The Best of the Aleph Blog, Part 11

This era encompasses August through October 2009, as the market rallied.

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Avoiding the Tail Wagging the Dog

We need to regulate gambling in out country, and that means shutting down many derivative markets.

Earnings, Analyst Estimates, and Estimating Future Prospects

How to differentiate between future estimates and past results.

Waiting for the Death of the Chicago School, and the Keynesian School also, Redux

Points out the impotence of the Chicago and Neoclassical schools.  It is still true today.

On Life Settlements

Explains why agents should extra-cautious if they are thinking about buying life insurance policies in the illiquid secondary market.

The Dominance and Size of the Federal Reserve

The Fed is too large and powerful.  How to reduce it?

Fusion Solution: The Stable Value Fund Guide to Commodity ETF Management

A truly classic article that anticipated what some ETF providers would do, seeking out the best opportunities rather than trying to float at spot.

Alternative Investments, Illiquidity, and Endowment Management

A definitive article on the asset-liability mismatch involved in university endowment management.

In Defense of the Rating Agencies — III

In Defense of the Rating Agencies — IV

The rating agencies are fair dealers with occasionally bad models.

Plan for Failure

Don’t think about the present, think about what that the future is likely to be, and how you disagree with it.

Toward a New Theory of the Cost of Equity Capital

Toward a New Theory of the Cost of Equity Capital, Part 2

Replace modern portfolio theory with a model based on contingent-claims pricing.

Risks, Not Risk

Risk does not exist in abstract.  Rather, we face specific risks.  Wise managers evaluate the risks versus the rewards.

The Good ETF

Good ETFs are:

  • Small compared to the pool that they fish in
  • Follow broad themes
  • Do not rely on irreplicable assets
  • Storable, they do not require a “roll” or some replication strategy.
  • not affected by unexpected credit events.
  • Liquid in terms of what they repesent, and liquid in what they hold.

Pension Apprehension

On why pension plans were likely to run into the difficulties they are presently in.

On Bond Investing, ETFs, Indexes, and the Current Market Environment

Why bond ETFs and index funds are more complex than those dealing with stocks.