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The Aleph Blog wrote a new blog post titled The Best of the Aleph Blog, Part 35
The Best of the Aleph Blog, Part 35Photo Credit: Renaud Camus ====================In my view, these were my best posts written between August 2015 and October 2015:Learning from the Past, Part 6 [Hopefully Final, But It Won’t Be…]The currently final episode on my investing errors, covering the last eight years.  Note that Valero has made me five times on my initial investment, though, and I still own it now.  This piece has…View On WordPress
45 days ago
The Aleph Blog wrote a new blog post titled The Best of the Aleph Blog, Part 35
Photo Credit: Renaud Camus====================In my view, these were my best posts written between August 2015 and October 2015:Learning from the Past, Part 6 [Hopefully Final, But It Won’t Be…]The currently final episode on my investing errors, covering the last eight years.  Note that Valero has made me five times on my initial investment, though, and I still own it now.  This piece has more of the bright side of what I learned.Musings on the Wealth Effect“None of the ways I mentioned for getting more money for spending out of investments is likely to produce a lot of additional...
46 days ago
The Aleph Blog wrote a new blog post titled The Best of the Aleph Blog, Part 34
Photo Credit: Renaud Camus=========================In my view, these were my best posts written between May 2015 and July 2015:Learning from the Past, Part 5b [Institutional Stock Version]Learning from the Past, Part 5c [Institutional Stock Version]How I did a bad job for Hovde on Scottish Re and National Atlantic Holdings.  Also, what I did to mitigate the errors.  (And I am supposed to be really good with insurance companies…)The SEC Pursues a Fool’s ErrandOn why the Consolidated Audit Trial [CAT] is a bad idea.  Preventing “flash crashes” is not a desirable goal; they...
55 days ago
The Aleph Blog wrote a new blog post titled The Pips are Squeaking
The Pips are SqueakingPhoto Credit: sid=================This should be a short post.  I just want to note the degree of stress that many emerging market countries are under.  The Fed raises rates, and something blows up.  That is often the class of debt that has grown the most in the bull phase of the cycle, or, the one that has financed with short-term debt.  This is the “volatility machine” that Michael Pettis…View On WordPress
61 days ago
The Aleph Blog wrote a new blog post titled The Pips are Squeaking
Photo Credit: sid=================This should be a short post.  I just want to note the degree of stress that many emerging market countries are under.  The Fed raises rates, and something blows up.  That is often the class of debt that has grown the most in the bull phase of the cycle, or, the one that has financed with short-term debt.  This is the “volatility machine” that Michael Pettis wrote so well about.The Brazilian stocks I own have been falling.  A little lower, and I will make them double-weight positions.  Five times earnings for utilities that cannot be done without? ...
62 days ago
The Aleph Blog wrote a new blog post titled Thoughts on Bank Debt
Thoughts on Bank DebtPhoto Credit: Teemu008I have long said that until an asset class goes through a “failure cycle,” risk-based pricing will be weak toward the assets in question.  One asset class that has become popular of late is bank debt.  Bank debt is a loan to a corporation that typically has first priority to make claims on the company in bankruptcy, ahead of the bondholders, much less the preferred…View On WordPress
66 days ago
The Aleph Blog wrote a new blog post titled Thoughts on Bank Debt
Photo Credit: Teemu008 I have long said that until an asset class goes through a “failure cycle,” risk-based pricing will be weak toward the assets in question.  One asset class that has become popular of late is bank debt.  Bank debt is a loan to a corporation that typically has first priority to make claims on the company in bankruptcy, ahead of the bondholders, much less the preferred stockholders and the common equity.Though it is called bank debt, often the loans are arranged by banks and allow others to lend alongside them.  This has become popular among closed-end...
66 days ago
The Aleph Blog wrote a new blog post titled Why I Watch the Thirty
Photo Credit: andy carter=============I like long bonds.  I am not saying that I like them as an investment.  I like them because they tell me about the economy.Though I argued to the Obama Administration that they should issue Fifties, Centuries and Perpetuals, the Thirty-year bond remains the longest bond issued.  I think its yield tells us a lot about the economy.How fast is nominal growth?  Look at the Thirty; it is highly correlated with that.What should the Fed use for its monetary policy?  Look at the Thirty, and don’t let the Five-year note get a higher yield than it.  Also,...
88 days ago
The Aleph Blog wrote a new blog post titled Notes on the Fed Announcements
Photo Credit: City of Boston Archives==========================Listening to the Fed Chair’s press conference, there was one thing where I disagreed with what Powell was saying.  He said a few times that they only made one decision at the FOMC meeting, that of raising the Fed Funds rate and the reverse repo rate by 0.25%.  They made another decision as well. The decided to raise the rate of quantitative tightening [QT] by increasing the rate of Treasury, MBS and agency bonds rolloff by $10B/month starting in April. They did that by increasing the rate of reduction of MBS and agency bonds...
117 days ago
The Aleph Blog wrote a new blog post titled Just Don’t Invert the Yield Curve
Photo Credit: Brookings Institution================================Jerome Powell is not an economist, and as such, has the potential to try to remake the way the Fed does monetary policy.  Rather than hold onto outmoded ideas ideas like the Phillips Curve, which may have made sense when the US was a more insular economy, there are better ways to think of monetary policy from a structural standpoint of how financial firms work.(Note: the Phillips Curve relies on a very simple assumption that goods and services price inflation stems from wage inflation, and that wage inflation occurs when...
118 days ago
The Aleph Blog wrote a new blog post titled Why I Like Foreign Small Cap ETFs
Photo Credit: amanda tipton || It may not be foreign, and not an ETF, but it IS a small cap======================This should be a short post.  When I like a foreign market because it seems cheap (blood running in the streets), I sometimes buy a small cap ETF or closed-end fund rather than the cheaper large cap version.  Why?They diversify a US-centric portfolio better.  There are several reasons for that:a) the large companies of many countries are often concentrated in the industries that the nation specializes in, and are not diversified of themselvesb) the large companies are typically...
123 days ago
The Aleph Blog wrote a new blog post titled Estimating Future Stock Returns, December 2017 Update
The future return keeps getting lower, as the market goes higher=================Jeff Bezos has a saying, “Your margin is my opportunity.”  He has found ways to eat the businesses of others by providing the same goods and services at a lower cost.  Now, that makes Amazon more productive and others less productive.  The same is true of other internet-related businesses like Google, Netflix, etc.And, there is a slight net benefit to the economy from the creative destruction.  Old capital gets recycled.  Malls that are no longer so useful serve lower-margin businesses for locals,...
125 days ago
The Aleph Blog wrote a new blog post titled Getting a Job in Insurance
Photo Credit: Boston Public LibraryWell, I never thought I would get this question, but here it is:Thank you for your dedication to your blog.I was wondering if you have any skill development advice for recent graduates to gain a job in insurance – is technical or programming skills the most important or perhaps making business cases, or showing that you can make sound and reasonable conclusions?Thank you for your time.Kind regards,There are many things to do in insurance.  Some are technical, like being an actuary, accountant, investment analyst/manager/trader, underwriter, lawyer or...
132 days ago
The Aleph Blog wrote a new blog post titled Surprise! Return to RT Boom/Bust
After almost three years, I returned to RT Boom/Bust on Tuesday.  There are many changes at RT.  Many new people, and a growing effort to put together an alternative channel that covers the world rather than just the US or just the developed world.  They are bursting at the seams, and their funding has doubled, so I was told.I get surprised by who watches RT and sees me.  My  congregation is pretty conservative in every way, but I have some friends working in intelligence come up to me and say, “Hey, saw you on RT Boom/Bust.”  And then there is my friend from Central Africa who...
138 days ago
The Aleph Blog wrote a new blog post titled Monitor Financial Accounts Regularly
Photo Credit: CafeCredit.com=================Fewer laws protect you now. In some ways, the laws are more virtual than real, and only apply to real situations, and not virtual ones.Let me explain.Though checks make up an increasingly smaller fraction of transaction volume in the US, they are still a lot higher here than in Europe.  As such, federal and many state legislators have not caught up with the effects of a hybrid system, where they attempt to regulate electronic banking transactions under the same rules as paper checks.Many people like making mobile deposits, rather than going into...
144 days ago
The Aleph Blog wrote a new blog post titled The Rules, Part LXIV
Photo Credit: Steve Rotman || Markets are not magic; government economic stimulus is useless with debt so highWeird begets weirdI said in an earlier piece on this topic:I use [the phrase] during periods in the markets where normal relationships seem to hold no longer. It is usually a sign that something greater is happening that is ill-understood.  In the financial crisis, what was not understood was that multiple areas of the financial economy were simultaneously overleveraged.So what’s weird now?Most major government running deficits, and racking up huge debts, adding to overall...
161 days ago
The Aleph Blog wrote a new blog post titled NASDAQ Composite Hits an Inflation-Adjusted High
Hey, it only took 18 years to eclipse the prior high in purchasing power terms! Better than the Great Depression! This is an update of a post I did less than three years ago.  In that relatively short time, the NASDAQ Composite hit an all-time record in purchasing power adjusted terms.  Quite an ascent in the last two years.  I never would have predicted it.  If you took the other side of my advice you did better.That said, the S&P 500 is forecast to return 3.4%/year prior to inflation for the next ten years.  Aside from one quarter during the go-go years (1968), the only period with...
177 days ago
The Aleph Blog wrote a new blog post titled On the Migration of Stock
Photo Credit: ashokboghaniThis should be a brief article.  I remember back in 1999 to early 2000 how P&C insurance stocks, and other boring slower-growth industries were falling in price despite growing net worth, and reasonable earnings.  I was working for The St. Paul at the time (a Property & Casualty Insurer), and for an investment actuary like me, who grew up in the life insurance business it was interesting to see the different philosophy of the industry.  Shorter-duration products make competition more obvious, making downturns uglier.The market in 1999-2000 got narrow.  Few...
181 days ago
The Aleph Blog wrote a new blog post titled On a Letter from an Old Friend
Photo Credit: jessica wilson {jek in the box}David:It’s been a while since we last corresponded.  I hope you and your family are well.Quick investment question. Given the sharp run-up in equities and stretched valuations, how are you positioning your portfolio?This in a market that seemingly doesn’t go down, where the risk of being cautious is missing out on big gains.In my portfolio, I’m carrying extra cash and moving fairly aggressively into gold. Also, on the fixed income side, I’ve been selling HY [DM: High Yield, aka “Junk”] bonds, shortening duration,...
182 days ago
The Aleph Blog wrote a new blog post titled Since 1950, the S&P 500 in 2017 Ranks First, Fourth, Tenth or Twenty-third?
Credit: Roadsidepictures from The Little Engine That Could By Watty Piper Illustrated By George & Doris Hauman c. 1954=========================================I wish I could have found a picture of Woodstock with a sign that said “We’re #1!”  Snoopy trails behind carrying a football, grinning and thinking “In this corner of the backyard.”That’s how I feel regarding all of the attention that has been paid to the S&P being up every month in 2017, and every month for the last 14 months.  These have never happened before.There’s a first time for...
195 days ago