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.


In my view, these were my best posts written between November 2014 and January 2015:

Stay Calm

Political changes rarely create the policy/legal changes that people fear or hope for, so relax.

Problems in Simulating Investment Returns

There are seven problem areas in investment return modeling that are rarely dealt with, and certainly never as a group.  That’s why I would encourage you to be at least least slightly skeptical of any simulation analysis that you might receive.  This goes 10x for the schmendricks that propound multivariate normal simulations.

Revenue Misses Can Be Good

Every dollar in the door may be the same, but not every sale or promise made is equally good.  The contribution margin matter a lot.  Earnings, especially future earnings, always matters more than revenues.

Is This Legit?

It is little known that I analyze simple and complex investment situations for third party clients so that they can know whether they have a good deal or not.  Do you need help with an investment situation that puzzles you?

It’s Their Money

Don’t argue with your clients when they leave.  Wish them well, and do your best for them until the end.

Lagging Long Yields

Yield curves only shift in a parallel fashion about 40% of the time.  The actual way that yield curves tend to move tend to overstate long bond durations [interest rate sensitivity] by two years versus a parallel yield curve shift.

Learning from the Past, Part 1

Learning from the Past, Part 2

Learning from the Past, Part 3

The start of a nine-part series on my worst investment mistakes, beginning with a boiler room scam, undue pessimism from macroeconomic forecasts, and Caldor (spit, spit).

Should Jim Cramer Sell TheStreet or Quit CNBC?

My personal reflections about Jim Cramer, and why I think efforts to make him change his ways will fail.

Have Your Cake, Eat It Too, And End Up With Only Crumbs

Why you should avoid margin loans; they are the best, until they are the worst.

On Financial Risk Statements, Part 1

I never completed this series, but here I explain how most financial risk statements are useless to average people.  It would help a lot if plain language and straight talk scenarios were employed.

Living in the Land of Worries, Part 1

How do you cope with worry in investing?  What if there are other things to worry about that you aren’t considering? (I also never wrote part 2 for this one.)

Relying on the Kindness of Strangers

If you relied on the Swiss Central Bank to keep its peg to the Euro, you deserved to lose the money.  Study history, and listen to the naysayers.


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

Don’t be a Miser in Retirement (Or Ever)

“There is a fine line between over-saving and under-living.”

Another way to phrase it: God isn’t a miser; you shouldn’t be either.

On Lump Sum Distributions

Managing a lump sum distribution for income is one of the hardest things to do in investing.

Easy In, Hard Out (III)

Continuing the series on the troubles the Fed will have shrinking its balance sheet.

Understand Your Liabilities

Your investment decisions should be driven by when you will need to convert the assets to cash for spending purposes.

The Limits of Risky Asset Diversification

Because of the behavior of investors, and increasing interconnectedness between markets, the degree that risky assets diversify each other has been decreasing over time.  There is really only one diversifier for risky assets — high quality bonds, whether short or long.

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

Continues the fictitious conversation between me and a friend on the topic of how there are no objective prices in the market, much as we might like them.

Seven Thoughts on the Markets

  • Learning Investments
  • OPEC
  • High Yield
  • F&G Life
  • Missing Opportunities
  • FOMC, and
  • What could the next crisis be?

Direction Matters More Than Position with Monetary Policy

Accommodation ended a lot sooner than the FOMC said it did

Sell a Fraction of Your Home?

In general, highly idiosyncratic and indivisible assets like a home should not be sold in pieces.  That said, this idea is better than most.

Annotated “In Hoc Anno Domini” 

Response to “In Hoc Anno Domini”

My critique of Vermont Royster’s vapid Christmas message which gets published in the Wall Street Journal each year.

On Currencies that are Not a Store of Value

What do you do if you live in a place where high inflation is the norm?

On Currencies That Are A Store Of Value, But Maybe Not For Long

What do you do with the currencies of countries that are currently stable, but aren’t running the most stable economic policies?

Cheapness versus Economic Cyclicality

What do you do when the only cheap, safe companies embed a lot of economic cyclicality?  I.e., they rely on economic growth in order to do really well…



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.

Photo Credit: Philipp Messner || Every culture should learn their alphabet 😉


In my view, these were my best posts written between May and July 2014:

Look to the Liabilities to Understand the Assets

Why do new asset classes work very well for a time and then fail?

I Have My Doubts

Learning to live with uncertainty and thrive amid it.

Asset Value Illusion

People don’t need assets as much as they need streams of income derived from the assets (dividends, capital gains) that allow them to purchase the goods and services that they want and need.  (Low interest rates mean assets aren’t worth as much.)

Illusory Investment Income

Some naively say, “Dividends don’t lie.”  Well yes, the money you receive is yours, but is the company as healthy after the dividend?  Will they be able to keep it up?  Often that is not the case.

A Bond Manager Thinks about the Equity Premium

This is a more logical way to think of the equity premium by decomposing it into three more understandable parts: yield curve slope, credit spread, and economic earnings.

A Survey on Trading/Investing

How I think about Buying and Selling Stocks

Investment Management: A Science to Teach or an Art to Learn?

It is better to have an accurate uncertainty, than an inaccurate certainty.  We are better of professing ignorance of what we don’t know, than being certain about things where we are wrong.

Self-Regulation in the Financial Markets: My Thoughts

Self-regulation is a better idea in theory than practice.  Either it needs to be regulated, or not.  Adversarial regulation is unavoidable if regulation is needed.

The guy from the National Futures Association emphasized the idea that mandatory membership in the association as a requirement to do business was paramount for an SRO and I can see that.  The SRO then has the “death penalty” hanging over the heads of those they regulate.  That said, consider this: the CFA Institute may dream of the day when all involved in investing *must* hold a CFA Charter.

I have no doubt that this would be a good thing.  Ethics codes are good for the industry, and to kick out bad apples would be a good thing.

Enabling Others

Whether on a micro-level (a business) or on a macro-level (a government) the way to build value comes from a simple concept.  What can I/we do to enable the goals of others?  Growth and success come through service.

The Tails of the Distribution do not Validate the Mean

Asset classes that average in the results of astounding successes and total failures do not adequately represent what can happen to individuals in their specific investments.

Avoid Illiquidity

What are the significant costs and benefits of investing in illiquid assets?

The Value That Investment Advisers Deliver

Registered Investment Advisers [RIAs] offer value to their clients in 10 ways, most particularly helping them to not sell in a panic or buy out of greed.

On Fixed Payment Annuities

The value of having income that you can’t outlive

Pity the Multiemployer Pension Plans

Why many of these pension plans will fail

On Berkshire Hathaway and Asbestos

Why Berkshire Hathaway reinsures a huge amount of all of the asbestos claims outstanding

On Learning Compound Interest Math

Why it is important for everyone to learn it.

One More Note on Failure

What does it take for a big failure of any sort to occur, despite some planning?

The Reason for Failure Matters

How to see in advance how failures can indicate that a bigger problem is here, or not.

Understanding Insurance Float

Why most people who read Buffett don’t understand the value of insurance float properly.  It is valuable, but not as valuable as naive acolytes of Buffett believe.

Full disclosure: long $BRK/B for clients and me


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


In my view, these were my best posts written between November 2013 and January 2014:

Advice For Would-be Bloggers

Be regular (I need that advice myself), write on what you care about, start small.  Not that much different than this recent interview of me regarding blogging.

What Life Insurance to Buy?

Depends on whether you need it for protection or as part of a tax shelter or estate plan.

Protect Your Older Family & Friends

Remember that older folks are very tempting targets for fraudsters, and very nice people delivering subpar service at a high price.

Where to Find Data

I give you my favorite sources.  Most are free.

An Internship at a Hedge Fund

Advice on what to do if you get such an opportunity.

On Position Sizing in Equity Long-Short Hedge Funds

It’s not an easy question, particularly when it comes to shorting or being levered long, but I do offer some ideas that are better than things I have read.

Risks, not Risk, Again

It is better to model the individual risks and manage them, than to rely on an academic-derived model with unstable parameters.

Unconstrained Will Get Overdone

As in any management style, typically the best managers get there first, followed by less talented wannabes.

What are Safe Assets?

It depends on your time horizon(s)

Two Good Questions

How to sort though multiple factors in investing, and is investment in the insurance industry overdone?

Two More Good Questions

On weighting position sizes by expected returns, and What are the tests I use to check if accounting is fair?

On Understanding and Valuing Financial Companies

A compendium piece to the way I reason through investing in financial companies.

Why Great CEOs Look at their Stock Price Every Now and Then

It aids in managing the capital of the company wisely, especially when doing M&A.

When to Worry — An Asset-Liability Management Perspective on Financial Macroeconomics

When those that hold risk assets predominantly have weak balance sheets, with short-dated funding/horizons, it is time to reduce risk.

Systemic Risk Stems from Asset-Liability Mismatches

More on the foolishness of the FSOC and attempts to look for systemic risk where there is none.

Lower the Cap Rate, Not

Rising stock prices does not mean that monetary policy or any other government policy is necessarily good.

A Preview of the Future in Local Government Financing

Not everything is going to fail, but the the worst 1-3% will.  Avoid municipalities under severe stress.

Equality, and its After-Effects

What do you do when the whole world becomes more competitive, and compensation in your industry comes under pressure?

Give Them a Small Bank

How could we make banking regulators more intelligent about the industry that they watch over?  Give them experience in managing a small bank.

In my view, these were my best posts written between August and October 2013:

I completed the last of my “Manager” series, on being an investment risk manager:

The Education of an Investment Risk Manager, Part VI

This is the bizarre story of how I pulled a win out of an impossible situation against my own management, and a major life insurer.

The Education of an Investment Risk Manager, Part VII

On the time that I correctly modeled a complex structured security, and the client wouldn’t listen to reason

The Education of an Investment Risk Manager, Part VIII

The time that I did a competitive study of the most aggressive life insurers, and how it did not dissuade my client’s management team from trying to imitate them.

The Education of an Investment Risk Manager, Part IX (The End)

A bevy of little tales about odd investment tasks that I succeeded with, and how many of them did no good for my clients.

Ben Graham Did Not Give Up on Value Investing in Theory

With quotations and links to the source documents, I show what Ben Graham really said in the article commonly cited to say that he gave up on value investing.

On Avoiding Con Men

A summary article of many of my prior articles on how to avoid being defrauded.

On Alternative Investments

Alternative investments are like regular investments, but they are less liquid, more opaque, and have higher fees.

Should You Buy Shares of Stock or Not?

Where I answer Mark Cuban the one time he tweeted to me.  Really!

Quiet Companies Are Better

Why companies should let their filings with the SEC speak for them, and abandon the media.

Two is Company, Three is a Crowd

On game theory, and how it affects politics and civil wars.

It Works, But It Doesn’t Work All The Time

On how good investment theories fail for periods of time, and then come roaring back when most people know they will never work again.

Value Investing when Debt Levels are High

On seeking a margin of safety, when very little seems safe

A New Look at Endowment Investing

I interact with a groundbreaking paper on endowment investing — a very good paper, and I give some ways that it could be improved.

Less is More

Do you want to do better in investing?  Make fewer decisions, and make them count.

Taleb Versus Reality

In which I take on Nassim Taleb’s views on how to reduce risk in investing, and show which half of his valid, and which half are fantasy.

To Young Analysts

What I contributed to Tom Brakke’s project for young investment analysts — what do I think they should know?

The Rules, Part XLIX

In institutional portfolio management, the two hardest things to do are to buy higher than your last buy, and sell lower than your last sale.

The Rules, Part L

Countries are firms that produce claims on assets and goods

The Rules, Part LI

65% of the time, the rules work.  30% of the time, the rules don’t work. 5% of the time, the opposite of the rules works.

The Rules, Part LII

ge + E/P > ilongest bond

The Rules, Part LIII

The tech market washes out about every eight years or so.  The broad market, which is a more robust beast, washes out far less frequently.  My question: are these variants of the same phenomenon?

The Rules, Part LIV

When do employee and corporate incentives line up?  Ideally, incentive schemes should reward people with a fraction of the additional profitability that resulted from the additional work that they did.  Difficulties: measurement impossible in many cases, people could receive a bonus when the firm is not profitable, neglects synergies (both positive and negative).

The Rules, Part LV

Financial intermediation reduces volatility.  In bull markets, demand for financial intermediaries drops.

The Rules, Part LVI

Leverage and risk eventually transfer to the least regulated

The Rules, Part LVII

The more that markets are united through derivatives, the more systemic risk is created.

Photo Credit: richard winchell  || No, don’t study the Kabbalah…

To my readers, for a little while, I am going to be doing some “best of” posts along with some smaller articles.  You should see eleven “best of” articles before this is done.  If this bugs you, just turn me off for a little while.  These articles are important, because there are some re-publishers that mine these pieces for content, and sometimes translate highlighted articles into languages other than English.

This era probably had the greatest density of “Rules” posts.  In my view, these were my best posts written between May and July 2013:

Improve Your Skills

How do you protect those whom you love and yourself from economic obsolescence?

In Defense of Concentrated Portfolios

Why it is good to have asset managers that are not closet indexers, unlike most actively managed money in the market today.

Many Will Not Retire; What About You?

Thinking about the different streams of income in society, and which might be more likely to fail.  Also, thoughts on how low interest rates fit into this picture.

On Captive Insurers

On how life insurers compromise rules on reserving using reinsurers that they own as subsidiaries.  Also examines other ways that insurers weaken solvency.

On Insurance Investing, Part 6

On Insurance Investing, Part 7 [Final]

On how insurance has changed for investors over the past ten years, Price-to-Book vs Return on Equity Diagrams, and miscellaneous issues for those investing in insurance companies.

On Long-Term Care Insurance

Really, it is not an insurable risk, which is why most companies underwriting LTC have lost money on it, and coverage has become less and less generous.

“As for those with long-term care policies, if they are old, keep paying on them, you will likely do well on them when you finally need to draw on the policies.  You have benefits that benefits that can no longer be purchased.  Enjoy the exclusive club you are in.”

On News

“In summary, all news is not equal.  The reactions to news, and the lack thereof, can tell us a lot about the intentions of large market actors.  Do your homework well, and prosper off of the knowledge that it gives you regarding reactions, over-reactions, and under-reactions.”

On Risk-Based Liquidity, and Financial Regulation

On the Designation of Systemically Important Financial Institutions

The beginning of my arguments against the pointy-headed Financial Stability Oversight Commission [FSOC] and their inability to understand the solvency of non-bank financials.

On Stock Splits

“This brings me to my conclusion: stock splits are a momentum effect, but it is larger when companies are still have a cheap valuation.”

On the Value of Writing Well

Qualitative reasoning is important.  Read a lot, and learn to write well.

Risk Control Upfront

Risk Control Upfront, Redux

All good risk management prepares in advance to avoid risk, with strategies to mitigate risk as it happens taking a distant second place.

Temporary Prosperity at the Cost of Longer-term Prosperity

It’s easier for a generation to become prosperous if they push the bills onto their children and grandchildren.  Eventually it catches up with a nation, and reduces opportunity for average people.

The Problem of Small Accounts

Is it better for small accounts to get no advice or advice that is conflicted?  It is very hard to provide quality advice to small accounts.

The Rules, Part XXXVII

The foolish do the best in a strong market

The Rules, Part XXXVIII

There is probably money to be made in analyzing the foibles of money managers, to create new strategies by taking on the opposite of what they are doing.

The Rules, Part XXXIX

The trouble with VAR and other mathematical models of risk is that if it becomes the dominant paradigm, and everyone begins to use it, it creates distortions in the market, because institutions gravitate to asset classes that the model makes to appear artificially cheap.  Then after a self-reinforcing cycle that boosts that now favored asset class to an unsupportable level, the cashflows underlying the asset can no longer support it, the market goes into reverse, and the VAR models encourage an undershoot.  The same factors that lead to buying to an unfair level also cause selling to an unfair level.

Benchmarking and risk control through VAR only work when few market participants use them.  When most people use them, it becomes like the portfolio insurance debacle of 1987.  VAR becomes pro-cyclical at that point.

The Rules, Part XL

Unions create inefficiency.  This creates an opportunity for new technologies that perform the same function, but aren’t as labor-intensive.  (E.g. integrated steel vs. mini-mills)”

The Rules, Part XLI

If businesses anticipate a flow of financing, they will depend on it.  Then a diminution or increase in the flow of investable funds will affect markets, even if the flow of investable funds remains positive or negative.

The Rules, Part XLII

During a panic, it is useful to reflect on the degree to which the real economy has been driven by the financial economy.  In the Great Depression, the degree was heavy; in the seventies, it was light.  Today, my guess is that it is in-between, which makes it difficult to figure out the right strategy.

The Rules, Part XLIII

Modify Purchasing Power Parity by adding in stocks and bonds

An optimal currency board price basket would contain both assets and goods.

The Rules, Part XLIV

Expectations are a part of the game.

The Rules, Part XLV

Market rents are typically fixed in size.  When a strategy to exploit a particular market inefficiency gets too big, returns to the rent disappear, or even go negative prospectively, even if they appear exceedingly productive retrospectively.

The Rules, Part XLVI

Speculative companies should be evaluated on cash, burn rate, probability of success, size of potential market and margins at maturity.

The Rules, Part XLVII

Crashes are the result of a shift from a positive self-reinforcing cycle to a negative self-reinforcing cycle.

The Rules, Part XLVIII

If an asset-backed security can produce a book return less than zero for reasons other than default, that asset-backed security should not be permitted as a reserve investment.

The Stock Price Matters, Regardless

Roughly one dozen ways that the stock price affects the marketing, operations and financing of publicly traded companies.

What NOT to do in Job Interviews

A somewhat humorous article of mistakes that I have made in job interviews.  Also a comment on making sure that you fit the culture of the firm at which you are interviewing.

What to Do When Things are Nuts?

So you think that the market is overvalued?  How do you adapt to that condition, while still leaving some room for opportunity if the market continues to rise.

In my view, these were my best posts written between February and April 2013:

Wall Street Hates You

I have a saying, “Don’t buy what someone wants to sell you. Buy what you have researched.”

And so I would tell everyone: don’t give brokers discretion over you accounts, and don’t let them convince you to buy unusual bonds, or obscure securities of any sort.  By unusual bonds, I mean structured notes, and eminent men like Joshua Brown and Larry Swedroe encourage the same thing: Don’t buy them.

The Education of a Mortgage Bond Manager, Part III

Why being careful with credit ratings is smart.

The Education of a Mortgage Bond Manager, Part IV

Be wary of odd asset classes; they are odd for a reason.

The Education of a Mortgage Bond Manager, Part V

Where I do odd things in order to serve my client.

The Education of a Mortgage Bond Manager, Part VI

The Education of a Mortgage Bond Manager, Part VII

The Education of a Mortgage Bond Manager, Part IX

Odd stuff, but particularly insightful into some of the perverse dynamics inside investment departments.

The Education of a Mortgage Bond Manager, Part VIII

How I led the successful effort to modify the Maryland Life Insurance Investment Law, and acted for the good of the public.

The Education of a Mortgage Bond Manager, Part X (The End)

Where I explain the odd bits of being portfolio manager, while succeeding with structured bonds amid difficult markets.

Berkshire Hathaway & Variable Annuities

I explain the good, bad, and ugly off of Berkshire Hathaway’s reinsurance deal with CIGNA.

Advice to Two Readers

Where I opine on some Sears bonds, and also on flu pandemic risk at RGA.

What I Would & Would Not Teach College Students About Finance

Mostly, I would teach them to think broadly, and realize the most of the complex investment math is easy to get wrong.

My Theory of Asset Pricing

My replacement for MPT using contingent claims theory.

On Insurance Investing, Part 4

On finding companies with conservative insurance reserving

On Insurance Investing, Part 5

On the squishy stuff, where there are no hard guidelines.

On Time Horizons

People shorten and lengthen their time horizons at the wrong time.

The Education of an Investment Risk Manager, Part IV

On two odd situations inside a life insurance company.

The Education of an Investment Risk Manager, Part V

On how we replaced a manager of managers.

Value Investing Flavors

Explains how there are many ways to do value investing.

Classic: Using Investment Advice, Part 1

Classic: Using Investment Advice, Part 2

Classic: Using Investment Advice, Part 3

Classic: Using Investment Advice, Part 4 [Tread Warily on Media Stock Tips]

Understand yourself, understand the advisor, understand the counsel that is offered, and finally, we wary of what you here through the media, including me.

Classic: Avoid the Dangers of Data-Mining, Part 1

Classic: Avoid the Dangers of Data-Mining, Part 2

There are many ways to torture the data to make it confess what you want to hear.  Avoid that.

Classic: The Fundamentals of Market Tops

Where I explain what conditions are like when market tops are near.

At the Towson University Investment Group’s International Market Summit, Part 5

Where I answer the question: Where does academic theory fail in finance and in economics?

Classic: Separating Weak Holders From the Strong

Classic: Get to Know the Holders’ Hands, Part 1

Classic: Get to Know the Holders’ Hands, Part 2

Articles that explain the fundamental  basis that underlies technical analysis.

Classic: The Long and Short of Trend Investing

How to play trends without getting skinned.

Full Disclosure: long RGA and BRK/B