Best of the Aleph Blog, Part 20

These articles appeared between November 2011 and January 2012:

The Foul Deed of the SEC in 2004

Why the SEC is to blame, and not to blame, regarding the net capital rule.  They changed little in 2004, but should have been more aggressive than that.

Bubbles are Easy to Spot, well almost…

How to spot bubbles, and why our world is so messed up from an unwillingness to takes losses on bad debts.

At the Cato Institute’s 29th Annual Monetary Conference (Epilogue)

My thoughts on monetary policy versus the many odd people who come to the conference.

A Large Middle Class Isn’t Necessarily Normal

After all, across human history, middle classes have been abnormal.  Why should they be regarded as normal now?  Has something fundamentally changed?  Lotsa flame-mail on this one. Hot!

Valuing Behemoths

Valuing Behemoths, Redux

On the issues regarding cheaply valued companies where the equity is worth more then $100B.

Improve the Position

We are no good at choosing the best assets, but we are better at choosing assets that are better than what we currently hold.

The Gold Medal Gold Model

I take Eddy Elfenbein’s model and apply regression to it.  The results explain what affects the price of gold — the real cost of carry.

Peak Credit

What I write here will not be rigorous.  We’ve heard about “peak oil.”  We’ve heard about other resources, and how production will decline over time.

But what of credit? It isn’t that hard to create, but it is hard to create well, particularly when debt levels are high, as in this environment.

The Rules, Part XXVIII

Rebalancing of any sort in investing presumes an underlying stability to the economic system, and thus, market returns.  Rebalancing will not protect against socialism, war, or an overleveraged position.

The Rules, Part XXIX

Risk premiums should never be capitalized, they should only be taken into income as earned.

The Rules, Part XXX (30)

In the recent run-up, there was talk of the infallibility of equities.  This led to a higher level of variable compensation in the economy through option and share issuance and low pressure to raise fixed wages.  This was yet another form of hidden leverage, which hid the unprofitability of enterprises through share dilution.

Stock Prices versus Implied Inflation

Stocks, at least in this environment do better when inflation implied by TIPS rises.

Permanent Asset Allocation

An attempt to explain why Harry Browne’s asset allocation idea works, at least until many realize it, and send gold shooting through the roof.

Too Many Par Claims versus Sub-Par Assets

This sums up the problems of our world today.  Everyone wants to be paid back in full, but many are “bust” and cannot repay.

On Predicting the Future

I reverse-engineered ECRI, and the response is minuscule.  This took a lot of work, and was controversial.

Against Simple Valuation Metrics

On the value of dividends, buybacks, acquisitions, and organic growth.

On Opaque Transparency

After a certain point, the more data you reveal, the harder it gets to evaluate what is going on.  Far better to reveal to the public the core data that explains policy than to make them slog through big data releases.

And in those cases, what is not revealed is the most important data.