The Best of the Aleph Blog, Part 29

Photo Credit: Hanan Cohen || Anyone need a copy?


In my view, these were my best posts written between February and April 2014:

On the Structure of Berkshire Hathaway

On the Structure of Berkshire Hathaway, Part 2, the Harney Investment Trust

This set of posts is unique in going through how the insurance entities of Berkshire Hathaway allow Buffett to hold as much as he does of his stocks/businesses through his insurance companies.  It also explains as much as can be publicly known about the secretive Harney Investment Trust.

On the “770” Account

How to dress up Permanent Life Insurance as a sexy investment vehicle, and get guaranteed underperformance.

The Good ETF, Part 2 (sort of)

If you are investing in any levered, inverse, or non-equity fund exchange traded product, then read the fine print of the prospectus.  If you fail to do that, you have no right to complain if you lose money.

Why it is Hard to Win in Investing

Most profitable investing takes an uncomfortable view versus the consensus, and buys when the market offers good deals.  If there are no good deals, profitable investing sits on cash, and waits for a better day.

On Target Prices & Yields

It is better to measure investments against similar alternative investments in order to decide where to invest money, rather than using target prices or yields.

On Approximate Valuation Methods

I suggest different valuation metrics for four different types of stock.

An Expensive Kind of Insurance

Where I suggest that VIX-type products must be used tactically, if at all.  (Note: the logic of this article is fine, but the graphs have not aged well.

On Intrinsic Value

On how it is difficult to calculate, but why a CEO/CFO might experiment with calculating it to have a better idea of when to buy back or issue stock.

On Emergent Phenomena

When are negative surprises more likely to happen?  Leverage and other factors play roles.

Conservation of Liquidity, under most Conditions

Conservation of Liquidity, under most Conditions, Coda

Why the “money parked on the sidelines” (or lack thereof) argument is always bogus.

“Different from the Consensus”

What is the consensus anyway?  When is it smart to think differently than the herd?

The Stock Market Is Rigged! The Stock Market Is Not Rigged!

Never allege a conspiracy when mere stupidity will suffice to explain the problem.

Limit Repo Financing

I am a lonely voice on this, but when repo financing fails, it fails colossally.  It was a moderately large factor in the systemic risk of 2008.

Peterson’s Guide to Financial Blog Commenters

Is it any wonder the most blogs and financial websites have eliminated comment sections at the end of articles?

On a Letter From A Younger Friend

Basic advice on personal finance.

Productivity Inequality

The unpopular truth as to why many people in the US (and other developed nations) are falling behind, and losing net wealth.

The Idea of Contributory Defined Benefit Plans

Solves two pension problems — participants don’t have to make investment choices, and they get an income that they can’t outlive.  Gives them greater choice over how big of a pension to have.

Why are Pensions so Messed Up

Lists in short order the ten main problems with pensions.

And finally, I finished up the “Rules” posts.  Though later, I added two more…

The Rules, Part LVIII

Can contingent claims theory for bond defaults be done on a cash flow/liquidity basis?  KMV-type models seem to fail on severely distressed bonds that have time to breathe and repair.

The Rules, Part LIX

Productivity increases are only so when they result in an increase of desired consumer goods purchasable at prior prices.

The Rules, Part LX

Rapid upward moves in volatility almost always presage a bounce rally.

The Rules, Part LXI (The End… of the Past)

Rule: every rule has exceptions, including this one


Full Disclosure: long BRK/B for myself and clients