Sunday, October 8, 2017

The Crossley ID Guide: Waterfowl

Back in 2011 I reviewed The Crossley ID Guide: Eastern Birds. In that post I suggested some ways in which identifying a bird is similar to identifying a good trading opportunity. It’s not as much of a stretch as you might think.

Richard Crossley has now published his fourth flexibound guide, this one to waterfowl. Like his previous books, it features gorgeous, lifelike compositions that are “painted in pixels.” It shows North American ducks, geese, and swans in their natural seasonal settings (winter/spring and summer/fall) as well as in flight. The illustrations also include juveniles at various stages of development. There are some mystery birds to identify, with answers provided. The second half of the book is text written by Paul Baicich and Jessie Barry, giving a detailed account of each species. All in all, about 500 pages of absolutely wonderful material

If you are a birder or a hunter, this book definitely belongs on your bookshelf. It is available at Crossley’s site.

Wednesday, October 4, 2017

Burchard, High Performance Habits

Most self-help books fail because they offer easy paths to success. Brendon Burchard’s High Performance Habits: How Extraordinary People Became That Way (Hay House, 2017) describes what it takes to become a person who creates ever-increasing levels of both well-being and external success over the long term. And it takes a lot.

Many factors can affect your long-term success—luck and timing, for instance. But Burchard sets out six things that “are under your control and improve your performance more than anything else we’ve measured.” First, seek clarity on who you want to be, how you want to interact with others, what you want, and what will bring you the greatest meaning. Second, generate energy so that you can maintain focus, effort, and well-being. Third, raise the necessity for exceptional performance, tapping into the reasons you absolutely must perform well. Fourth, increase productivity in your primary field of interest, focusing on prolific quality output. Fifth, develop influence with those around you. And sixth, demonstrate courage.

Burchard’s HP6 go beyond the usual nostrums: work hard, be passionate, focus on your strengths, practice a lot, stick to it, and be grateful. You can be a grateful hard worker and still be on the bottom of the pile. Or you can be passionate and practice a lot—and burn out.

Some of Burchard’s suggestions seem hokey, but for the most part they ring true. I, of course, haven’t tried the vast majority of them. I just finished reading the book, after all. But what’s the worst that can happen? That you do nothing, just keep going the way you always have. Unless, of course, you’re already a consistently high performer.

Sunday, October 1, 2017

Carver, Smart Portfolios

Robert Carver, author of Systematic Trading, has turned his attention to the thorny problem of portfolio construction. In Smart Portfolios: A Practical Guide to Building and Maintaining Intelligent Investment Portfolios (Harriman House, 2017) he deals with such topics as how to blend assets with different levels of risk, the reasons that forecasting returns is so difficult, and how to calculate the true costs of your investments.

One problem that investors face is that not only is the future uncertain, the past is as well. This is a point that Carver drives home multiple times. He shows, for instance, that “the uncertainty of the past is largest for risk-adjusted returns. We can be 95% confident that the estimated relative Sharpe Ratio (SR) of the two assets was within a range of around 0.5 SR units. For US stocks and bonds this uncertainty range is -0.16 to 0.36. This is a huge degree of estimation error: our estimates of Sharpe Ratio are effectively worthless.” By contrast, “the uncertainty of standard deviation estimates is much lower than for the Sharpe Ratio,” and “in typical financial data estimates of bond and equity correlations are 95% likely to be within a range of around one-third (actual range -0.12 to 0.21).”

To manage the problem of past parameter uncertainty in portfolio construction, he assumes that risk-adjusted returns are identical for all assets, he uses risk weighting to account for differences in asset volatility, and he employs a technique he calls handcrafting to handle correlations sensibly.

In over 500 pages Carver takes the reader through both theoretical considerations and practical applications. He shows how to build a smart portfolio top-down, contingent on portfolio size, from an institutional investor to a person with $40,000. He introduces two forecasting models (momentum and yield) to aid in the construction of a portfolio. And he addresses the need for maintenance, such as smart rebalancing and portfolio repair.

Smart Portfolios is a sophisticated but not overly technical treatment of a topic that every investor has to come to grips with. As such, it is a recommended read.