Image Credit: Sean MacEntee || Should I have gotten a picture of a guy in a bathrobe?
Dear Friends,
I may occasionally write opinions that are controversial, but I try not be controversial as a rule. So, when I wrote my piece yesterday, I was not looking to make any huge statement regarding Berkshire Hathaway. Yes, I might be a little disappointed in Buffett’s lack of action, but I still think very highly of him. Of all investors alive today, he is the one who most deserves to be studied. Ben Graham had no better pupil. Same for Phil Fisher. And as far as Henry Singleton goes, Buffett has outdone him.
I don’t mind media coverage of my blog. Really, I like it. And yes, I am a longtime fan of Buffett who might sell the remainder of my stake in BRK, but why should anyone care about that? I don’t manage that much money.
This is what I tweeted:
Here’s why one longtime Warren Buffett fan is considering dumping his entire stake in Berkshire Hathaway https://t.co/DkPEsDBHQC Though I have been mentioned in the media before, it has never happened so quickly, or with a sensationalistic headline. Ouch.
Yes, I sold half of my stake in BRK recently, but that only removed what I had added during the crisis. The amount I hold today is roughly the same as what I held on January 1st, 2020. I am sorry that I didn’t say that yesterday.
I had a thesis that Buffett would take advantage of the crisis, and buy some amount of stock. That was a major reason why I doubled my position; the secondary reason is that BRK is a safe asset.
That Buffett did nothing surprised me, and I sold half for a moderate gain. If Buffett has such a long time horizon, he missed some opportunities.
I want people to read what I write, but I hate sensationalism. Why else do I have relatively boring headlines for my posts? I know how to write exciting headlines and I don’t do it. I am here to educate in a friendly way. I am not here to be thrilling.
Anyway, enough. I wish Buffett the best, and hope his plans work out. The challenge for him in the present environment stems from the same reason that the Fed replaced J. P. Morgan. Now the Fed is replacing Warren Buffett.
And, for the cases where Buffett is buying healthy firms at a reasonable price, private equity takes his offer as a cue to outbid him… because Buffett never pays top dollar. Unless a private owner doesn’t want top dollar, Buffett will never win. He doesn’t participate in auctions.
Don’t get me wrong, I admire the discipline. But when your ability to source cheap assets goes to nearly zero, isn’t it time to re-evaluate whether the world hasn’t changed around you? After all, Buffett has reinvented his strategy several times already. Time to reinvent yourself again, Warren.
Photo Credit: Ron Frazier || No, it wasn’t a vacation — perhaps a pause…
When I returned from my break from blogging, I realized my traffic was down by 2/3s over what it was when I left publishing. I wasn’t too surprised at that. I remember the early days when I started blogging. My readership grew rapidly over the first six months, partly fueled by people reading me who remembered me from RealMoney. After that it leveled out. I expect the same will happen this time.
As an aside, now that we are more than 11 years past the onset of the crisis, if a new crisis should come, readership of financial blogs will explode again, as investors search for answers amid chaos. Just remember that many readers will fade away as the crisis ebbs. It will be even more true if you bang the crisis drum too long. Though I covered the crisis well, I never wanted to be a “crisis blogger.” A balance between crisis and opportunity is best. After all, periods of crisis occupy less than 25% of the time.
Now email is the reverse. I found it funny to watch email subscriptions grow week after week while I was on hiatus, and then shrink when I returned. Must have seemed to be a good idea at the time when they subscribed, but less so when they actually received the emails.
There were a bunch of quasi-legal sites republishing me. They never asked my permission, but I rarely ask them to desist. Most disappeared during the hiatus and did not return. The legal republishers who had my permission were slow to restart, but they are back in force.
Commenters are slow to return, but that is no surprise. People are emailing me again, but not at the level from before the hiatus. Most are glad to have me back.
What really made me happy were bloggers who were happy to see my return. Chief among them was Tadas at Abnormal Returns. I also appreciated Jeff Miller at A Dash of Insight.
Last, I felt refreshed by the break, but I also feel refreshed by restarting. The break gave me more ideas, and hopefully I am expressing them better.
One thing that was unaffected was the spam that bloggers receive. I got it before the hiatus, during and after the hiatus. These people are desperate, don’t do their homework, and just scattergun in an effort to gain some market for their writing, services, etc.
I will simply close with this: it is nice to be back. There’s a lot more to come.
Photo Credit: Stephan Caspar || In Roman numerals 3000 is MMM… and thus the yummy picture that will make some people go “mmm….” As for me Mmm… I’m glad to be back.
Every 100 posts (except that I did not do it at the 2900 milestone), I take a moment to reflect. I started blogging back in February of 2007. I was 46 years old then; I am 58 now.
I resisted starting a blog for some time. When my editor at RealMoney asked me (she was asking all the contributors) “Are you going to start a blog?” I answered, “RealMoney, particularly the Columnist Conversation is my blog.”
I loved writing for RealMoney, but in some ways I was not the best fit for RM. I wrote more about theory, and less about actionable ideas. My main reason for that was that beyond holding a CFA charter, and at the time, a dues-paying life actuary, I have a code of ethics in addition to those from CFAI and the SOA. Aside from that, feedback is lopsided, like on Yelp. You get disproportionate feedback when you make a mistake, but little praise when you get something right.
But the reason I decamped from RealMoney was that I wanted more editorial freedom. It is the same reason that I tried writing for The Balance, and gave it up because I needed more freedom to write what I was thinking. (Also, writing for The Balance involved rewriting old articles, many of which were average for the web, but way below my standards. Rewriting those took a lot of time, and did not satisfy the other requirement of writing new articles on topics the the editors wanted, most of which were decidedly niche.)
How Aleph Blog Changed Over Time
When I began, I was writing two small articles per night. I morphed into writing articles that were relatively long, and one per night. I had a goal: to express all of the main ideas that I had come to regarding finance, economics and investment. A major part of that was The Rules posts, which mostly stemmed from insights I had between 1999 and 2003. There were a few that came after that, but not many. When I finished the last of the original Rules posts, I breathed a sigh of relief, because one of the major goals of the blog was complete. I had written an article on all of the “Rules.”
Now, one other thing that changed was the financial crisis. During the crisis, I resolved to write about all of the issues that I thought my distinct view could help explain. But I did not want to be a “crisis blogger.” There are some bloggers that are locked into writing about disaster, which is problematic when we have been in a very long though shallow recovery. Some commenters criticized me for not being like Zero Hedge back in 2009 or so. I ignored it because I want to be an “All Weather” blogger. I will write when the sun shines. I will write when it rains.
I do want to make one comment from the crisis era, when I was one of the bloggers invited to the first US Treasury / Blogger summit. In my 7-part coverage of the event, I never mentioned what I said during the main portion of the event. I was not the most outspoken at that event. Those that were “crisis bloggers” dominated the conversation.
There were only two things I got to say during the meeting. The first was my telling them that they could learn something from the way Canada regulates their banks, and also that the US state-regulated insurance companies were regulated better than the depository institutions in the US, especially for solvency.
The second thing that I said was that the US should lengthen maturities for Treasury issuance, and issue fifties, centuries, and consols. Also, they should issue floating rate debt. I told them that the US government would face a crisis when there is too much debt to roll over, so stagger the maturities, and pay up to borrow longer.
Back to the Present
I wrote a lot of book reviews in the past. I am unlikely to write a lot more of them, though there will be some. Part of that is Amazon favoring reviewers that bought their books at Amazon. I got most of mine from the publishers.
I have maybe 40 article ideas to work on now. Many of them will require significant work. Many of my best articles required that level of work, but it will mean that my output will slow down. If you have something you would like me to write about, send me an email. My address is on the Contact Me page. I don’t guarantee that I will write about it, but reader letters have led to more articles at my blog than most others.
Thanks to my Readers
There is one post that is especially dear to me, the one entitled Learning Leadership. It describes a time when I effected a huge change in the business that I worked for, and got little to no reward for doing so.
I thank all of my readers for reading me, wherever you are. One-third of my readers are outside of the US. I try to write for a global audience, but living in the US, I know that it will be somewhat US-centric. All the same, I invite those outside the US to write me and ask me questions.
And with that, I close this piece. Not that I will answer every question, but I will read everything that is written to me. My readers help make my blog better. Keep writing to me and helping me; I appreciate it.
For about two months, I wondered when I would write this.? Now I know… I’m writing it now.? To all my readers, I am letting you know that Aleph Blog is not ending, but it is changing.? I accepted a writing assignment with The Balance.? I am going to write 4-5 articles for them per month, and correct some old articles as well.? I will publish links to them here.? Like Aleph Blog, The Balance is free, so you don’t have to do anything more than click on the article link here to read it.
Why did I do this?? I felt I was getting stale in my writing.? I was a little bored; that’s why I wasn’t writing so much.? I had completed all of my main goals for the blog in 2014, and slowly lost the will to keep cranking it out.
The deal with The Balance is like theStreet.com in that I get compensated.? It is not like theStreet.com in three ways.
I write primarily in the third person, like a journalist.
They don’t want any stock picks.
They assign me topics to write on, and I pitch ideas to them, which they must approve before I write.
I like it.? It forces me to learn new things and write in a new way outside of my comfort zone.? It is a challenge.
I will still write some pieces natively for Aleph Blog, but most of what you will see here will be lead-ins to my articles at The Balance.? I will personalize them here, and say things that I can’t say there, because here I don’t have to be neutral.
Let me simply say here that I am not crazy about Private Activity Bonds [PABs], and municipal bonds generally.? If you have a long enough time horizon to buy and hold a muni bond 20-30 years, then you may as well own stocks.? Aside from that, these aren’t municipalities paying on the PABs — these are private corporations.? It is a “heads they win, tails you lose” situation in many cases.? The credit risk level is higher than an equivalently rated muni.? So, buyer beware, and stick to investments that are simple, because complexity favors the financial structurer, not the buyer of the note that is a part of the financial structure.
But maybe I am wrong.? If you think I missed something, let me know in the comments.
As you might recall, I was invited to participate in?The Best Investment Writing, Volume 1. Well, volume 2 is being discussed. This time, I thought I would let my readers offer their opinion on the matter. So, let me know, you can take this poll — oh, and can vote for as many as you like.
Photo Credit: Mary Merkel || I am busy all of the time
Every 100 posts or so, every year or so, I take a small break from covering the markets to give a few thoughts of mine that are less related to the markets. ?I have not done that recently. ?I skipped doing post 2700, and also a post for my eighth blogoversary. ?I also slowed down my posting generally. ?Today I would like to explain why that was so.
I carry a lot of responsibility outside of my business, family, and writing. ?The last two years had me taking on more responsibility at my congregation because:
Our pastor left, and I helped lead the search for a new one, who started with us this past June.
When there is no pastor, who takes care of pastoral needs? ?Those don’t go away. ?Nor do the needs of a mission church that we oversee. ?I picked up the pieces where I could, including visitation?of a sick older friend who eventually died.
I also arranged for 80 weeks of temporary preaching.
Together with my fellow elders, we agreed to purchase a building adequate to hold our congregation, and end our situation of renting a school, as we had for the last 27 years. ?We did that before we called a pastor. ?I took care of all of the financial aspects of the decision, which made life easy for my fellow elders. ?That transaction closed last week; in the picture above, that’s me standing at the back of the building in Burtonsville, Maryland. ?(My congregational website is listed on the homepage — if you’re in the area on a Sunday, you can drop in for worship. ?I’m the one up front leading the singing on most days.)
We are in the midst of selling a smaller building that we own, to help fund the purchase of the larger building.
There’s more than this, as I aided our Presbyterial and Denominational efforts, and aided the Baltimore CFA Institute, but those are normal duties for me.
Add in my two seniors in high school this fiscal year, and that makes me a little busier as I teach both of them economics, and one of them Calculus. ?Both are also good athletes, and their schedules take up time. ?Next year, home schooling gets quieter, as we will only have one left at home, and she is a quiet one.
During the busy time, something had to sag, and the two things that sagged were blogging, and marketing for my firm. ?I did not let asset management sag, because I owe a debt of service to existing clients. ?I dd not put much effort during the period into obtaining new clients. ?I felt that was the right way to do things — I don’t have to grow, but I do have to serve. ?Also, I don’t have to blog, but I like doing it, and never wanted to stop completely.
At this point, things have freed up enough, that more regular blogging ?can resume, together with restarting marketing. ?As for future topics, I do have a few more things to write on personal finance, and I hope to write out more book reviews, and the pieces in “the school of money” and “simple stuff” series, while still taking up intriguing topics where I have opportunity.
As always, thanks for reading me, and now you know how busy my life can be.
I love books. ?I read a lot of them, especially those on investing, finance, and economics. ?I could argue that the genre is tired, but there are a lot of people trying to jazz it up, sometimes with more success, and sometimes with less. ?Those who do it different have a strong probability of bombing it, but occasionally a new approach is brilliant.
If you’re new to Aleph Blog, you might not know that about one in ten posts is a book review. ?That wasn’t what?I intended when I started this project 8.6 years ago. ?Actually, I’m not sure what I intended, this has ended up bigger and more involved than I ever imagined.
If you have read my book reviews, you might note several things that are different:
I read in full almost all of the books that I review. ?When I don’t, I disclose it.
I don’t just review new books. ?I review older books when it makes sense to me.
I don’t just review books that I like, but those that I don’t like also.
I also try to identify who might be the right sort of person for a given book — some people don’t like math, some books are too simple, some are too hard, etc.
I usually cross-post my reviews at Amazon.com. ?For the types of the books that I review, I think I have a pretty good reviewer ranking at Amazon. ?That said, I know it would be a lot higher if I did four?things.
Stop mixing in my own experiences or knowledge on a given topic, which sometimes is equal to that of the author, and occasionally, exceeds the knowledge of the author. ?Book reviews aren’t supposed to be about me. ?I get it, and I am trying to reduce that.
Review only new books, and get them done as close?as possible to the release date of the book. ?There are many book reviews that are in my opinion lousy, but they got done first, and people voted them up, giving a review that is the equivalent of a “smiley face” button a parasitic life off of the book.
Write shorter reviews.
Stop doing critical reviews. ?Only post happy stuff — these authors hail from Lake Wobegon, and are all above average.
I want to amplify that last point. ?Books have natural defenders — certainly the author and his friends, but also?if it is a book on a cultic topic, such as gold, Bitcoin, various schools of economic prejudice thought, doomsday economics,?THE ONE WAY TO INVEST, etc., etc., etc., you get the mindless zombies partisans defending the cult. ?They will vote you down, and it doesn’t take many reviews where you have 20% helpful votes, even if it is the best critical review, before your rating sinks dramatically.
I’m not going to stop writing critical reviews. ?I’d rather be less popular and known, than sacrifice credibility, even if I look like a fool at times. ? (Yes, that is somewhat contradictory.) ?That’s just a price of cross-posting at Amazon, and I will keep doing it to benefit readers generally, whether they like it or not.
And Now For Something Completely Different
On an unrelated note, one interesting thing that has developed over time are all of the independent authors and small publishers sending me books in the mail.??Some are preceded by an email for permission, others show up like lost puppies.
They are interesting books, and I don’t review all of them, because many of them don’t work — they are just too quirky, and probably needed a better editor, or, a publisher who would do the author a favor and tell him, “No.”
Second unrelated note: the hardest books for me are those where I know the author, and I end up not being crazy about the book. ?Usually, I quietly spike those reviews, and send a note to my friend/acquaintance as to why he won’t see a review out of me. ?I do have a heart, after all, and value my relationships more than “telling it like it is,” unless it is egregious.
This morning, I looked at the fall in the Chinese stock market, and I said to myself, “It’s been a long journey since the last crash.” After that, I wrote a brief piece at RealMoney, and another at what was then the new Aleph Blog, which was republished and promoted at Seeking Alpha, and got featured at a few news outlets. ?It gave my blog an early jolt of prominence. I was surprised at all of the early attention. That said, it encouraged me to keep going, and eventually led me away from RealMoney, and into my present work of managing money for upper middle class individuals and small institutions.
I try to write material that will last, even though this is only blogging. ?Looking at the piece on the last China crash made me think… what pieces of the past (pre-2015) still get readers? ?So, I stumbled across a way to answer that at wordpress.com, and thought that the array of articles still getting readers was interesting. ?The tail is very long on my blog, with 2725 articles so far, with an average word length of around 800. ?Anyway, have a look at the top 20 articles written before 2015 that are still getting read now:
Though I write about personal finance, it’s not my strongest suit. ?Nonetheless, when I?wanted to write some articles about personal finance for average people, I realized I needed to limit myself mostly to cash management. ?A few of the articles in the new series “The School of Money,” should be good in that regard.
This is a controversial piece on the most secretive aspects of what Buffett does in investing. ?I have tried to get people from the media to pick up this story, but no one wants to touch it. ?I think I am one of the few admirers of Buffett willing to be critical… but so what? ?Hasn’t worked on this story.
This short series goes through my worst investing mistakes. ?It’s almost finished. ?I have one or two more articles to write on the topic. ?This one covers my early days, where I made a lot of rookie errors.
Here I do a post aiding all of my competitors, giving the relevant references to the de minimus laws for registered investment advisers in all 50 states, plus DC and Puerto Rico. ?Note that I got my home state of Maryland wrong, and I corrected it later.
Cramer generates controversy, and thus pageviews as well. ?As an aside, TheStreet.com is down another 20% since I wrote that. ?Still, the piece had my insights from brief discussions that I had with Cramer, way back when.
I have always enjoyed the times where I have had the opportunity to interact with the authors of the books that I have gotten to review. ?Guy Spier was a particularly interesting and nice guy to interact with.
This is the predecessor piece to the one rated #14 on this list. ?Brief, but gets the points across on what the best exchange traded products are like. ?It was written in 2009.
I’ve been banging this drum for some time, and the last one in this series was quite popular also. ?This article highlighted how much average investors lose relative to buy-and-hold investors in the?S&P 500 Spider [SPY]. ?Really kinda sad, underperforming by ~7%/year.
I had forgotten that I had written this one in 2011. ?Why does it still get hits? ?In it I argue that the US will get out of its difficulties more easily than Japan. ?(Maybe this gets read in Japan?)
My contention is that Actuaries are underrated relative to Quantitative Analysts, and have a lot to offer the financial markets, should the Actuaries ever get their act together.
I was shocked at this one, written in 2008. ?This post explains a math concept in simple visual terms for teachers to explain?greatest common factors and least common multiples.
Should it be any surprise that the last three, the most popular, are on Buffett, Berkshire Hathaway and Insurance? ?People go nuts over Buffett!
The one novel thing I bring to table here is my understanding of the insurance aspects of BRK. ?Each of the three deal with that topic in a detailed way. ?Aleph Blog is pretty unique on that topic; who else has written in detail about the insurance company-driven holding company structure? ?Aside from that,?many don’t get how critical BRK is to covering asbestos claims, and don’t get the economics of insurance float. ?Many think float is magic, when it can lead to an amplification of losses, as well as an intensification of gains.
These last three pieces got really popular in March, around the time that BRK released its 2015 earnings, even though they were one year old.
Anyway, I hope you found this interesting… I was surprised at what gets read after time goes by. ?One final note: for every time the most popular pre-2015 article was read, articles that would have been rated #22 and beyond got read 10 times… and thus the long tail. ?It’s nice to write for the long term. 🙂
Full disclosure: long BRK/B for myself and clients
No, because you can’t avoid them if you are writing about investing
Why You Should Avoid Making Predictions
My leading reason for avoiding making predictions is that when you are wrong, and someone loses a lot of money, he gets really annoyed. ?I can’t say that I blame them much.
Now, I might do it more if I got praise equal to the amount of annoyance. ?But my experience from my RealMoney days was for every bit of praise that I would get from a correct prediction, I would get 10 bits of criticism for one that I got wrong. ?That’s not much different in a way from reviews you read on the web for restaurants, hotels, service companies, etc., because people get greater motivation to write when bad service is delivered rather than good.
Why You Can’t?Avoid Making Predictions
We can talk about the past, present, and the future. ?We know the past reasonably well. ?The present is fuzzy.?We know the future not at all — we can only make guesses. ?Those guesses might be educated guesses, but they are still guesses.
You could spend all your time writing about the past, but readers would ask how that can benefit them now. ?Logically, they could ask “If this past situation had the result you mentioned, can I expect the same thing in this current situation that seems a lot like it?” ?It’s a fair question, and if you don’t answer it, you might find that your readers go elsewhere. ?They’d rather risk being burned than not get an opinion on some issue that they care about.
You could just report on the present. ?Some of that is useful, like hearing color commentary at a sports game. ?The same set of questions could come to you, like: “The market has been hitting new highs. ?Does that mean it will hit higher highs, or is it time to take some risk assets off of the table?” ?Another fair question, and readers would like an opinion.
As an aside, when I began studying nonlinear modeling, it was noted by many that nonlinear models don’t predict well. ?One academic decided to take the bull by the horns, and wrote a paper that was entitled something like, “If Nonlinear Models Can’t Predict Well, Why Should We Bother With Them?” ?One possible answer would be that most models don’t predict well, but that’s too discouraging for most readers.
The thing is, readers have their concerns about the future, and they want advice. ?Many would rather have a false certainty than a nuanced set of possibilities. ?We can’t do anything for them — they are fodder for the charlatans.
My answer for my writing is to try to be humble about the possibilities, and write things that explain thought processes rather than conclusions.
“Give a man a fish and he eats for a day. ?Teach a man to fish and he eats for a lifetime.”
— Old Proverb
The trouble is, we can’t even give people easy?investment ideas that will always work. ?We can try to explain how to think about the question, and the possible scenarios that could result, and how likely they are. ?Giving people the building blocks of investment knowledge is more valuable than handing out tips. ?The building blocks have been tested, and work most of the time, but they take work to deploy. ?Tips are uncertain, but neophytes love them, partly because they take almost no effort to implement.
Finally, be happy about whatever audience you get. ?Largely, you will get the audience you deserve, and the criticism that goes along with it. ?Just be careful, and take a page from Hippocrates that resembles the concept of margin of safety:
Here is the second part of my interview on RT Boom/Bust. It was recorded while the FOMC was releasing its statement, so I had no idea at that time as to what the announcement had been.
The interview covers my view of Apple (not one of my strong points), Fed Policy, and what should value investors do in this low interest rate environment. Note that not all of my opinions are strong ones, and that in my opinion is a good thing. Often the best opinions are not controversial.
If you are interested in these topics, or listening to me, then please enjoy the above video. My segment is about seven minutes long.
