In the heart of the digital fray,
Where algorithms dance and sway,
Waymo's self-driving car, so keen,
Navigates streets with circuits clean,
A symphony of code, night and day.As an introduction to a couple of paragraphs about autonomous vehicles, I asked Copilot, Microsoft’s AI companion to write a limerick about the Waymo self-driving car, which is providing human driver-free transportation in certain cities today. Of course, AI is central to creating fleets of autonomous transportation vehicles in coming months and years.
Progress toward self-driving automobiles: It has been 20 years since the original DARPA Grand Challenge, a competition to sponsor American autonomous vehicles. The challenge of getting to full (category 5) automation has been/is great, but much progress has been made. Here we will briefly consider some of the benefits that are quickly coming into reach – benefits related to time, space, costs and safety.
Time – as autonomous fleets become common, we will not have to spend our time fighting traffic and finding parking spots. Our commuting times can be enjoyed doing pleasant activities like reading, listening to music, sleeping, texting, enjoying the view, etc., etc.
Space – because self-driving cars will be able to continuously provide services to one rider after another, there will be less requirement for parking spaces. Those now unneeded spaces can be re-allocated to better uses.
Costs – it is estimated that fleets of self-driving vehicles will reduce the costs for transportation by 25% to 50%.
Safety – non-human drivers will make transportation safer. Automobile insurers are concerned that eventually costs associated with property damage and legal liability will plummet.
The number of automated vehicles will surely expand in the future, but the technology is here today. If you are interested, take a look at this video report of one man’s first-hand experience traveling in the Los Angeles area aboard a Waymo human driver-less car.
“Never met a backtest I didn’t love.” I read my first book on investing in the late 1970s and have continued my studies ever since including master’s level courses at Webster University, The American College, and the College for Financial Planning. Also, during past decades I have attended countless presentations of investment strategies purporting to produce better than average returns, below average risk, or both. It is common that the justification for said superior results is proved by showing that the strategy (backtest), if applied to past time periods would have provided the hoped-for happiness. It is also common that given the many, many variables involved, the future results fail to measure up, hence the quote at the top of this paragraph which was uttered by a good friend some years ago. Truly, “past performance does not guarantee future results.”
The reason for the paragraph above is to begin an explanation of some of the choices that I might make in the interest of establishing good strategic allocation decisions among our clients’ investment assets. Equity markets are generally efficient. That is to say that even with keen stock analysis or market timing skills it would be unusual for an investor to do better than “the market” over the long term. So, it makes sense that an investor’s core equity holdings should be chosen to behave like the market. Fortunately, it costs very little to “buy the market” (which includes the good years, and the bad years.) For our clients, the Vanguard US Large Cap ETF is usually the core equity holding. In some cases, it is the only equity holding. This fund allows us to get the market return at an annual cost of only .03%, practically zero.
However, studies have also found that from time to time, emphasizing certain market factors (small company effect, high book to market effect, momentum effect, moat effect, etc.) has yielded risk and return characteristics that differ from the broad market. In other words, investing in a subset of the market, whether a single stock or a group of stocks might provide a better (or worse) return than the market return. With that in mind in some cases we emphasize certain market sectors that we hope will experience above average company profits leading to above average stock gains. It should be noted that in investment speak, straying from the broad market allocation, regardless of the outcome is considered to be adding to portfolio risk. Still, it may be appropriate to add to risk in some cases with the hope that doing so will increase portfolio total return.
Driving back from Vermont, I stopped at a vegetable stand. It was deserted except for a sleeping German shepherd. I stepped over the dog, helped myself to some corn, then opened the cashbox to pay. Taped to the inside of the lid was this note: “The dog can count.”
The good times continue: Last year our investment management clients experienced an average gain of 17.14%. It was a good year! The first quarter of 2024 has been a good one as well, with our investors gaining an average of 3.72%. Investment reports for our clients are posted during the first week of each new calendar quarter.
Note: The calculation used to determine investment returns experienced by our clients is called the internal rate of return. It is cash flow specific and is net of all fees and expenses. Investment return information is provided by Morningstar using GIPS standards.
It’s income tax time: If you are uncertain what documents you should have handy when filing your income tax return the document attached here will provide some help.
After hearing a sermon on Psalm 52:3-4 (lies and deceit), a man wrote the IRS, “I can’t sleep knowing that I have cheated on my income tax. Enclosed is a check for $150. If I still can’t sleep, I’ll send the rest.”
Magic retirement number: An insurance company recently published a report suggesting that adults in the United States believe they will need $1.46 million to retire comfortably. No doubt that information is useful and correct for at least one household, probably more than one; however, our experience has shown that with regard to financial objectives and needs one size does not fit all. Furthermore, it is inevitable that circumstances will change over time. In fact, the report points out that this year’s “magic number” is 15% higher than last year’s prediction.
Successfully planning for financial independence is a process, an ongoing process. There is no one magic number. There are goals, variables, and assumptions to consider. Mid-course corrections are necessary. A trusted adviser with good tools and experience can help you avoid costly diversions from your true course.
A retirement conversation: Ralph: I have questions about retiring, so I am using an online retirement calculator. George: Wonderful! Does your online calculator adjust your cash flow projections for IRMAA? Ralph: What is IRMAA? George: And is sequence of returns risk taken into consideration? Ralph: I don’t know, what is sequence of returns risk? George: How about withdrawal sequence risk? Ralph: Not sure. George: Longevity risk? Ralph: My parents died young, I’m sure I will, too. George: Life is complex. Maybe you should consider getting some help from a specialist.
After a health scare, I hugged my wife and whispered, “If something happens to me, the presents in my closet are yours.” She whispered back, “If anything happens to you, everything in your closet is mine.”
Thanks for reading.
Music bonus! Click below to enjoy some music performed by Leonid Vorobyev and friends, a group of Russian and Ukrainian musicians who do fine covers of the music of Chicago, Earth Wind and Fire, Steely Dan, Chaka Kahn and others. Turn the volume up. Enjoy!