparency. Those requirements disappeared with VIX products, and now the floodgates are open.

[Aaron Brask, PhD @aaronbrask]

@kkmaway @JosephOnions @cullenroche I think it's possible to be more precise around modeling around liabilities than just throwing 60/40 at everything. At the same time, there are many ways to do worse than 60/40.

[Aaron Brask, PhD @aaronbrask]

@kkmaway @JosephOnions @cullenroche 60/40 et al work, but is that to say there's no structure beneath the surface to model?

Also, not to split hairs/digress, but is inst investing precise? Eg, predictable cash flows like annuities + life insurance. It all gets comingled in one *general* account.

PS: Go Gators

[Aaron Brask, PhD @aaronbrask]

@GestaltU @DannyDayan5 You, or Claude?

[Aaron Brask, PhD @aaronbrask]

@DannyDayan5 @GestaltU I don't see that. You CAN have 100% correl (by the definition/formula), and still capture alpha. I suspect you (+ media at large) may be interpreting correlation loosely/intuitively - not formulaically. That's why I wrote that "pet peeve" article.

[Aaron Brask, PhD @aaronbrask]

@DannyDayan5 @GestaltU With all due respect, you are missing the technical point. Correlation does not measure what you think it does. Zero connection w/ alpha opportunity. Look at the spreadsheet. Assets can offer ample opportunity for alpha (return spread), but be 100% correlated, and vice versa.

[Aaron Brask, PhD @aaronbrask]

@DanRyan007 @sonusvarghese Sounds sensible. Not advice, but I'd just monitor pre-tax acct growth => RMDs becoming annoying later - forcing into higher tax brackets, triggering more IRMAA, widow's tax (if applicable), etc. Roth may or may not make sense. More general info here ~ https://t.co/AcJFmAJKwk