Best of the Aleph Blog, Part 17

These articles appeared between February and April 2011:

On the Percentage of Market Cap held by Domestic Stock ETFs


  • Domestic stock ETFs tend to pick more volatile stocks.
  • Domestic stock ETFs tend to pick stocks held by major institutions.
  • Domestic stock ETFs tend to pick stocks less held by insiders.  (They tend to be more boring.)

Goes Down Double-Speed

Bear markets move at 1.9x the rate of bull markets. (double speed)

Consider the Boom in the Bust; Consider the Bust in the Boom

We would all be better off if policymakers thought at least half a cycle ahead in the credit cycle. Sadly, they are linear thinkers, and would be better off working at the county landfill, if they qualified for such authority.

Critical Analysis of Buffett’s Annual Letter

Critical Analysis of Buffett’s Annual Report

Analyzes Berkshire Hathaway in 2011.  Points at the growth in debt at BRK, and concentration risk in the subsidiaries.

Musings on Yield

Why you should not use yield as a criterion for investment.

On the Usefulness of Yield Spreads

So what does this tell us?

  • There is a credit factor that effects yields, and the effect on Baa bonds is roughly 1.5x that of Aaa bonds.
  • As Treasury yields get lower, Baa bond yields rise at roughly 45% of the rate.  There is the nominal yield need — even Baa bonds tend to need a certain nominal yield, particularly for 20+ year bonds.
  • Present yield levels are fair for long Baa bonds, to the extent that Moody’s measures them accurately.

On Con Men

So avoid complex investments.  Particularly avoid investments that you don’t understand.  At minimum, find a competent friend, or some neutral party that will look at the deal.  If you can’t find such a friend/party, don’t do the deal.  The friend is important, because he does not want you to come to harm, or lose you as a friend if things go bad.

Three Years from Now

There are real advantages to managing for the intermediate term.

Responding to a Bright Reader

Why I started a bond product.

Things are not as good as they look

Analyzing economic statistics when they don’t sound right.

Limits: Models, Governments, and Central Banks

Most writers say the governments and central banks are all-powerful.  I disagree, and I try to explain why.

Regarding David Sokol

Regarding David Sokol, Redux

Regarding David Sokol, Part 3

Regarding David Sokol, Part 4

The growing sentiment, though ahead of the crowd, that David Sokol should leave Berkshire Hathaway.

Everything Old is New Again in Bonds

On unconstrained mandates and managing for total returns with bonds.

When I was Young

What I went through in investing in my younger days.  Taught me a lot.

When Everything is Strong

When Everything is Strong, Redux

When the only thing weak is high quality bonds, what do you do?

It Would Have Happened Already, Redux

What do you do when all you hear are consensus opinions?