Category: Best Articles

The Best of the Aleph Blog, Part 42

The Best of the Aleph Blog, Part 42

Photo Credit: michel D’anastasio

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In my view, these were my best posts written between May 2017 and July 2017:

The Biggest Problems For Investors Today

The “two-minute question” with a half hour response.

Perceived Versus Real Risk Tolerance

Why questions about objective measures of risk tolerance need to be asked before querying someone about their subjective risk tolerance.

Overvaluation is NOT Due to Passive Investing

Active managers as a group are very similar to the index.? That shares move from active to passive managers does not affect their valuation, just as one active manager selling to another does not.

Goes Down Double-Speed (Update 4)

Why the current bull market, the second longest on record, is both amazing and boring at the same time.

The Doubling Rule

The Doubling Rule, Redux

Slightly more complex than the “Rule of 72” but more accurate as you get further away from 8%.

The Rule of K: If R is the interest rate multiplied by 100, money doubles in K/R years, where K = 70 + (R ? 2)/3

Why Social Security Should not be Invested in the Stock Market

This was rejected at the founding of Social Security because of the socializing of America’s private companies as a result.? Also, given that politicians would never make decision immediately after a crisis, there would be the tendency to buy in when expensive, and becoming the ultimate dumb money of the market.? Assets subject to the whims of politicians rarely get managed well — they are the worst at greed and fear.

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Note: this is the last “Best of Aleph Blog” post for a while.? My policy was don’t decide on what’s best for a year.? As it is, given that my posting rate has slowed, these posts may come even more rarely, because there won’t be enough in some three month windows to justify a post.

The Best of the Aleph Blog, Part 41

The Best of the Aleph Blog, Part 41

Photo Credit: Renaud Camus

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In my view, these were my best posts written between February 2017 and April 2017:

Problems with Constant Compound Interest (6)

It is very difficult to get a high real rate of return over a long time.? This article peels apart the math, and brings out the quantitative factors that play a role in the analysis.

Yield = Poison (3)

When the yield premiums for taking most forms of additional risk are too low, it’s time to take much less risk, and reduce yield considerably.

Streaking Into the Record Books?

Remember the streak of days where the market did not go down by 1% or more?? It ended and did not set a record, but it was a top 10 long streak.

We Get New Highs More Frequently After New Highs

Dog bites man, but I have never seen an analysis like this done before.

Everyone Needs Good Advice

On the value of having someone financially smart to whom you can ask questions

Two Questions on Returns

Clarifying the return series that I use for my forecasts of future stock market returns, and is it likely for an investor to earn a 3% real return over a long horizon?

The Permanent Portfolio

I give a significant analysis of Harry Browne’s idea.? Yes, it works.

Four Simple Investment Strategies That Work

  1. Indexing
  2. Buy-and-hold
  3. Permanent Portfolio
  4. Bond Ladders

Operating vs Financial Cash Flows

Do ETFs affect the valuations of individual stocks, or the market as a whole?

The Rules, Part LXIII

(This rule applies to salesmen) ?We pay disclosed compensation. ?We pay undisclosed compensation. ?We don?t pay both?disclosed compensation?and undisclosed compensation.?

Steeling Themselves For Pension Benefit Cuts

On the?Kline-Miller Multiemployer Pension Reform Act of 2014, and its impact on pension benefits in multiemployer plans that are VERY underfunded.

Because of underfunding, there will be more cuts. ?Depend on that happening for the worst funds, and at least run through the risk analysis of what you would do if your pension benefit were cut by 20% for a municipal plan, or to the PBGC limit for a corporate plan. ?Why? ?Because it could happen.

On the Pursuit of Economic Growth

On why cultural values play a large role in economic growth, but governments generally don’t.? (Hint: Stimulus is a dumb idea.)

The Financial Report of the United States Government 2016

This is an underrated report from the US Government, but even it is forced to downplay how the situation is for Social Security and Medicare.? Things aren’t getting better, and time is running short.? The next time I write about this is when the 2018 report comes out.? Until then remember my more recent piece?Notes from an Unwelcome Future, Part 1.

The Best of the Aleph Blog, Part 40

The Best of the Aleph Blog, Part 40

Photo Credit: michel D’anastasio

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In my view, these were my best posts written between November 2016 and January 2017:

When I was a Boy?

Can lessons from the distant past illumine the future?? I think so.

On Long-Term Corporate Investments

This is timely.? Are US firms too short-term in their orientation? No.? To be more controversial, if companies in the rest of the world imitate the US, they will be better off.? They don’t push the present hard enough, and the great long-term returns don’t materialize as a result.

How do you Manage a Company when the Stock is Considerably Overvalued?

This was a fun piece to write.? It is a high quality problem (usually), but the rules are the opposite for firms with undervalued stock, which is more common.

?Do Half? Applied

What should you do if you think you missed the rally???What should you do if you think you think you should take money off the table?

Edging In, Edging Out

How do you balance the short- and long-term in long-only investing?

The Beauty of Old Ideas

Often it takes time for an investment thesis to work.? Thus, look at old ideas that have gone nowhere… maybe the work is about to pay off.? Also, other ways to find ideas to buy.

Patience and a Little Courage

Why are patience and courage the attitudes that most investors need?

The Rules, Part LXII

In markets, ?what is true? works in the long run. ?What people are growing to believe is true? works in the short run.

Be wary of surrendering liquidity

I talk about interval funds and other illiquid investments.

Who Needs Liquidity Most?

Liquidity is plentiful now, but what happens when it switches and becomes scarce?

The Value of Risk-Based Capital in Financial Regulation

How to think about asset credit risk for financial institutions.? Also, why a “brain dead” 10% leverage proposal for banks is a bad idea, and really not a conservative idea at all.

A Failure of Insurance Regulation

On the liquidation of Penn Treaty’s subsidiaries, and what things regulators should do to avoid a repeat.? (Hint: apply these ideas to Genworth.)

Call Me When You Have A Real Insurance Company!

Supposedly Hank Greenberg said that to Warren Buffett at one point.? This was written when BRK wrote a huge retroactive cover for AIG, capping prior bad underwriting decisions.

Distrust Forecasts

Distrust Forecasts, Part 2

Why you should be careful about what you read in the media, and even from me.

A Cautionary Tale on Municipal Pensions

Why the main municipal pension fund in South Carolina ran into troubles, and what lessons we can learn from that.? (Put on your peril-sensitive sunglasses before reading this…)

Trump and Conflicts of Interest

Why Trump could have IPO’ed his firm, and lost all of the conflicts of interest, despite his objections at the time.

On Human Fertility, Part 5

Fertility doesn?t turn on a dime. ?When women conclude that the rewards of society (money, power, approval of peers) go to those with fewer children, that?s a tough cultural idea to overcome. ?I would conclude that it will take a lot longer than a single five-year plan to turn around birthrates in China? if they can be turned around at all. ?All across Asia, marriages happen at lesser rates, happen later, and produce fewer children. ?China is one of the more notable examples.

The Best of the Aleph Blog, Part 39

The Best of the Aleph Blog, Part 39

Photo Credit: michel D’anastasio

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In my view, these were my best posts written between August 2016 and October 2016:

What to do when Ethics are Discouraged

Eight ways to promote ethics where it is not popular.

On Pricing Grids, Part 1

On Pricing Grids, Part 1a

On how to price illiquid bonds, and why GAAP accounting does not matter for financial stock prices.

The Cash Will Prove Itself

On Donald Trump, during a time in 1990, when he said in the midst of a personal business financial crisis said:

?What I want to do is go and bargain hunt,? he said. ?I want to be king of cash.?

I even get to draw analogies to Warren Buffett, Elon Musk, and nifty finance poem that is less known today.

Dead as a Severed Horse?s Head

A lot of people got skinned by the bankruptcy of Horsehead Holdings, which was unfair to stockholders, but sadly, legal.? That said, those that owned the company missed several significant points regarding risk control, and that is why they lost.

Thinking About Monetary Policy: A Counterfactual

On a rare time that I agree with Paul McCulley — we both think the Fed in general should not invert the yield curve.? Also, how the Fed could be genuinely independent, unlike their “independence” that they talk of presently.

Practically Understanding Non-GAAP Earnings Adjustments

It ain’t all dirty, and it ain’t all clean.? Sometimes non-GAAP is a correction, and sometimes it is abusive of economic reality.? You have to analyze it carefully.

On the Decline of Lifestyle Employment

On the political fetishes that exist with protecting certain types of employment, when economies constantly change.

Watch Net Income Double in Two Years, Not

Remember, earnings estimates are off of non-GAAP earnings.? Do not confuse them with prior GAAP earnings for making an estimate of the growth in the value of corporations.

Of Milk Cows and Moats

“What municipalities lose businesses and people? ?Those that treat them like milk cows. ?Take a look at the states, counties and cities that have lost vitality, and will find that is one of the two factors in play, the other being a concentrated industry mix in where the dominant industry is in decline.

The more a municipality tries to milk its businesses and people, the more the businesses begin to hit their flinch point, and look for greener pastures. ?With the loss of businesses and people, they may try to raise taxes to compensate, leading to a self-reinforcing cycle that eventually leads to insolvency.”

Me Too!

How financial imitation helps create bubbles, if imitators don’t understand the risks they are taking.

The Plumbing of Investing

“Money does not flow into or out of assets. ?When a stock trade happens, shares flow?from one account to another, and money flows the opposite direction, with the brokers raking off a tiny amount of cash in the process. ?Prices of assets change based on the relative desire of buyers and sellers to buy or sell shares near the existing prior price level. ?In a nutshell, that is how secondary markets work.”

The Best of the Aleph Blog, Part 38

The Best of the Aleph Blog, Part 38

Photo Credit: michel D’anastasio

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In my view, these were my best posts written between May 2016 and July 2016:

You Can Get Too Pessimistic

In general, I think there is?no?value in preparing for the ?total disaster? scenario if you live in the developed world. ?No one wants to poison their own prosperity, and so the?rich and powerful?hold back from being too rapacious.

<snip>

The sun will rise tomorrow, Lord helping us? so?diversify and take moderate risks most of time.

Risk vs Return ? The Dirty Secret

After a certain point, additional risk reduces returns, because average people cannot stomach making the tough decisions when things are too good, or things are too bad.

Simple Stuff: What is Risk?

I thought of doing Simple Stuff as a series, but this is the only one that I have done so far.? Anyone have an idea for another one?

Risk is the probability that an entity will not meet its goals, and the degree of pain it will go through depending on?how much?it?missed the goals.

The Dead Model

My modified “Fed Model” as a measure of the equity premium inherent in the well-known Dividend Discount Model applied to the market as a whole.? Then I break the equity premium apart into three concepts that are simpler to understand.

Brexit Boogeyman

Brexit Boogeyman Bellows ?Boo!?

My take on the Brexit, before and after the vote.? It is still my opinion that Britain is better off outside the EU, and that the worries regarding it remain overblown.

The Best of the Aleph Blog, Part 37

The Best of the Aleph Blog, Part 37

Photo Credit: michel D’anastasio

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In my view, these were my best posts written between February 2016 and April 2016:

On Investment Charlatans

Mostly regarding some scammers pitching preferred stock, but without calling it that.? Always be wary of those that won’t be direct with you.

If Someone Tries to Sell You, Don?t Buy It

?Don?t buy what someone else wants to sell you. ?Buy what you have researched that you want to buy.?

They Can?t Help You

On a Letter from an Expatriate

On another type of charlatans, the political sorts.? Two of the few things I had to say prior to the elections in 2016 — the first one about how the problems were bigger than the government could solve, yet the politicians would still promise solutions.? The second was in the same vein, but at greater length.

Fly Away From Helicopter Money

Last set of charlatans, the ones at the Fed.? Using money finance has always led to bad results.? Much as I think the Fed talks about monetary policy lags, and then acts like they don’t believe that, that is a small error compared to helicopter money.? (This one got me a 15-minute interview on an English-speaking financial radio in Seoul, Korea.)

A World Deep in Debt?

Picturing Pensions

Two real long-term problems that our world will have to face.? High private and governmental debt around the world, which may lead to some weak nations defaulting on dollar-denominated debt.? “Weak parts of the Eurozone and Japan are possibilities, along with a number of emerging markets.”? Pensions are another issue, and most of the news globally is depressing.? So much for not having children and not saving.

Financial Market Liquidity Isn?t That Important for the Economy as a Whole

If All Investments Were Private

Though I always consider illiquidity to be a risk factor, for the economy as a whole, liquidity is overrated.? Public policy should not be geared to making all/more assets tradable.? Things that are genuinely illiquid should remain so, lest you have financial crises like the recent housing bubble, where too much money was lent against illiquid assets.

Actual asset performance is more important than liquidity. Analyze your investment selections carefully.

Estimating Future Stock Returns

Estimating Future Stock Returns, Follow-up

The first two articles on The Economic Philosopher’s stock valuation model that I have written.? As an update, the market is currently priced for a 3.8%/year return over the next ten years, not adjusted for inflation.? This is the best model available on future returns, bar none.

Goes Down Double-Speed (Update 3)

On the current bull market, and how it is the second longest on record.? And still is.

Think Half of a Cycle Ahead

On the virtue of realizing that present conditions won’t continue indefinitely, and thinking about when and how the turn will come.

Big Returns, Narrow Doors

“My advice to you tonight is simple. ?Be skeptical of complex approaches that worked well in the past and are portrayed as new ideas for making money in the markets. ?These ideas quickly outgrow the carrying capacity of the markets, and choke on their own success.”

The Best of the Aleph Blog, Part 36

The Best of the Aleph Blog, Part 36

 

Photo Credit: Renaud Camus

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In my view, these were my best posts written between November 2015 and January?2016:

Don?t be a Miser in Retirement (Or Ever)

It is possible to over-save, and underspend.? You should leave some inheritance for your heirs, but don’t deprive yourself of the benefits that having some assets provides.

On Lump Sum Distributions

In general it is better to take payments over time than to receive it as a lump sum.? If you do have a lump sum that comes to you, take care not to spend it too rapidly.

On Currencies that are Not a Store of Value

How would you live if you were trapped in Venezuela, Turkey, Zimbabwe, or some other badly run country with high inflation.? Here are a few bits of advice.

Understand Your Liabilities

How do you figure out how much expenses you need to fund, and as a result, how much you have to grow your assets to fund those expenses.

Ten Questions and Answers on ETFs and Other Topics

This was from a survey of bloggers on basic questions to answer for young people.

Ten Investing Books to Consider

Good books on value investing, markets, and risk.

We Eat Dollar Weighted Returns ? VII

Truly gruesome.? What’s the difference between what a buy-and-hold investor earned on Ken Heebner’s main fund versus what the average investor earned on the fund?? Really, it’s astounding.

The Limits of Risky Asset Diversification

Over time, all classes of risky assets tend to become correlated with each other.? This is because investors naively diversify their risky assets across these classes, and then engage in panic selling behavior with all of these classes as a group.

How Much is that Asset in the Window? (III)

What is the value of a fund that you can’t get money out of?

Direction Matters More Than Position with Monetary Policy

As the yield curve steepens, more investment opportunities become uneconomic.? Don’t say that monetary policy is accommodative when you are tightening.

Sell a Fraction of Your Home?

There are always new freaky ideas in finance that will likely not become common.? This is one of them.

Annotated ?In Hoc Anno Domini?

Response to ?In Hoc Anno Domini?

At Christmas, the Wall Street Journal republishes a vacuous opinion piece by Vermont Royster that is little better than liberation theology for conservatives.? He twists Scripture out its contexts to make it mean what is never meant.? Bogus beyond measure.

The Best of the Aleph Blog, Part 35

The Best of the Aleph Blog, Part 35

Photo Credit: Renaud Camus

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In my view, these were my best posts written between August 2015 and October 2015:

Learning from the Past, Part 6 [Hopefully Final, But It Won?t Be?]

The currently final episode on my investing errors, covering the last eight years.? Note that Valero has made me five times on my initial investment, though, and I still own it now.? This piece has more of the bright side of what I learned.

Musings on the Wealth Effect

“None of the ways I mentioned for getting more money for spending out of investments is likely to produce a lot of additional spending in aggregate across the economy. ?As a result, I think that the Executive Branch, the Congress, and the Federal Reserve should be cautious of trying to make asset values rise, or encourage more borrowing against assets. ?It will likely not have any significant effect to grow the economy over the intermediate -to-long term.”

The Surprise Dividend

A hypothetical piece for a company that wants to pay its shareholders more, but wants to do it in a more tax-efficient way.

Thinking About Pensions, Part 1

Thinking About Pensions, Part 2

This is a very realistic look at the issues surrounding retirement, and how to fund it.? it is very frank, and accurate in terms of what is possible.

Quarterly Financial Reporting is Needed, Productive, and Good

Why Companies SHOULD Offer Earnings Guidance

Quarterly earnings reporting is necessary for proper oversight.? If we did not have earnings guidance, a cottage industry would grow up to give it because investors want to know whether companies are performing adequately or not.

The Importance of Your Time Horizon

This is one of the most important concepts in financial planning.? When will you need the assets to provide spending money?

Buying The Next Hot Idea

This is an idea that rarely works.? Why do people fool themselves and chase fads?

When to Deploy Capital

A full answer to the question, “When do I invest cash balances?”? Hint: a middling solution is usually best.? Don’t be too bold or too timid.

When to Double Down

This is a tough question, but I give a clear answer:

Now, since I set up the eight rules, I have doubled down maybe 5-6 times over the last 15 years. ?In other words, I haven?t done it often. ?I?turn a single-weight stock into a double-weight stock if I know:

  • The position is utterly safe, it can?t go broke
  • The valuation is stupid cheap
  • I have a distinct edge in understanding the company, and after significant review I conclude that I can?t lose

Plan and Act, Don?t React

In general, the best investing anticipates likely changes.? By the time a change is revealed, it is too late to make investment decisions.

Too Many Vultures, Too Little Carrion, Redux

I suggested at the time that there were too many investors buying distressed energy assets, many of which went broke.

The Incredible Chain of Lending

Why to be careful when the financial sector grows too large.

A Bigger Brick in the Wall of Worries

I suggest that nonfinancial corporates may be the next financial crisis.? This is looking more likely now.

Volume Is Usually Low At Turning Points

This is a less-known truth: you can’t catch the bottom or the top, particularly if you have a large portfolio to manage.

Modeling Financial Liquidity and Solvency

Why most bank cash flow testing stinks, and how to improve it.

Don?t Worry About Public Bond Market Illiquidity

Bonds are illiquid, aside from the cash that they regularly throw off.? That’s normal; get used to it.

How Much is that Asset in the Window?

How Much is that Asset in the Window? (II)

A theoretical discussion about what assets are worth, settling on the unhappy idea that it is utterly relative, and that changing macroeconomic situations can affect things markedly.

At Least Build A Small Buffer

Having a small cash hoard is better than no cash hoard

Commissions Matter

I disembowel the idea that it doesn’t matter how large the salesman’s commission is.

Long-term Relationships and Credit Scores

An interesting piece on marriage, and how to make things work out, even when there are economic disagreements.

One Dozen Thoughts on Dealing with Risk in Investing for Retirement

“The basic idea of retirement investing is how to convert present excess income into a robust income stream in retirement. ?Managing a pile of assets for income to live off of is a challenge, and one that most people?are not geared up for, because poor planning and emotional decisions lead to subpar results.”

The Best of the Aleph Blog, Part 34

The Best of the Aleph Blog, Part 34

Photo Credit: Renaud Camus

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In my view, these were my best posts written between May 2015 and July 2015:

Learning from the Past, Part 5b [Institutional Stock Version]

Learning from the Past, Part 5c [Institutional Stock Version]

How I did a bad job for Hovde on Scottish Re and National Atlantic Holdings.? Also, what I did to mitigate the errors.? (And I am supposed to be really good with insurance companies…)

The SEC Pursues a Fool?s Errand

On why the Consolidated Audit Trial [CAT] is a bad idea.? Preventing “flash crashes” is not a desirable goal; they teach people not to use market orders, and to be careful.? The market is a place for big guys, not little guys.

On Partnership Investing

What do you have to be careful about if you are entering into a partnership?

On Risk-Based Liquidity and Systemic Risk

On how the Federal Government is making a mess of post-crisis policy.? The best policies would be:

  • Regulate banks, money market funds and other depositary financials tightly.
  • Don?t let them invest in one another.
  • Make sure that they have more than enough liquid assets to meet any conceivable liquidity withdrawal scenario.
  • Regulate repurchase markets tightly.
  • Raise the amount of money that has to be deposited for margin agreements, until those are no longer a threat.
  • Perhaps break up banks by ending interstate branching. ?State regulation is good regulation.

Advice to a Friend on a Concentrated Private Stock Position from His Employer

How to analyze a large position in your employer’s stock.? Lots of potential for gain and loss because of the lack of diversification in one stock.

There?s a Reason for Risk Premiums

Some academic literature implicitly treats risk premiums as “free money” if you hold it long enough.? But there’s the problem: can you hold it long enough?? Also, sometimes the extra returns are so small that they are not worth the risk.

On Bond Market Illiquidity (and more)

On Bond Market Illiquidity (and more) Redux

Some things aren’t meant to be highly liquid, and it is foolish to worry about the lack lack of liquidity.? The second article covered some good questions that I got asked, including bonds that are predominantly “bought and held,” and the limitations on investment banks to hold inventory post-crisis.

Yes, Build the Buffer

More reasons why you should keep a supply of cash on hand.

Coping With Zero

In this period, I couldn’t find any new stocks to buy.? What should I do?

Stocks or Bonds?

What do you recommend when stocks and bonds are likely to return the same amount over the next ten years?? I leaned toward the bonds, which so far has been the wrong call.

The Phases of an Investment Idea

Sixteen Implications of ?The Phases of an Investment Idea?

How to analyze the cycles that investment ideas go through.? People think about it linearly, which helps lead to the booms and busts.? The second article gives 16 practical applications of the idea to illustrate the general theory.

Avoid Indexed Life Insurance Products

Why indexed insurance products give subpar returns with reduced volatility, assuming the insurer stays solvent.

Asset-Liability Mismatches and Bubbles

In this article, I argue that China has been indirectly encouraging its banks to run huge risks by financing illiquid assets with liquid liabilities.? Again, the risk hasn’t materialized yet.

How To End Index Gaming

?…in this short post I would like to point out two ways to stop the gaming.

  1. Define your index to include all securities in the class (say, all US-based stocks with over $10 million in market cap), or
  2. Control your index so that additions and deletions are done at your leisure, and not in any predictable way.

Gundlach vs Morningstar

I discussed the unwillingness of Doubleline to cooperate with Morningstar to analyze certain Doubleline funds, and why it was reasonable in some ways for Doubleline to refuse, and Morningstar to not give favorable ratings.? That said, I concluded that Morningstar should apologize to Doubleline.? This article earned me polite calls from both sides, and one request to take the article down voluntarily.? I politely refused.

What is Liquidity? (Part VIII)

The occasional series that never ends.? Ten things that affect the liquidity of an asset, and explaining the Treasury “flash crash.”

It?s Difficult to Make Predictions, Especially About the Future

It is a fatal attraction, but if you are going to write about investing, you will have to make some predictions about markets.? Just try to keep them from being too outlandish.

We Eat Dollar Weighted Returns ? VI

In which I analyze the Hussman Strategic Growth fund and the large negative difference between time-weighted and dollar-weighted returns.

Stock Valuations: Micro and Macro

Can valuation measures applied to individual companies be used to value the market as a whole?? Under what conditions, or, is there a better way?

The School of Money, First Grade

This was the first of what was going to be sixteen articles.? I was thinking of turning it into a book.? Things have been too busy for that.? This article is about figuring out what you want to do in life.

Pick a Valid Strategy, Stick With It

Many amateur investors give up on a strategy just as it is about to start succeeding, and choose a strategy that has performed well, only to watch it underperform.

Bid Out Your Personal Insurance Policies!

I give you at least five reasons why you should bid out your personal insurance policies every three years or so.? Underwriting rules and premiums change, and some companies take advantage of loyalty.

The Best of the Aleph Blog, Part 33

The Best of the Aleph Blog, Part 33

Photo Credit: Renaud Camus

In my view, these were my best posts written between February 2015 and April 2015:

One Dozen Reasons Why the Average Person Underperforms In Investing, Part 1

One Dozen Reasons Why the Average Person Underperforms In Investing, Part 2

Most of this boils down to chasing past performance, neglecting fundamentals, and neglecting basic risk control.

Learning from the Past, Part 4

Learning from the Past, Part 5a [Institutional Bond Version]

In this series, I disclose my WORST investing mistakes ever. ?Personal errors: cellular auctions, mistiming small cap value, and small deal arbitrage. ?Professional error:?Manufactured Housing Asset Backed Securities ? Mezzanine and Subordinated Certificates.

Smell the burning money!

The ?Secret? of Berkshire Hathaway

You can’t imitate what they do, because you would have to tear up everything you are doing now.

One Potential Weakness of Berkshire Hathaway

Reserving is weakening, new places to find float are few, and if policy on asbsetos settlements changed, BRK could be in a world of hurt.

From Stream to Shining Stream

How a stream of excess income during working years becomes a stream of income in retirement years. ?It’s harder to do than you might expect. ?Includes a list of strategies and pitfalls.

2000 More Points To Go; Look Elsewhere!

Even today, the NASDAQ Composite still hasn’t hit an inflation adjusted high.

On Bitcoin

I feel stronger about this than when I originally wrote this. ?Bitcoin and the other cryptocurrencies are just a speculative crapshoot, and the attempt to have a currency without the legal structure of a government will fail, unless it is a commodity like gold. ?Also, the blockchain is an overrated resource hog that lacks the flexibility possessed by life insurance company policy management systems.

On Negative Interest Rates

Explains why they exist, and what dangers could come from them.

An Idea Whose Time Should Not Come

Financial complexity should usually be avoided, particularly with financial guaranty schemes.

We Don?t Need To Be Able To Short Private Companies

Like the prior article, there are people with too much time on their hands thinking up nutty and useless ideas. ?There is enough risk in the world already; we don’t have to add to it.

The Bond Market Tells The Fed What To Do, Not Vice-Versa

Sometimes we forget that the collective lending and borrowing decisions of the US bond market are more powerful than the Fed.

Index Investing is not Inherently Socialistic

I think active managers have to grow up and accept that passive investing isn’t evil; it just cuts against the economic interests of active managers like me, at least for now. ?When it gets really big, the paradigm will shift…

On Being A Forced Seller in a Panic

Very few people want to panic, and fewer want to sell at the bottom — but many do just that. ?How can you avoid it?

Why Life Insurers, Defined Benefit Plans, and Endowments Invest Differently

How investing differs for investors that have different types of long-duration liabilities to fund.

Fade High Price-Sensitivity Assets in Crude Oil

A short and lonely post where I told you in advance that crude oil would hang around $50/barrel “for a few years.” ?And, my reasoning was on target as well.

Simple Stuff: On Bid-Ask Spreads

Do you have basic concepts that you want to have explained? ?Shoot me an email, and if I think enough people would be interested, I will do it.

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