Best of the Aleph Blog, Part 18

These articles appeared between May and July 2011:

Most People are not Better off Buying Common Stocks on their own

versus

Why Amateurs Should Invest in Common Stocks

Yes, I wrote them both, but they complement each other.  Yes, most average people get skinned investing in common stocks, but if you apply yourself assiduously to investing, it will improve your performance in other jobs, by broadening your skill set.

Impossible Dream, Part 2

Impossible Dream Project, Part 1

The latter of (part 1) these was my highest day and month for access of my blog.  I came close to eclipsing the monthly total last month, but missed by 2%.  These pieces take up asset allocation via valuation, and momentum.

Learning Leadership

A story of how Roy and I disobeyed orders a little, and created a lot of growth for the company that we served.  Personally, I think this is a great story… I never created more value than when I worked for Provident Mutual.

On Longevity Derivatives

I like to think that I am an intelligent skeptic on derivatives; in this case credit risk fights any real hedging.

Segmenting to Make Better Decisions

The smaller the range of choices is, the better people do in choosing.  One way to facilitate that is to break down decision making into a series of choices with each having few options.

The Rules, Part XXI

All assets represent future goods.  The prices of assets represent the trade-off between present goods and assets.

The Rules, Part XXII

Rapid money supply growth with no consumer price inflation can only really occur within the confines of an asset price bubble, or else, where does the money go?  Interest rates are low at such a time because of the incredible liquidity, and complacency of lenders that they will get an equal amount of purchasing power back.  Perhaps another possibility is when a country’s currency is being used more and more as a shadow currency, like the US in the Third World.  But even that will come home someday.

Learning to Like Lumpiness

This is probably one of the most important articles I have written, because investment returns are lumpy, and we need to learn to live with it.  For those of us that are smart, we need to take advantage of it.

What is Liquidity (V)

Liquidity cannot be created, but it can be redirected.

Got Cash?

Cash is valuable even when interest rates are low.  Cash is flexibility and optionality.

Enduring Ponzi

Madoff’s Ponzi scheme lasted so long because it raked off so little.

The Costs of Illiquidity

On the tradeoff of liquidity in order to get yield.

Silent as Night

It also taught me a lesson.  When fees are deducted daily, no one notices.

“Is He Economically Rational?”

Now after all of this, it’s not so much a question of rationality but ethics.  Who will do the right thing for the one he ultimately serves?  Working for those people is a joy, and is beneficial to those that own. Doing right does well for many.

Downgrade Jitters

On why credit ratings are opinions, and not facts.

Where to Hide?

How to preserve purchasing power, even when it is difficult.

The Costs of Illiquidity — II

Don’t buy REITs that are not publicly traded.