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Sorted Weekly Tweets

Saturday, April 12th, 2014

US Policy & Politics 

  • Nearly Half of Dodd-Frank Rules Still Unwritten Experiment of regulation by study committees continues albeit slow $$ Apr 12, 2014
  • Banks Given Two Extra Years to Fully Comply With Volcker Rule Banks prefer abolition; Fed offers a delay $$ #more? Apr 12, 2014
  • How Big Banks Created a Fed to Serve Their Own Interests Fed almost always ends up being a shill 4 the banks $$ $XLF Apr 12, 2014
  • Angry students snap photos of lunches, tell Michelle Obama: ‘You call this a [expletive] lunch?’ Food Nazis r mean $$ Apr 12, 2014
  • On equal pay for women, Obama challenges GOP to ‘join us in this the 21st century’ White House has own disparities $$ Apr 12, 2014
  • When the Messenger Is Worth Shooting Fewer & fewer people think teaching financial literacy 2 avg ppl works $$ $SPY Apr 12, 2014
  • Republicans should be friendly to markets, not to business Big business excellent at co-opt laws 4 their own good $$ Apr 12, 2014
  • Maybe a Gender Pay Gap Is OK This argumentation isn’t new; economists have been making this argument since the 70s $$ Apr 12, 2014
  • The Best SEC Money Can Buy @ritholtz on Jim Kidney’s excellent retirement speech on the SEC which is worth reading $$ Apr 12, 2014
  • Food Price Shock, 2014 Edition Note that the last time this happened, wars & other pains hit developing world $$ Apr 12, 2014

Market Impact

  • Hedge Fund Industry Growing With Pensions To Thank Probably a mistake as hedge funds tend not 2b good w/volatility $$ Apr 12, 2014
  • Hedge Funds Unwind As Growth To Value Rotation Intensifies As growth stocks correct, hedge funds chase performance $$ Apr 12, 2014
  • How Money Managers Fight Their Emotions and Sometimes Lose Too Bold? Not bold enough? Tough 2strike right balance $$ Apr 12, 2014
  • The Buys You Can’t Make Yourself @reformedbroker points out the value of @MebFaber ‘s global value ETF $GVAL $$ Apr 12, 2014
  • Humble Student of the Markets: A quant lesson from a technician Useful way to understand indicators & mkt regimes $$ Apr 12, 2014
  • 2014 crash will be worse than 1987′s: Marc Faber Bold w/respect to timing &severity of the next crisis, prob wrong $$ Apr 12, 2014
  • Do ‘rising rate’ ETFs really protect investors? I would b wary here; additional yield often carries hidden risks $$ Apr 12, 2014

Rest of the World

  • Kuroda Seen Brewing Yen-Weakening Surprise Action Don’t b shocked if the BOJ does yet more to weaken the yen $FXY $$ Apr 12, 2014
  • This is the bank to watch for a Chinese credit implosion Minsheng is an aggressive lender 2the most dodgy credits $$ Apr 12, 2014
  • China’s steelmakers have branched out into shadow banking—which is funny since they owe $484B Brief stmt of prob $$ Apr 12, 2014
  • China Pizza Passion Has Fonterra Riding Mozzarella Wave Pizza is so different than traditional Chinese food $$ $YUM Apr 12, 2014
  • Ukraine’s Rust Belt Faces Ruin as Putin Threatens Imports Russia has more ec influence on Ukraine thn US on Russia $$ Apr 12, 2014
  • Saudi Banks Reject Algosaibi Meeting on $5.9B Default Islamic finance struggles w/debt that isn’t debt but is debt $$ Apr 12, 2014
  • Lavender-Filled Teddy Bears From Tasmania Are a Big Hit in China Bobbie Bear touches the hearts of Chinese ladies $$ Apr 12, 2014
  • Top economists warn Germany that EMU crisis as dangerous as ever Overall & banking leverage still higher than safe $$ Apr 12, 2014
  • Fracking’s hottest year in China China finds gas & tight oil in their shale formations. Who knew? $$ $FXI $XLE Apr 12, 2014

Companies & Industries

  • Time Inc. to Raise $1.4B in Debt for Spinoff I would b careful here; levering up old media not a recipe 4 success $$ Apr 12, 2014
  • Vox Takes Melding of Journalism and Technology to a New Level Vox Media creates a content mgmt system 4 journalism $$ Apr 12, 2014
  • Trailer Parks Lure Wall Street Investors Looking for Double-Wide Returns Poor people have a hard time moving $$ Apr 12, 2014


  • Stay-at-Home Moms Rise in Reversal of Modern Family Trend Children deserve attention to help them grow up $$ $SPY Apr 12, 2014
  • More Moms Staying Home, Reversing Decadeslong Decline Value in efforts 2 produce better children w/more parenting $$ Apr 12, 2014
  • Font War: Inside the Design World’s $20M Divorce Not clearly spelling out a partnership agreement: font of trouble $$ Apr 12, 2014
  • Windows XP Goes Dark; Will Hackers Be Lurking? XP has been debugged; odds of significant holes are low $$ Apr 12, 2014
  • After Heartbleed Bug, A Race to Plug Internet Hole A significant part of internet affecting privacy had a hole $$ Apr 12, 2014
  • Global solar dominance in sight as science trumps fossil fuels Can capture 31% of sun’s energy with a 111V Solar Cell Apr 12, 2014
  • At Gross’s Pimco, El-Erian Says ‘Different Styles’ Stopped Working Well Together Oil & water eventually separated $$ Apr 12, 2014


  • Unsafe: Greece Plans to Issue Long-Term Bond on Wednesday Lust 4 yield guides the behavior of debt investors $$ Apr 12, 2014
  • Misleading: Oklahoma Swamped by Surge in Earthquakes Near Fracking All quakes r little which avoids big quakes $$ Apr 12, 2014
  • Wrong: Are Safer Cars Worth the Money? Misapplies benefit-cost analysis; may b cheaper ways 2 save more lives $$ $F Apr 12, 2014

Retweets, Replies & Comments

  • ‘ @foxjust Nice going; EEBS is breaktakingly honest with respect to earnings manipulation. cc: @jciesielski $$ Apr 12, 2014
  • RT @ReformedBroker: Reminder: The Fed’s own economic forecasts are basically worse than your dog’s. Apr 09, 2014

Sorted Weekly Tweets

Friday, April 4th, 2014

Rest of the World

  • Putin’s Rejection of the West, in Writing ”Russia must be viewed as a unique and original civilization…” $$ $MACRO Apr 05, 2014
  • Japan Working Women Face Tax Blow as Their Numbers Swell Govt’s like women working o/s home: can tax their output $$ Apr 05, 2014
  • China Leverage Seen Rising Through 2016 It’s relatively worse than advertised, debts r private, bank & muni $$ Apr 03, 2014
  • China Unsated by US Ham Means More Food Deals If China is rebalancing to consumption, expect large food imports $$ Apr 03, 2014
  • Rajan Offers No Solace as Developers Fight Rut Rising rates put pressure on Indian businessmen $$ Apr 03, 2014
  • CHINA IS IMPORTING GOLD SECRETLY USING MILITARY CHANNELS @JamesGRickards new book is coming out in a few days $$ $GLD Apr 01, 2014
  • How rumour sparked panic and three-day bank run in Chinese city All it took was a rumor that went viral $$ $FXI $SPY Apr 01, 2014
  • Foreign Policy Legacy of Obama Administration in European Hands U don’t want Europeans 2question the value of NATO $$ Apr 01, 2014
  • Chinese Private Sector Debt China’s ratio of private debt to GDP is higher than the US & EU $$ Apr 01, 2014
  • Poor Coordination Led to Flawed Search for Missing Malaysia Airlines Flight 370 Maybe, but would have been hard $$ Apr 01, 2014
  • South Sudan Ethnic Hatred Drives Rebel Leader’s White Army Read the last sentence & u will c y this war persists $$ Apr 01, 2014
  • She’s lost 3 sons in the war & is adamant should continue. “The war will not be stopped until we kill all Dinka, including the children,” $$ Apr 01, 2014
  • China Burns Speculators as $5.5B Lost on Yuan Bets Real market goes more than 1 way, doles out punishment 2losers $$ Apr 01, 2014
  • Almost 10,000 Divorces Each Day in China’s Breakup Boom Driven by increasing economics & greater freedom 2 do so $$ Apr 01, 2014
  • Dashed Ikea Dreams Show Decades Lost to Bribery in Ukraine Corruption & denial of propty rights keep nations poor $$ Apr 01, 2014
  • China’s $14.5B Test China seizes $14.5B assets from family, associates of ex-security chief $$ Apr 01, 2014
  • China Lake Saved From Stink Leaves Fiscal Cleanup for Li Ability 2 service municipal debt is a problem 4 China $$ Apr 01, 2014

US Politics & Policy

  • A Catastrophe Like No Other Peggy Noonan: The president tries to put a good face on ObamaCare $$ #unforcederror $TLT Apr 05, 2014
  • Janet Yellen’s Human Message Gets Clouded Truth is monetary policy is weak w/respect to unemployment $$ Change regs Apr 03, 2014
  • Yelp Reviews Brew Fight Over Free Speech, Fairness Free speech doesn’t mean u can say anything, libel is a crime $$ Apr 03, 2014
  • Democrats Bet on Technology Instead of Paying Down Debts Dems put lack of $$ where mouth is, b/c debts don’t matter Apr 01, 2014
  • Constitutional conundrum: Michigan demand 4a balanced budget could trigger amendment convention States take power? $$ Apr 01, 2014
  • The House Republican Mess GOP leadership held unannounced voice vote on a one-year unfunded “doc fix” 4 Medicare $$ Apr 01, 2014
  • What Is a Patent Troll? Congress, Courts Try to Find Out Should not be able to patent ideas, many ways 2 implement $$ Apr 01, 2014
  • Controversial FHA payoff rule to end At closings, FHA required one month’s interest from sellers who prepaid mtge $$ Apr 01, 2014
  • Supreme Court skeptical of computer-based patents Multiple ways 2 achieve same results w/computer code $$ $MSFT $GOOG Apr 01, 2014
  • Yellen Assures Markets on Interest Rates In the short-run, monetary looseness helps, in the long-run it hurts $$ $TLT Apr 01, 2014
  • GOP Sees a New Path for Senate Through Iowa Looking at the data, the GOP will have a hard time taking the Senate $$ Apr 01, 2014            

Market Impact

  • Buying Bonds in Sellers’ World: Prepare to Fail If u r a life insurer, don’t want 2 give up income from prem bonds $$ Apr 05, 2014
  • Emerging markets ETFs take off in March and June Bear market rallies r short & sharp, watch monetary tightening $$ Apr 03, 2014
  • Investors Clamor for Risky Debt Offerings High yield isn’t so high anymore, & income starvation leads ppl astray $$ Apr 03, 2014
  • Gross Worst as Volatility Spikes in Fund Bad idea to move to 5s just as Yellen began to speak unguardedly $$ #taper Apr 03, 2014
  • Forget the lottery. Time for the Billionaire ETF? Kind of a follow the 13Fs of the wealthy fund, could do worse $$ Apr 03, 2014
  • Vanguard Beats BlackRock Winning Most ETF Money This Year Low fees, sticky clients, tracks index well, low fees $$ Apr 01, 2014
  • Andreesen On How To Kill Stock Market Personal pet peeve is how Sarbox killed off sponsored listings of fgn firms $$ Apr 01, 2014
  • Activists Beat S&P 500 in 48% Gain for Shareholders Cool interactive graphic $$ $SPY Apr 01, 2014
  • Investors Picking Fights Enhance Value as Stocks Beat S&P 500 Problem: avg investors can’t find those stocks early $$ Apr 01, 2014
  • Biggest ETF Flow From US Debt Since ’10 on Growth Optimism Funny how long Tsys haven’t tanked yet $$ $TLT Apr 01, 2014
  • So Far, So Meh @ReformedBroker tells us to expect a boring year when all is done with lots of jolts inbetween $$ $SPY Apr 01, 2014
  • Flows Don’t Follow Value, They Follow Performance @reformedbroker tells u small investors r always late & lose $$ Apr 01, 2014  

High Frequency Trading (Boo!)

  • Michael Lewis Feels No Shame as Book Curdles Tempers Must admit, I lost respect 4 him on this last media circus $$ Apr 05, 2014
  • High-Frequency Trading May Be Too Efficient @matt_levine explains the effect of HFT, who gets hurt, who doesn’t $$ Apr 03, 2014
  • High-Frequency Traders Chase Currencies as Stock Volume Recedes Ponder how HFT can b good 1 place & bad in others $$ Apr 03, 2014
  • What Michael Lewis Gets Wrong About High-Frequency Trading He gets quite a bit wrong; this is a good summary $$ Apr 03, 2014
  • An Adaptation From ‘Flash Boys: A Wall Street Revolt,’ by Michael Lewis Tells story creating a fair stock exchange $$ Apr 01, 2014  

Marvel Comics Movies

  • Kevin Feige, Marvel’s Superhero at Running Movie Franchises Great article. Explains the strategic aspects well $$ Apr 05, 2014
  • Comic Wars: How Two Tycoons Battled Over the Marvel Comics Empire–And Both Lost Provides backstory for Marvel $$ Apr 05, 2014  

Companies & Industries

  • Energy Future Talks Pit Billionaires Against Billionaires & the IRS, who is owed billions, creditors want 2 stiff $$ Apr 03, 2014
  • Old Math Casts Doubt on Accuracy of Oil Reserve Estimates Life of fracked wells is a lot shorter than conventional $$ Apr 03, 2014
  • New $GOOG Shares Hit Market as Founders Cement Grip With Split Won’t hurt much, just don’t issue2many C shs $$ $GOOGL Apr 03, 2014
  • The Argument for $75 Oil Should Be $95 Oil W/weak global econ, oil should b falling but it is not; new equilibrium $$ Apr 01, 2014  


  • Loans Are Finally Easier to Get If this persists for 6 months, start watching consumer price inflation $$ Apr 03, 2014
  • Jules Kroll’s KBRA Out to Disrupt Cozy Ratings Agency Business Starts in area of greatest failure: securitizations $$ Apr 03, 2014
  • So U Think You’re Smarter Than A CIA Agent Good Judgment project finds bright ppl who predict better than experts $$ Apr 03, 2014
  • Do We Hate Female Bosses? Never had one, so I don’t know. ;) $$ Apr 03, 2014
  • How Americans Meet Their Spouses Fewer people meet their spouses @ work, more meet them over the internet than b4 $$ Apr 01, 2014
  • US Airports Are Off the Chart @Ritholtz shows how lack of infrastructural investment hurts the US $$ $SPY $TLT Apr 01, 2014
  • Millennials Mired in Wealth Gap as Older Americans Gain If u had lots of debts & few assets going into 2008, ouch $$ Apr 01, 2014  


  • 2hard: US Seeks Changes to ‘Skewed’ Data in UN Climate Draft Models r 2complex 2produce any sort of accuracy $$ $SPY Apr 05, 2014
  • Wrong: Investment strategies you’d be foolish to ignore – Pros Many of these might work in the short-run, not L-T $$ Apr 03, 2014
  • Wrong: Schwab: HFT a cancer that needs to be stopped It’s more complex than that; improves mkts in some ways $$ $SPY Apr 03, 2014
  • Wrong: Christine Lagarde: global economic growth is still too slow Aside frm degegulation govts can’t affct growth $$ Apr 03, 2014
  • Wrong: This Ratio Reveals The Market’s Top Bargains Makes rookie error of applying FCF 2 financials, can’t b done $$ Apr 03, 2014
  • Wrong: The Modern View of the Stock Market Value of MPT is that it sidelines smart people who would b competitors $$ Apr 01, 2014
  • Meh: Flight 370 Search Gains Vessel With Black Box-Detector Late 2 arrive; can’t probe more than 1 mile deep $$ $BA Apr 01, 2014
  • Maybe: Home Sales in US Poised to Surge With Spring Maybe if prices come down this might happen, few moveup buyers $$ Apr 01, 2014
  • Very Wrong: When You Really Look, Financial Quicksand Turns Into Oligarchical BS Claims Govt debt doesn’t matter $$ Apr 01, 2014  

Comments, Replies, and Retweets

  • @charlie_simpson Marry young, have children, a recipe for happiness that fights loneliness — true for men as well. Apr 02, 2014
  • @insidermonkey @jimcramer @katsuyama Stupid argument. Read & learn $$ Apr 02, 2014
  • . @dpinsen seems he just wants it 2 stop. Also notes Darfur attacked once again & $$ $SPY $TLT Apr 01, 2014
  • @dpinsen I’m not backing the Ukraine in NATO — only caution. NATO should be bold or silent, but not in-between, counting the costs. $$ Mar 30, 2014

Best of the Aleph Blog, Part 24

Friday, April 4th, 2014

These articles appeared between November 2012 and January 2013:

On Time Horizons

Investment advice without a time horizon is not investment advice.

This Election Will Solve Nothing

So far that is true of the 2012 elections.


We need to add “None of the Above” as an electoral choice in all elections.

Eliminating the Rating Agencies, Part 2

Eliminating the Rating Agencies, Part 3

Where I propose a great idea, and then realize that I am wrong.

The Rules, Part XXXV

Stability only comes to markets in a self-reinforcing mode, from buy and hold (and sell and sit on cash) investors who act at the turning points.

The Rules, Part XXXVI

It almost never makes sense to play for the last 5% of something; it costs too much. Getting 90-95% is relatively easy; grasping for the last 5-10% usually results in losing some of the 90-95%.

Charlie Brown the Retail Investor

Where Lucy represents Wall Street, the football is returns, and Charlie Brown is the Retail Investor. Aaauuuggh!

On Hucksters

Why to be careful when promised results seem too good, and they get delayed, or worse.

Bombing Baby BDC Bonds

Avoid bonds with few protective covenants, unless the borrower is very strong.

On Math Education

Why current efforts to change Math Education will fail.  Pedagogy peaked in the ’50s, and has been declining since then.

On Human Fertility, Part 2

On the continuing decline in human fertility across the globe.

If you Want to be Well-off in Life

Simple advice on how to be better off.  Warning: it requires discipline.

Young People Should Favor Low Discount Rates

If we had assumed lower discount rates in the past, we wouldn’t have the problems we do now.  (And maybe DB pensions would have died sooner.)

Problems in Life Insurance

On why we should be concerned about life insurance accounting.

Investing In P&C Insurers

On why analyzing P&C insurers boils down to analyzing management teams.

Selling Options Cheaply (Did You Know?)

Naive bond investors often take on risks that they did not anticipate.

Book Review: The Snowball, Part One

Book Review: The Snowball, Part Two

Book Review: The Snowball, Part Three

Book Review: The Snowball, Part Four

Book Review: The Snowball, Epilogue

My review of the most comprehensive book on the life of Warren Buffett.

On Watchlists

How I met one of the Superinvestors of Graham-and -Doddsville, and how I generate investment ideas.

Why do Value Investors Like to Index?

How I admitted to not having  a correct perspective on value indexing.

Evaluating Regulated Financials

Why regulated financials are different from other stocks, and how to analyze them.

Locking in a Smaller Loss

Why people are willing to lock in a loss against inflation, because of bad monetary policy.

Why I Sold the Long End

Great timing.

The Evaluation of Common Stocks

Value investing is still powerful, but the competition is a lot tougher.

The Order of Battle in Financial Planning for Ordinary Folks

The basics of personal finance

Sorting Through the News

How to use my free news screener to cut through the news flow, and eliminate noise.

On Financial Blogging

So why do we spend the time at this?

Matching Assets and Liabilities Personally

How to manage investments to fit your own need for cash in the future.

Penny Wise, Pound Foolish

How short-sighted, incompetent managers destroy value.

Expensive High Yield – II

No such thing as a bad trade , only an early trade… high yield prices moved higher from here.

2012 Financial Report of the US Government

Chronicling the financial promises made by the Federal Government

On Insurance Investing, Part 1

On Insurance Investing, Part 2

On Insurance Investing, Part 3

The first three parts of my 7-part series on how to understand this complex group of sub-industries.

How to Become Super-Rich?

Even Buffett didn’t get super-rich by only investing his own money.  He had to invest the money of others as well.  The super-rich form corporations and grow them; they build institutions bigger than themselves.

The Product that Never saw the Light of Day

On the Variable Annuity product that would simply be a tax scam.  Later I would learn that product exists now, just not in the form I proposed 8 years earlier when it didn’t exist.

Best of the Aleph Blog, Part 23

Thursday, April 3rd, 2014

Before I start this evening, I would like to explain some of the reasons for these “Best of the Aleph Blog” articles.  I write these no closer than one year after an article was written, so that I can have a more dispassionate assessment of how good they were.  I write these for the following reasons:

  • Some people want a quick introduction to the way I think.
  • Some publishers on the web want additional copy, and I let them republish some of my best pieces.
  • One day I may bundle a bunch of them together, rewrite them to improve clarity, and integrate them to create a set of books on different topics.
  • One of my editors at RealMoney once shared with me that I was one of the few authors there whose articles got re-read, or read after a significant time had passed.  This is meant to be mostly “timeless” stuff.
  • New readers might be interested in older stuff.
  • I enjoy re-reading my older pieces, and sometimes it stimulates updates, and new ideas.

Anyway, onto this issue of the “Best of the Aleph Blog.”  These articles appeared between August 2012 and October 2012:

On Credit Scores

Why credit scores are important; make sure you guard yours.

Retail Investors and the Stock Market

On the pathologies of being an amateur investor when there are those who will take advantage of you, and you might sabotage yourself as well.

On the Poway School District

Goes through the details of how a school district outside San Diego mortgaged the future of the next generation who will live there, if any will live there.

Using Investment Advice, Part I

Using Investment Advice, Part II

Using Investment Advice, Part III

Using Investment Advice, Part IV

A series of articles inspired by what I wrote at RealMoney, encouraging people to be careful about listening to advice in the media on stocks, including those recommended by Cramer.

The Future Belongs to Those with Patience

On why patience and discipline are required for good investing.

What Caused the Crisis?

A retrospective, if somewhat controversial.

On the International Business Machines Industrial Average

Replace the DJIA with a new cap-weighted index of the 30 largest capitalization stocks.

How Warren Buffett is Different from Most Investors, Part 1

How Warren Buffett is Different from Most Investors, Part 2

You have to understand Buffett the businessman to understand Buffett the investor.

Volatility Analogy

How an interview I messed up led to an interesting way to explain volatility.

Spot the Gerrymander

Eventually we need to eliminate gerrymandering — hey, maybe we can do that at the future Constitutional Convention.

Reforming Public School Testing

Creating exams where you can’t study for the test; you can only study.

Carrying Capacity

Governments imagine that they can shape outcomes, and in the short-run, they can.  In the long-run, the real productivity of the economy matters, and only those that can make it without government help will make it.  Whatever government policy may try to achieve, eventually the economy reverts to what would happen naturally without incentives.  There is a natural carrying capacity for most activities, and efforts to change that usually fail.

Actuaries Versus Quants

On why Actuaries are much better than Quants

Neoclassical vs Austrian Economics

Applying math to economics has been a loser.  Who has a consistently good macroeconomic model?  No one that I know.  Estimates of future GDP growth and inflation are regularly wrong, and no one calls turning points well.

The Dilemma of Adding Yield

A quick summary of risk in bonds, and why additional yield is often not rewarded.

The Dilemma of Adding Yield, Redux

On working out the pricing between discount, premium, and par bonds.

Too Much Investment

Investment is a good thing, overinvestment is a bad thing.

Got Cash? (Part 2)

On Buffett and others carrying cash to give themselves flexibility.

Set it and Forget it

On what uneducated investors should do.

Forest Fires and Central Banking

Short piece pointing out that small crises are needed to prevent huge crises.

Match Assets and Liabilities

Total Return Versus Long Liabilities

Cash flow matching has often been sneered at as an investment policy.  I explain why such a view is naive, not sophisticated, and definitely wrong.

The Rules, Part XXXIV

“Once something is used for hedging purposes, it becomes useless for predictive purposes.”

Why I LOVE Blogging

On the downsides of blogging, and why they aren’t so bad.

Higher Taxes, Inflation, Default (Choose One)

Coming to a country near you, and soon!

On the Virtue of Hard Questions for Young Analysts

How young analysts toughen up through hard competitions.

Dealing in Fractions of Sense

On how to reform High Frequency Trading

Yield is the Last Refuge of Scoundrels

Far from offering high price appreciation, it is far easier to cheat many people by offering a high yield, because average people look for ways to stretch their limited resources with a tight budget.

Book Review: Treasure Islands

Tuesday, April 1st, 2014


Tax havens exist to lower taxes and regulations on corporations and wealthy individuals.  But doing this involves significant complicated legal and accounting work.  The average person could not benefit because the fixed costs are high.  You need to have a lot of assets to benefit from tax havens.

So why do the wealthy governments of the world tolerate tax havens?  Why don’t they “use NATO to blockade these places, and tell them to end their tax-avoidance-facilitation policies, or else.”  Sadly, the wealthy have disproportionate power over politicians, and the majority of politicians are wealthy.  They like the system as it is.  You can make the tax code as progressive as you like; you will not end up taxing the intelligent wealthy much more.

This book confronts transfer pricing, where profits get shifted to low-tax countries by clever accountants.  Very difficult to police.

The is an amusing section in the middle of the book about the City of London Corporation, which has unique rights in the UK.  It is the home of most financial activity n London, and is mostly unaccountable to the UK.

In general, I believe that taxation should be the same regardless of the structure of the entity being taxed, its location, etc.  To that end, I think that corporations should be taxed on their global income as expressed to its owners.  Or, don’t tax corporations, but make all taxation like limited partnerships, and tax the individuals that own them.

There are other possible solutions.  There can be limits on corporate structure.  Israel limits subsidiaries such that the depth from the holding company cannot exceed two.  There could be consolidation and/or non-recognition of  subsidiaries in tax havens.

Additional Resources

Longreads article

Book website (those reading at Amazon, come to Aleph Blog to get links)


The book makes its last chapter about how tax havens helped cause the financial crisis, but it makes a very weak case.  Individuals and Banks overlevered themselves as asset prices rose, creating a bubble — not much different than the 1920s.  Tax havens played little role, even if they aided securitization in a few ways.

The book argues for capital controls, but those controls often create incentives for greater corruption.

My main problem with the book is that it does not offer any workable solutions to the problems.  My secondary problem is that the problem is not so much with the tax havens, which we could easily marginalize, but with the politicians, who do not do the hard work of seeing that taxation takes place, regardless of the corporate form or location.

Who would benefit from this book: You have to be willing to endure complex arguments to benefit from this book.  If you want to, you can buy it here: Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens.

Full disclosure: I borrowed it at my library.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.

Sorted Weekly Tweets

Saturday, March 29th, 2014

Rest of the World


  • Malaysia Plane Traced in Inmarsat Engineer London Huddle How they managed to figure out the area of the crash $$ $SPY Mar 30, 2014
  • UK Pension Revolution Putting Long-Term Bonds at Risk Need 2 match liabs drives demand 4 long bonds, lowers yields $$ Mar 30, 2014
  • Putin Has Exposed NATO’s Weakness US & NATO Europe willing to agree upon? What r they willing 2 risk? Be careful $$ Mar 30, 2014
  • China Said to Expand Property Survey Amid Oversupply Concern Will b difficult 2 end overinvestment by fiat $$ Mar 30, 2014
  • Chinese Pigs Eating Soybeans Cut US Supply to 1965 Low Chinese demand 4 pork drives demand 4 US Soybeans $$ Mar 30, 2014
  • Lira Fate Tied to Real Assets as Hot Money Flees In countries where inflation is a threat, invest in property $$ Mar 30, 2014
  • Business not ipso facto criminal: Tendency of presuming it guilty without proof is damaging India’s economy $$ Mar 30, 2014
  • Mr. Putin’s Revealing Speech Defender of Orthodox civilization as he sees it pushes back against encroahing NATO $$ Mar 30, 2014
  • Russian Forces on Border Stir Concern as Crimea Annexed Threats of more economic sanctions will not deter Putin $$ Mar 23, 2014
  • What the West Can Learn From Putin’s Other Neighbors Don’t make promises that u won’t keep; Putin is not scared $$ Mar 22, 2014


Financial Sector


  • So what is today’s nonbank business model? Legalized extortion done to “protect consumers,” objective is political $$ Mar 30, 2014
  • Wall Street Banks Cut Out of Prized Commercial Mortgages $MET $PRU originate commercial mortgages 2 fund own liabs $$ Mar 30, 2014
  • SEC Is Probing Dealings by Banks and Companies in Loan Securities Current CLO issuance drives loan issuance $$ $BKLN Mar 30, 2014
  • Pimco Chases BlackRock in ETFs as Money Returns to Bonds Amazing how people follow anything w/positive momentum $$ Mar 30, 2014
  • And if banks start lending aggressively, it will b time to radically shrink asset maturities in bond portfolios, velocity will b rising $$ Mar 30, 2014
  • Banks Lending Like It’s 2007 Belied by $10T Hoard But they aren’t lending heavy yet, if they do FOMC has 2tighten $$ Mar 30, 2014
  • Scandal-Hit British Banks Turn to ‘Weirdy Beardy’ ”Why do you exist?” “Who r u?” Pondering existence bugs bankers $$ Mar 30, 2014
  • Josh Rosner: The Wrong Remedy for Fannie and Freddie Better to wind them up & get Govt out of the Mtge mkts $$ Mar 30, 2014
  • Iowa’s Friendlier Watchdogs Lead Insurer Pack to Des Moines Iowa DOI will regret embracing complexity, gtee funds2 $$ Mar 30, 2014


Market Impact


  • Which will win? $BRK.B or $IWM ? 3views: & & BRK will beat smallcaps $$ Mar 30, 2014
  • Americans Can’t Retire When Bill Gross Sees Repression Investments eventually reflect the underlying cash flows $$ Mar 30, 2014
  • Financial scars linger: 1/3 of investors wary of stocks Have 2 wait 4 these people 2 come & put in the top $$ $SPY Mar 30, 2014
  • 1999 Buffett: stocks can’t possibly meet public’s expectations. Internet? Notes how few got rich in auto &aviation $$ Mar 30, 2014
  • Declining Pension Benefits Leave Workers Uneasy Difficult 2 fund high benefits when interest rates r so low $$ $TLT Mar 30, 2014
  • Google Traders See Opportunity in Confusion on New Shares New nonvoting shares may allow 4 some arbitrage plays $$ Mar 30, 2014
  • Attention Suckers: Please Send Us Your Money @Ritholtz comments how the JOBS Act weakened investor protections $$ Mar 30, 2014


US Housing


  • High Prices Partly to Blame for Slow New Home Sales When markets near their peak, frequently volumes drop off $$ $LEN Mar 30, 2014
  • Time might be ripe for boomers to sell their homes and move on Sell them 2whom & @ what price? Lack move-up buyers $$ Mar 30, 2014
  • Finding a House That Won’t Destroy You Buy a house u can afford even under stressed conditions, reduce risk $$ Mar 30, 2014


US Politics, Policy & Economics


  • Florida’s Scott Travels on Corporate Tab as Lobbyists Tag Along Governors increasingly use corporate $$ 2fund trips Mar 30, 2014
  • IRS Takes a Position on Bitcoin: It’s Property Thus any trading of bitcoins involves capital gains &losses $$ $BTCUSD Mar 30, 2014
  • Google, EBay and the Roots of Collusion Some don’t want to annoy companies that r complementary 2their biz goals $$ Mar 30, 2014
  • The Individual Mandate Goes Poof Barack Obama undoes what House GOP would like 2undo, just not permanently totally $$ Mar 30, 2014
  • Global Warming Will Not Cost the Earth, Leaked IPCC Report Admits Will b interesting 2c how gets spun by bothsides $$ Mar 30, 2014
  • Economists: Rising interest rates are the biggest threat to recovery More evidence that rates will stay low $TLT $$ Mar 24, 2014
  • Kocherlakota: Don’t raise rates to head off possible crisis There may come a time when you will have no choice $$ Mar 22, 2014



  • Advice for a Happy Life by Charles Murray Marry young & someone similar 2u, don’t try2get rich, Groundhog Day $$ $SPY Mar 30, 2014
  • Why Runners Can’t Eat Whatever They Want Studies Show Heart Risks to Devil-May-Care Diets—No Matter How Much U Run $$ Mar 30, 2014
  • Speed Reading Returns Apps and Classes Help People Adapt 2Reading on Their Phones | More content 2 read everywhere $$ Mar 30, 2014
  • The book Scientology tried to ban Read about the *real* L. Ron Hubbard, from a book Church of Scientology hates $$ Mar 30, 2014



  • Wrong: Not Voting Should Not Be a Choice Seems fundamental that no one should b forced to vote; it’s a protest $$ Mar 30, 2014
  • Wrong: Japan Is Doomed Unless It Learns to Love Inflation More “hair of the dog that bit you solutions” $$ $JPY $JOF Mar 30, 2014
  • Wrong: Digital v human: the new debate We’ve seen transformational technologies b4, takes a while 4 new jobs 2show $$ Mar 30, 2014
  • Wrong: Fed’s Bullard: Yellen’s ‘6 Months’ Comment Doesn’t Represent Change in Policy Stance Could have fooled me $$ Mar 22, 2014


Notes, Comments, Reples & Retweets

  • RT @ReformedBroker: In November 1999, Buffett wrote this op-ed for Fortune on why he doesn’t bet on innovation. @pmarca @hblodget http://t… Mar 27, 2014
  • RT @felixsalmon: “This means Bitcoins are not fungible, and that makes it unworkable as a currency.” cc @pmarca @bar… Mar 27, 2014
  • RT @journalistjosh: Crowdfunding emptor: Attention Suckers: Please Send Us Your Money via @BloombergView Mar 27, 2014
  • We enjoyed having @susanweiner speak to us at the #CFA Institute – Baltimore; we can all benefit from learning to write more engagingly $$ Mar 26, 2014
  • ‘ @PlanMaestro Yes, I remember that piece and the series that followed it $$ Capital efficient Mar 26, 2014


Sorted Weekly Tweets

Saturday, March 22nd, 2014

Federal Reserve


  • Why Central Banks Should Be Vague They would b better off saying nothing, as their ability 2analyze future is poor $$ Mar 21, 2014
  • Yellen and the Curse of Forward Guidance @BloombergView Better the Fed should shut up & let the market adjust $$ $TLT Mar 21, 2014
  • Yellen and the Fed Go Dark @M_C_Klein tells the truth, better the FOMC should say nothing, words don’t mean much $$ Mar 21, 2014
  • Yellen Punt Prompts Panic Interesting to be quoted in the article above. Author liked my comment on the weather $$ Mar 20, 2014
  • Essentially Yellen said monetary policy will b the same as before, only more so. But the forecasts show a faster removal of accommodation $$ Mar 19, 2014
  • Level of Central tendency of FOMC Fed Funds forecasts 2014-6, LR — 0.30%, 1.13%, 2.42%, 3.88% Change -0.04%, 0.07%, 0.25%, -0.01% $$ Mar 19, 2014
  • Level of Central tendency of forecasts for when the Fed first starts tightening Fed funds: October 2015, change from prior January 2016 $$ Mar 19, 2014
  • Level of Central tendency of FOMC PCE Inflation forecasts 2014-6, LR — 1.55%, 1.80%, 1.84%, 2.00% Change 0.04%, 0.03%, -0.03%, 0.00% $$ Mar 19, 2014
  • Level of Central tendency of FOMC Unemp forecasts 2014-6, LR — 6.21%, 5.73%, 5.41%, 5.45% Change -0.24%, -0.20%, -0.13%, -0.08% $$ Mar 19, 2014
  • Level of Central tendency of FOMC GDP forecasts 2014-6, LR — 2.81%, 3.04%, 2.76%, 2.21% Change -0.13%, -0.09%, -0.08%, -0.05% $$ Mar 19, 2014
  • Low-Wage Workers Are Finding Poverty Harder to Escape Low Marketable Skills plus divorce or no marriage w/kids $$ Mar 18, 2014
  • Fed set to roll out new low-rate pledge Fed spends 2much time on words, not enough on long-term efficacy of policy $$ Mar 18, 2014
  • Yellen should take away the punch bowl Fed will never do that; doesn’t like 2 take actions that point back @ them $$ Mar 18, 2014


Rest of the World


  • Bloomberg Hints at Curb on Articles About China Bloomberg makes its $$ by renting out terminals; wants more China biz Mar 21, 2014
  • CPI Credibility Lasts 34 Days as Doubts Return Well, that was quick – guess Argentina doesn’t want 2 pay more out $$ Mar 20, 2014
  • Putin’s Tools of Sabotage Beat Urgency of Ukraine Invasion Putin ready 2 play a rougher game, understands politics $$ Mar 20, 2014
  • Putin Is No Madman to Russians as Power Play Trumps Economy We shouldn’t fight over this, Crimea is Russian $$ $RSX Mar 19, 2014
  • “Nobody Knows Anything” Knowledge lost as Cold War Generation gone from foreign policy: C: $$ Mar 18, 2014
  • How China’s official bank card is used to smuggle money Between Macau Casinos & UnionPay, wealthy get $$ out of China Mar 18, 2014
  • China to Spend More Than $162B on Shantytowns Herding people into cities, but what will they do for work? $$ $FXI Mar 18, 2014
  • Alibaba Confirms It Will Begin IPO Process in US Could be valuable 4 $YHOO who owns ~24% $$ Mar 18, 2014
  • The Welsh dairy farmers who bought 320 buy-to-let properties in Sweden Worry when it seems easy 2 make $$ in housing Mar 18, 2014
  • Chinese Companies Caught in Yuan Riptide What was once viewed as “free money” proves to have a cost, panic ensues $$ Mar 18, 2014
  • Musk Jab at Rival Shows US Space Reliance on Russia Interesting how we rely on Russia 4 manned space flight $$ Mar 18, 2014
  • Nigeria Overtaking South Africa Masks Poverty Trap When economy is mostly resource extraction inequality common $$ Mar 18, 2014
  • Putin’s Motives Rooted in History Remain a Mystery Abroad Should b happy that most of Ukraine is allied w/West $$ Mar 18, 2014
  • Chinese Developer Bonds Sink in Secondary Trade Amid Collapse Test 4 Govt: how much bad credit will u bail out? $$ Mar 18, 2014
  • Japan Analysts Split on Fiscal Crisis Time as Tax Looms Testing the limits of how much a govt can borrow b4 crisis $$ Mar 18, 2014

New Businesses


  • Rock-Climbing Generation at Foot of US Startup Ascent Example of an unusual business catering to exercise wants $$ Mar 21, 2014
  • Zuckerberg, Musk Invest in Vicarious Part of brain that sees, controls the body, understands language & does math $$ Mar 21, 2014
  • Personally, I think Artificial Intelligence won’t succeed w/ that. No surprise that Vicarious is trying, though — would save lotsa time $$ Mar 21, 2014




  • Credit Card Data Security Standards Don’t Guarantee Security Antiquated technology relatively ez2hack, no surprise $$ Mar 21, 2014
  • Why Do High Frequency Traders Never Lose Money? Why do auctioneers & brokers rarely lose money facilitating trades $$ Mar 21, 2014
  • How to Decide on Your Investment in Bonds When rates are so low you should b extra careful, stay short & hi qual $$ Mar 21, 2014
  • Shadow Banking Deals Prompt SEC Plan to Cap Broker Leverage SEC does not go far enough, repo mkts should b ended $$ Mar 21, 2014
  • SEC to take another look at ETF regulation Should leveraged products & inverse products b allowed? Lousy returns $$ Mar 20, 2014
  • Junk Bonds at $2T as Gundlach Pulls Back Markets always seem large when they are overvalued, Gundlach is right $$ Mar 20, 2014
  • Seth Klarman warns of impending asset price bubble When he runs out of safe places 2 put $$ the red lights flash Mar 18, 2014
  • ARM Loans—a Vestige of the Housing Bubble—Are Making a Comeback True 4 wealthy & those with prime credit scores $$ Mar 18, 2014
  • Buffett gets the better of everyone, version 4,762 Parts w/his holdings of $GHC, retires shares of $BRK.A & $BRK.B $$ Mar 15, 2014


Politics & Policy


  • Uneven Wage Gains Restrain Recovery Article has a lot of interesting data on what jobs r available to semi-skilled $$ Mar 21, 2014
  • Obama Keystone Choice Pits Donors Against At-Risk Senate Kind of a no-win situation 4 Obama; should ok the deal $$ Mar 20, 2014
  • Young Invincibles Are Killing Obamacare Obamacare destroys the healthcare system as healthy young people leave $$ Mar 20, 2014
  • Christie Counts on Revenue Surge Not Seen in Most States A Reaganesqe flaw: relying on the rosy scenario w/Dems $$ Mar 20, 2014


Companies & Industries


  • Phillips 66 Considering Splitter at Sweeny Refinery New trend: Partial refining. Those products can b exported $$ Mar 21, 2014
  • TV Subscriptions Fall for First Time as Viewers Cut the Cord It is cheaper to not have a cable subscription $$ $SPY Mar 21, 2014
  • A Sour Bean Sweetens Cocoa Supply Fascinating story of a high-yield bean that is more sour than low-yield beans $$ Mar 21, 2014
  • Buffett Cuts Tax Bill, Tells Others Not 2 Complain If Buffett weren’t so sanctimonious on taxes this would b small $$ Mar 20, 2014
  • IBM’s Watson to help in brain cancer research Fascinating 2c Watson sequencing DNA of cancer & suggest treatments $$ Mar 20, 2014
  • TED Winner Launches Campaign to Unmask Shell Companies Ambitious effort 2unmask those using shells 4 bad purposes $$ Mar 20, 2014
  • Windows XP: What to Do When Microsoft Ends Its Support Article agrees w/my answer; get a copy of Windows 7 $$ $MSFT Mar 20, 2014
  • Fannie Mae Wind-Down Deemed Threat to Home Recovery It will be painful, but we need to delever housing $$ Mar 19, 2014




  • IFRS could be stripped of accountancy watchdog role This would be very good. US GAAP is far superior to IFRS $$ $SPY Mar 19, 2014
  • Bugatti-Driving 26-Year-Old Tied to Penny-Stock Website Of John Babikian & the misnamed AwesomePennyStocks $$ $SPY Mar 18, 2014
  • Behind The Scenes With Dream Team, CytRx & Galena He gets inside firm paid/undisclosed promotions 4 $CYTR & $GALE $$ Mar 18, 2014
  • Individual investors Lose Money When Using Technical Analysis I can hear it now, “But they’re doing TA wrong!” $$ Mar 18, 2014
  • The Hidden Rot in the Jobs Numbers Here’s another way 2c it: $$ $TLT $MACRO Mar 18, 2014
  • Want Success? Choose the Right Parents Not sure I believe it, but interesting thesis $$ Mar 18, 2014
  • Pssst! Everything’s a Conspiracy Tough 2hold a significant conspiracy together, high incentives 2eventually reveal $$ Mar 18, 2014
  • To Make an Airplane Disappear, Start by Getting Through the Cockpit Door How difficult it would b2 take over a 777 $$ Mar 18, 2014




  • Late: City vs. Country: How Where We Live Deepens the Nation’s Political Divide This isn’t news; no surprises here $$ Mar 21, 2014
  • Wrong: ‘Ring of Death’ Throttles Georgia as Small Banks Close Lent 2 much on overvalued properties, their fault $$ Mar 20, 2014
  • Weak: Why gaining from value investing is hard Value investing typically does better on other side of mkt peaks $$ Mar 18, 2014
  • If We’re Going to Take Budget Forecasts Seriously, Then This is a Good Way To Present Them Kinda naive about stats $$ Mar 18, 2014
  • Wrong: Why equities sold off despite a dovish Fed Fed was not dovish. Yellen’s comments & Fed forecasts bearish $$ Mar 21, 2014
  • Weak: Robert Shiller On The Tech Economy Some innovations save labor; others create demand 4labor through new svcs $$ Mar 21, 2014


Replies, Retweets & Comments


  • The bigger change was the shift in the time tightening is likely to happen. That shifted up 3 months on… Mar 19, 2014
  • “Interesting to be quoted in the article above. If you want to see the other things I wrote about…” David_Merkel $$ Mar 20, 2014
  • RT @treehcapital: Credit investors like the elves in LOTR~when they leave Middle Earth, time to pay attention “Gundlach Pulls Back” http://… Mar 20, 2014
  • @treehcapital That’s a great analogy. I’ve lightened up as well, time to do more. Mar 20, 2014
  • We’ve been through periods like this before in human history. Inventions that save labor in an area… Mar 21, 2014

Limit Repo Financing

Friday, March 21st, 2014

If you have a moment, read this Bloomberg article.  The brokers are utterly dishonest when they say:

Brokers contend that their borrowing is generally less risky than bank lending. Repo borrowing, for instance, is backed by collateral that can be readily sold to raise cash in case the other party defaults, said Steven Lofchie, co-chairman of the financial services group at Cadwalader, Wickersham & Taft LLP.

“If you think about a bank that is lending 90 percent against a house, versus a broker-dealer taking in 102 percent against a loan of a security, the broker-dealer’s credit risk is exponentially less,” Lofchie said.

This is true under ordinary circumstances, but not in a crisis, as we saw in 2008.  Seemingly safe securities were no longer safe, because too many overleveraged parties could not hold their positions when the prices of their seemingly safe securities started to fall.  This led to a panic, because of the structural error of financing long-dated securities with short-dated funding.  In a crisis, that is the fatal flaw of repo financing.

I think the proposals of the SEC are decent, and those that the broker-dealers propose are not.  I would go further and abolish repo markets.  They are crisis-bait.  The asset-liability mismatch invites trouble.

The proposal of the broker-dealers is flawed, because they don’t adopt a model where they match assets and liabilities.  Stable systems match assets and liabilities.  Until they do so, they should not be taken seriously.  The math of risk control wars against them.

As Light As Hydrogen

Wednesday, March 19th, 2014

Okay let’s roll the promoted stocks scoreboard:

TickerDate of ArticlePrice @ ArticlePrice @ 3/18/13DeclineAnnualizedSplits







































































































































































Tonight’s loser-in-waiting is HydroPhi Technologies [HPTG].  This one can’t even get basic science right.  It claims to be able to split water into hydrogen and oxygen, and then recombine them to create energy.  Circular processes in general lose energy, otherwise we would have perpetual motion machines.

And behind the vapid analysis is an uber-loser.  His analyses never pan out over one year.  A clever speculator might make money occasionally, but not regularly, because the stocks he pumps are like this one.  Little revenues, negative earnings, negative net worth.  This is a recipe for disaster.

Think about it — if you had a miracle energy technology, would you merge your company with a failed internet advertising company “BigClix?”  I would think not.  You would keep your company private and enjoy the significant profits.

As it is, there are no profits, so where is this great energy technology?  This is a scam, and laws should be revised to allow prosecution of those who write such promotional garbage as we have seen.  It is no good to have the 4-point type disclaimers telling some of the truth, while the big type says “Buy, buy BUYYY!!!”  Also, as far as the web version of this promotion goes, the promoters pour in half a million.  As it says in the 4-point type:

Third Party Advertiser IMPORTANT NOTICE: Esquire Media Services Inc (EMS) has managed up to a $500,000 USD advertising production budget as of January 21, 2014 in an effort to build industry and investor awareness for HydroPhi Technology Group Inc (ticker symbol: HPTG). 

It’s easy to affect the price of a company that has bad fundamentals.  It’s overvalued to start; it will only be more overvalued at the crest of the promotion.  If you attract a bunch of people to the pump-and-dump who want to play the momentum, some may think they will be clever enough to scalp a quick profit along with the insiders.  Some of them win, and others lose.  Others believe the advertising, and stay to lose a ton.

Seth Klarman recently said, “It might not look like it now, but markets don’t exist simply to enrich people.”  This needs to be remembered by all.  Markets are for trading, and trading is a negative-sum game.  Those who buy & hold valuable businesses for a span — that is a positive-sum game, because the underlying asset is appreciating.

To close: don’t buy promoted stocks.  Never.  Those who are paid directly or indirectly to encourage you to buy are at best sub-agents for the seller — they aren’t on your side.  In buying promoted stocks, it’s like going to Vegas, minus the fun.  You will lose.  You will lose a lot.   The house edge is fixed — it’s only a question of how much you will lose.

Avoid promoted stocks.  As I often say: “Don’t buy what someone else wants to sell you, buy what you have researched and know has value.”

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

Friday, March 14th, 2014

In Omaha, there is Farnam Street.  Among value investors, it is well-known, because the small main office of Berkshire Hathaway [BRK] is located there.  Less well known is Harney Street, but from an insurance standpoint it is important, because Berkshire Hathaway’s largest insurance subsidiary, National Indemnity, is located there.  One of the major assets of National Indemnity is the Harney Investment Trust, of which National Indemnity is the sole beneficiary.

Before I go further, I want to say there is a lot I don’t know about what I am going to write.  Let me tell you what sources I have looked at:

  • SEC filings of companies where the Harney Investment Trust was a greater than 5% shareholder.
  • Legal documents from Bankruptcies and other corporate legal events where Harney Investment Trust was a party.
  • All of the statutory filings for Berkshire Hathaway’s primary insurance companies in 2012.
  • All of National Indemnity’s statutory filings on assets 2002-2013.
  • All of National Indemity’s statutory audits, 2002-2012.

Now, if you read through BRK’s filings to the SEC, you won’t find many mentions of the Harney Investment Trust.  You have to read the insurance regulatory documents to find it, and even if you do that, you will still be puzzled.  Why?

  • Over the last 12 years, the National Association of Insurance Commissioners does not require “Other Assets” on Schedule BA to provide enough data so that an external user can make the change in book value or market value make sense.  It has gotten better over time, but it is still not enough.  You want to have enough data such that it explains the change in market and book value to the nearest thousand dollars.
  • There are a few errors that are obvious.  Some easy calculations don’t add.  Current year starting values are not the same as last year’s ending values.
  • A few numbers between the statutory filings and audits don’t agree.

Now, some of that is due to bad regulation.  The data reported for schedule BA assets could be streamlined such that it reports the change in the balance sheet for each asset on a book and fair market value basis.

But more of it is due to BRK’s lack of willingness to discuss/mention the Harney Investment Trust.  I did a lot of digging on this, and found  little that was definitive.  One seemingly intelligent opinion I found here.  I will quote the most relevant portion from “globalfinancepartners”:

Regarding the large surplus at Berkshire – it is largely because many subsidiaries are owned inside the insurance companies – especially within National Indemnity.  100% of the stock of BNSF, for example, valued at BRK’s cost of $34 Billion – is owned by National Indemnity and counts towards the statutory surplus.  Also, National Indemnity owns 100% of the shares of GEICO.  Then in addition there are the securities, of course.

GEICO, in turn, owns 100% of the shares of Clayton, McLane, TTI, as well the marketable securities.

I’ll attach an NAIC filing if you really want to geek out.  But unfortunately, the mystery stock Buffett has been accumulating and receiving confidential status on through the SEC is hidden like always inside the “Harney Investment Trust” – Buffett’s go-to vehicle for keeping stock trading hidden from regulatory filings.  (Harney Street is in Omaha)

He gets it, mostly, and concludes that Buffett uses the Harney Investment Trust to hide his buying and selling of positions.  Assets inside the Trust do not get reported one-by-one on the insurance Schedule D.

Now, before I close, I want to share the data that I have harvested from the Statutory statements, and make a few more comments.







Cost   8,063,249,239   6,098,184,425    4,345,049,427      7,566,419,887
Addl Investment      4,314,851,219
Fair Value   10,532,124,694
Book   9,814,864,000   9,325,481,908   8,326,636,998    5,326,049,532      9,524,818,329
Change     (220,350,768)       859,931,290  (1,141,017,994)      1,958,398,441
FX Change
Inv Income          455,078,969
Book Sold   5,405,086,442   4,640,112,416    2,934,268,712      1,121,718,176
Change           (40,084,139)
Consideration   6,156,977,208   5,492,507,843    3,827,449,032      1,561,718,363
Gain       751,890,766       852,395,427         893,180,320          399,916,048
% Assets





Am Cost   8,355,067,000   8,063,249,000   6,098,184,000    4,345,049,000      7,566,420,000
URGC   1,459,797,000   1,711,427,000   3,810,157,000    2,316,272,000      2,965,705,000
URCL                                  -       144,894,000                                  -                                   -                                     -
Fair Value   9,814,864,000   9,629,782,000   9,908,341,000    6,661,321,000   10,532,125,000
CommentsDisagreeing figs







Cost      6,964,633,697   20,139,079,483      5,921,482,114      5,786,018,179
Addl Investment          982,768,239   15,783,905,450      9,781,668,840   10,865,269,974
Fair Value   12,117,706,779   21,921,621,265      4,923,093,676      6,769,046,868
Book   11,123,440,646   21,921,621,265      4,801,843,191      5,800,502,260
Change      3,098,256,653      1,751,436,622    (2,840,908,667)      1,108,867,879
Accretion          119,595,243          197,707,597
OTTI          288,188,143      2,590,146,282
FX Change           (57,873,620)             36,966,246
Inv Income      1,261,755,231          663,463,512          987,469,687          826,207,723
Book Sold      1,746,959,239      2,653,395,647   24,830,673,311      8,645,957,509
Change        (100,447,051)              (3,398,147)             37,662,286
Consideration      1,999,993,027      6,522,527,452   24,010,303,351      9,017,341,154
Gain          353,480,839      3,869,131,805          179,640,040          371,383,645
income                3,658,670             62,505,008
% Assets





Am Cost      6,964,634,000   20,139,079,000      5,921,482,000      5,786,018,000
URGC      5,153,073,000      1,782,542,000                                     -          983,029,000
URCL                                     -                                     -          998,388,000                                     -
Fair Value   12,117,707,000   21,921,621,000      4,923,094,000      6,769,047,000
CommentsBought out other trustsCleaned House





Cost      9,457,498,340      7,464,877,852   7,064,639,865   5,004,510,446
Addl Investment      7,068,414,613   12,784,563,299   4,186,877,510   3,254,233,606
Fair Value   11,700,226,848      7,807,366,099   9,066,610,408   7,675,070,719
Book   10,720,330,531      7,450,894,712   8,417,129,742   7,511,081,043
Change      1,271,863,576    (1,276,652,476)   1,332,026,027   1,163,420,948
Accretion             17,914,824           (25,309,149)             2,759,586             2,810,400
OTTI          476,659,635          190,142,457       115,680,863
FX Change              (5,766,223)                   (911,734)             1,296,067                  659,774
Inv Income          554,369,500          719,996,080       389,469,312       403,093,171
Book Sold      2,944,738,747   14,566,437,847   4,479,185,215   5,214,644,823
Change                7,728,019                4,705,665             4,970,996     (102,528,623)
Consideration      3,576,396,272   14,738,706,689   4,833,798,698   5,785,003,373
Gain          631,657,525          141,268,842       354,613,478       570,358,551
income             76,920,680             25,137,655          11,091,687       118,147,838
% Assets




Am Cost      9,457,498,000      7,464,878,000   7,064,640,000
URGC      2,343,171,000          866,984,000   2,083,717,000
URCL          100,442,000          524,226,000          81,747,000
Fair Value   11,700,227,000      7,807,636,000   9,066,610,000

Notes: OTTI: other than temporary impairments.  URCG: Unrealized Capital Gains. URCL: Unrealized Capital Losses.  Other categories are hard to define, though I am sure the NAIC has definitions, though they don’t give complete changes in balance sheets.

Another thing that I could not make to match from the statutory statements was the securities that went in and out of the trust.  Aside from some Treasury bonds  in 2002, here are all of the reported transactions where securities moved from National Indemnity to the Trust, and vice-versa.

YearActionTickerSharesValueConsiderationCapital Gain (loss)


InMTB         927,760              3,655,241


InWFC     6,138,800         127,795,056


InAXP     5,308,500         101,902,002


InMCO   16,140,300         340,631,841


PoofLVLT   32,691,065         100,000,000


InTMK         872,200           20,268,837


InHRB   14,350,600         222,546,836


InCDO     1,195,274                              1


InCOST     5,254,000         146,595,428


InGCI     3,447,600           81,873,173


InMLI     1,361,900           30,408,193


InSEE     1,113,300           32,102,292


InUSG     6,500,000           37,180,000


OutTMK         872,200           20,268,837         49,826,080               29,557,243


OutHRB   14,350,600         222,546,836       703,179,400             480,632,564


OutCDO     1,195,274                              1         26,666,563               26,666,562


OutCOST     5,254,000         146,595,428       254,346,140             107,750,712


OutGCI     3,447,600           81,873,173       281,668,800             199,795,627


OutMLI     1,361,900           30,408,193         43,853,180               13,444,987


OutSEE     1,113,300           32,102,292         59,305,491               27,203,199


OutUSG     6,500,000           37,180,000       261,755,000             224,575,000


InUSB   20,768,728         657,202,698


InWFC   52,372,788     1,819,017,267


InCOP   71,896,273     5,878,643,401


InCOST     5,264,000         146,595,428


InKFT   89,222,400     2,957,096,963


InPG   17,200,318     1,026,726,674


InUSG   10,102,918         202,419,056


InWMT   18,998,300         901,731,797


OutPG   20,000,000     1,193,846,154   1,468,400,000           (274,553,846)


InCOP   29,711,330     1,163,495,683


InMTB             6,300                 447,467


InPG   14,328,093         855,276,936


InTMK     1,656,900           60,572,017


InWMT   14,892,842         746,046,432


InWFC   21,030,680         473,941,080


InGSK     1,510,500           78,918,016


InPKX     1,087,000           44,260,228


InSNY     2,896,133         119,233,280


OutCOP   71,896,273     5,690,321,498   3,724,226,941         1,966,094,557


OutMCO   15,000,000         163,880,137       284,850,000           (120,969,863)


OutPG   26,000,000     1,552,000,000   1,607,320,000             (55,320,000)


InJNJ   13,274,736         851,173,066


OutCOP   25,227,450         987,906,942   1,288,365,871           (300,458,929)


OutKFT   57,684,645     1,885,271,843   1,567,868,651             317,403,192


OutMTB     4,680,322           36,930,716       216,105,603             179,174,887


OutPG   15,000,000         895,384,615       909,450,000               14,065,385


InCOP   21,109,637         826,653,385


InGCI     1,740,231           13,921,848


InIBM   63,905,931   10,856,339,550


InMTB     4,671,245           38,003,193


InPG   12,669,252         756,256,889


InWFC   28,446,437         718,140,133


OutJNJ   12,951,761         829,897,088       801,466,418               28,830,670


InWFC   32,872,641     1,090,916,624


OutPG   29,754,036     1,776,087,072   1,984,891,742             208,804,670

In means assets came into National Indemnity, and out means the reverse.  Poof means something came into National Indemnity, and left in the same calendar year.

Notably, in 2008, Buffett had most of the assets exit the trust into National Indemnity, when they were in a position of unrealized capital loss.  I don’t fully understand the tax and capital effects here, but it seems that Buffett found it to his advantage to move assets out of the trust, and into National Indemnity once the assets were unrealized capital losses.

I think the guy I quoted is correct.  Buffett uses the Harney Investment Trust to hide his acquisitions and dispositions of stock.  The NAIC should end this, and make Schedule BA assets that are easily separable appear on Schedule D, where they belong.  Schedule BA should be for assets that are not publicly traded.  Partnerships with assets that would fit on Schedule D should  be on Schedule D.


Buffett tries to take an ethical stance in investing, and makes many statements about the way investing ought to be done.  Using a trust to avoid disclosure of holdings and transactions is not in the spirit of GAAP or statutory accounting/disclosures.   This practice should be ended.  Warren, step up your game before you have to and end the Harney Investment Trust.  I write this as a fan who owns BRK/B shares.

And, to my dedicated readers, if you have more data, or a better means of analysis of the data I have gathered, by all means offer your help.  Thanks, David

Full disclosure: long BRK/B for clients and me


David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.

Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions.

Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.

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