What We’re Reading

A few good pieces the Collab team came across this week …

Supply and demand


With the peak holiday shipping season fast-approaching, global package delivery giant FedEx Corp is paying retirement-age pilots bonuses of $40,000 - and potentially as much as $110,000 - to keep them flying into next year, according to two sources with knowledge of the matter and a contract seen by Reuters.

The bonuses, outlined in the latest pilot contract and previously unreported, reveal that a wave of pilot retirements, global pilot shortages and rising cargo demand fueled by the growth of global e-commerce are straining the world’s largest air delivery fleet.

Getting away with it


Last year, the I.R.S.’s criminal division brought 795 cases in which tax fraud was the primary crime, a decline of almost a quarter since 2010. “That is a startling number,” Don Fort, the chief of criminal investigations for the I.R.S., acknowledged at a New York University tax conference in June.

“Due to budget cuts, attrition and a shift in focus, there’s been a collapse in the commitment to take on tax fraud,” said Chuck Pine, who used to be the third-ranking criminal enforcement officer at the I.R.S. and is now a managing director at BDO Consulting. “I believe there are thousands of individuals who have U.S. tax obligations and are not complying with U.S. tax laws.”


Smart interview with Cliff Asness:

ES: You’re as confident as ever in your backtests, confident that the factors you’ve identified are replicable going forward, confident that they’re not the result of data mining or survivorship bias?

CA: I’m always in a panic that they’re the result of data mining or survivorship bias. We spend our lives trying to disprove that. I’ll still wake up sweating once a year, worrying that we’ve just gotten lucky forever.

Golden years


Perhaps there is no greater public pension horror story than that of the New Orleans Firefighters’ Pension and Relief Fund. According to the latest actuarial report from 2016, the fund has $43 million in assets for $464 million in liabilities. That’s a 10% funded ratio. The woes of the Firefighters’ Pension are numerous and include the City of New Orleans withholding payments to the Fund for multiple years.

However, the investment decisions made by the Fund’s board were unbelievably bad, perhaps borderline criminal. Mistakes include a $15 million investment in a Cayman Island hedge fund that went bankrupt, and the purchase of a failing golf course for more than $40 million that is currently valued at $1.5 million. They might as well have put cash on the table and lit it on fire.



If you know that markets break, and you know that broken markets break our investing compass, then it makes sense to really take the time to determine how much risk you need to take, because taking too much risk can cause you to forget why you’re taking risk in first place.

This is the most important question investors need to ask and it’s also one of the hardest to answer.

Jack Bogle recently said “I spend about half of my time wondering why I have so much in stocks and about half wondering why I have so little.”

Time horizon


There are other deaths we cannot avoid. Smaller ones. Changes in governance. Changes in law. Changes in tax schemes. Changes in securities law and regulation. Changes in student loan markets. Changes in philanthropy and in centers of wealth. These are all a death for us as investors, because they may change what we ought to be doing, and because they may invalidate the strategies we employed before. Amid those deaths, we have one governing rule:

Your time horizon is the shortest period over which you may be forced by circumstance, behavior, prudence, constituencies, governments or outside forces to sell what you own.

Have a good weekend.