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On a Letter from an Old Friend

January 16, 2018 Comments (0)

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...

Since 1950, the S&P 500 in 2017 Ranks First, Fourth, Tenth or Twenty-third?

January 3, 2018 Comments (0)

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...

On Finding a Job in Finance

December 19, 2017 Comments (0)

Photo Credit: Chris-Håvard BergeI was approached by a younger friend for advice.  This is my response to his questions below:Thank you for agreeing to do this for me. I would love to have an actual conversation with you but unfortunately, I think that between all of the classes, exams, and group project meetings I have this week it would prove to be too much of a hassle for both of us to try to set up a time.1. What professional and soft skills do you need to be successful in this career and...

Favorite Aleph Blog Post of 2017?

December 9, 2017 Comments (0)

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.Thanks,David Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

Classic: Wrecking Ball Looms for Big Housing Spec

December 8, 2017 Comments (0)

Photo Credit: Rhys A.====================I thought this old post from RealMoney.com was lost, never to be found again.  This was the important post made on November 22, 2006 that forecast some of the troubles in the subprime residential mortgage backed securities market.  I favored the idea that there there would be a crash in residential housing prices, and the best way to play it would be to pick up the pieces after the crash, because of the difficulties of being able to be right on the...

Estimating Future Stock Returns, September 2017 Update

December 8, 2017 Comments (0)

Another quarter goes by, the market rises further, and the the 10-year forward return falls again.  Here are the last eight values: 6.10%, 6.74%, 6.30%, 6.01%, 5.02%, 4.79%, and 4.30%, 3.99%.  At the end of September 2017, the figure would have been 4.49%, but the rally since the end of the quarter shaves future returns down to 3.99%.At the end of June the figure was 4.58%.  Subtract 29 basis points for the total return, and add back 12 basis points for mean reversion, and that would leave us...

Notes from an Unwelcome Future, Part 1

November 28, 2017 Comments (0)

Photo Credit: Tim Harding==============================================================Dear Readers, this is another one of my occasional experiments, so please be measured in your comments.  The following was written as a ten-year retrospective article in 2042.==============================================================It was indeed an ugly surprise to many when the payments from Social Security in February 2032 did not come.  Indeed, the phones in Congress rang off the hook, and the scroll...

The Crisis Lending Fund

November 18, 2017 Comments (0)

Photo Credit: Barron’s===================Last week, there was an article in Barron’s describing how many mutual fund families take advantage of a provision in the law allowing them to have funds lend to one another.  Quoting from the article:Under normal circumstances the Securities and Exchange Commission bars funds from making “affiliated transactions,” but there’s a loophole in the Investment Company Act of 1940 for funds to apply for an exemption to make such “interfund loans.”...

Short-Term Rational, but Intermediate-Term Irrational

October 24, 2017 Comments (0)

Don’t look at the left side of the chart on an empty stomach==================This will be a short post.  At present the expected 10-year rate of total return on the S&P 500 is around 4.05%/year.  We’re at the 94th percentile now.  The ovals on the graph above are 68% and 95% confidence intervals on what the actual return might be.  Truly, they should be two vertical lines, but this makes it easier to see.  One standard deviation is roughly equal to two percent.But, at the left...

The Little Market that Could

October 20, 2017 Comments (0)

Picture Credit: Roadsidepictures from The Little Engine That Could By Watty Piper, Illustrated By George & Doris Hauman | That said, for every one that COULD, at least two COULDN’T======================================So what do you think of the market?  Why are both actual and implied volatility so low?  Why are the moves so small, but predominantly up?  Is this the closest impression of the Chinese Water Torture that a stock market can pull off?Why doesn’t the market care...