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

The Biggest Problems For Investors Today

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

Perceived Versus Real Risk Tolerance

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

Overvaluation is NOT Due to Passive Investing

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

Goes Down Double-Speed (Update 4)

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

The Doubling Rule

The Doubling Rule, Redux

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

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

Why Social Security Should not be Invested in the Stock Market

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

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

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

Problems with Constant Compound Interest (6)

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

Yield = Poison (3)

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

Streaking Into the Record Books?

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

We Get New Highs More Frequently After New Highs

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

Everyone Needs Good Advice

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

Two Questions on Returns

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

The Permanent Portfolio

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

Four Simple Investment Strategies That Work

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

Operating vs Financial Cash Flows

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

The Rules, Part LXIII

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

Steeling Themselves For Pension Benefit Cuts

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

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

On the Pursuit of Economic Growth

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

The Financial Report of the United States Government 2016

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

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

When I was a Boy?

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

On Long-Term Corporate Investments

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

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

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

?Do Half? Applied

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

Edging In, Edging Out

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

The Beauty of Old Ideas

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

Patience and a Little Courage

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

The Rules, Part LXII

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

Be wary of surrendering liquidity

I talk about interval funds and other illiquid investments.

Who Needs Liquidity Most?

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

The Value of Risk-Based Capital in Financial Regulation

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

A Failure of Insurance Regulation

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

Call Me When You Have A Real Insurance Company!

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

Distrust Forecasts

Distrust Forecasts, Part 2

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

A Cautionary Tale on Municipal Pensions

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

Trump and Conflicts of Interest

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

On Human Fertility, Part 5

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

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

What to do when Ethics are Discouraged

Eight ways to promote ethics where it is not popular.

On Pricing Grids, Part 1

On Pricing Grids, Part 1a

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

The Cash Will Prove Itself

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

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

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

Dead as a Severed Horse?s Head

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

Thinking About Monetary Policy: A Counterfactual

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

Practically Understanding Non-GAAP Earnings Adjustments

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

On the Decline of Lifestyle Employment

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

Watch Net Income Double in Two Years, Not

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

Of Milk Cows and Moats

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

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

Me Too!

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

The Plumbing of Investing

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

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

You Can Get Too Pessimistic

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

<snip>

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

Risk vs Return ? The Dirty Secret

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

Simple Stuff: What is Risk?

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

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

The Dead Model

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

Brexit Boogeyman

Brexit Boogeyman Bellows ?Boo!?

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

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

On Investment Charlatans

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

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

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

They Can?t Help You

On a Letter from an Expatriate

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

Fly Away From Helicopter Money

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

A World Deep in Debt?

Picturing Pensions

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

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

If All Investments Were Private

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

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

Estimating Future Stock Returns

Estimating Future Stock Returns, Follow-up

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

Goes Down Double-Speed (Update 3)

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

Think Half of a Cycle Ahead

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

Big Returns, Narrow Doors

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