The Best of the Aleph Blog, Part 31


During this era, I started contributing articles via tumblr to Yahoo Finance.  That also meant that every article would start with a picture, graph, or photo.

In my view, these were my best posts written between August and October 2014:

The Investments Matter More than their Form

Hedge funds and mutual funds are shells — what goes into them matters more than the form itself.

On Genworth

Down 70%+ since then.  In general, complexity is not rewarded in investments, and particularly insurance companies.  It also helps if you choose lines of business that are good risks, which long-term care and mortgage insurance aren’t.

The Tip Culture in Amateur Investing

Shortcuts in investing are generally not a good idea.

Ranking P&C Reserving Conservatism

Prescient — the liberal reservers have not done well as a group.  I will be doing an update on this.

The Victors Write the History Books, Even in Finance

Survivorship bias has an effect on all of our investment statistics.  Try to combat that by reading history books — the only thing more volatile than markets is history.

Should I Invest in Private Equity?

It’s not as easy at it looks, and often IRRs overstate the realized returns when you consider capital that is locked up.

The Art of Extracting Large Commissions From Investors

Beware of being sold an investment; rather, research your investments carefully, perhaps with the aid of a skilled and trusted friend

One Less Mentioned Reason for Stock Buybacks

Managements want to prevent hostile takeovers through not leaving a lot of idle cash on the balance sheet.

The FSOC is Full of Hot Air

The Financial Stability Oversight Council doesn’t understand what firms contribute to systemic risk.

End the “Code of Silence”

Why the CFA “Future of Finance” project was unlikely to go far.  Is that still around?

Making Systematic Risk Disappear, Not

If you stop measuring performance and risk, the performance doesn’t change, and the risk doesn’t go away

Retirement – A Luxury Good

The first thing to remember is that retirement is a modern concept. That the world existed without retirement for over 5000 years may mean that it is not a necessary institution. For a detailed comment on this, please consult my article, “The Retirement Tripod: Ancient and Modern.”

Volatility Can Be Risk, At Rare Times

When assets are highly levered, volatility can morph into permanent destruction of capital.

Possible Bond ETF Problems

If a large amount of bonds inside an ETF are illiquid, all sorts of funny things could happen, but they wont make us laugh.

What Should the Cost of Equity Be to Value Investors?

It should reflect the opportunity cost of the unlevered funds.

Buying an Inexpensive Car

A few tips and tricks

Managing Money for Retirement

Money management is far harder when you have to draw funds regularly to cover expenses.  Also, most people overestimate how much money they can draw from investments.

Numerator vs Denominator

…Howard Simons, astutely would comment something to the effect of: “The stock market is not a futures contract on GDP.”  This much is true, but why is it true?  How can the market go down on good economic news?

Factor Glut

Are factors getting overused?

Even with Good Managers, Volatility Matters

An examination of the Fairholme Fund, and what returns that an average investor received from it.

Mantra: Interest Rates Have to Rise, Interest Rates Have to…

An examination of why interest rates don’t have to go up.

Meeting the “Bond King”

What happened when I met Bill Gross…

The Butterfly Machine

It’s harder to create a giant crisis than you think, but if enough parties borrow enough money at the same time, we just might be able to do it.