We Eat Dollar Weighted Returns — III
Somebody notify the Bogleheads, they will like this one, or at least Jack will. Yo, Jack, I met you over 15 years ago at a Philadelphia Financial Analysts Society meeting. How bad are individual investors at investing? Bad, very bad. But what if we limit it to a passive vehicle like the Grandaddy of all...
The Rules, Part XXX (30)
In the recent run-up, there was talk of the infallibility of equities. This led to a higher level of variable compensation in the economy through option and share issuance and low pressure to raise fixed wages. This was yet another form of hidden leverage, which hid the unprofitability of enterprises through share dilution. That was...
The Rules, Part XXVII, and, Seeming Cheapness vs Margin of Safety
The market takes action against firms that carry positions bigger than their funding base can handle. Temporarily, things may look good as the position is established, because the price rises as the position shifts from being a marginal part of the market to a structural part of the market. After that happens, valuation-motivated sellers appear...
Risk-Based Liquidity
When there is financial failure, it comes as a result of illiquidity. Now, truly, these parties are insolvent, because they took the risk of not being able to pay cash when it was due. Illiquidity and insolvency are really the same thing, though many obfuscate. If you can’t pay cash, it doesn’t matter what your...
Risk-Based Liquidity
When there is financial failure, it comes as a result of illiquidity. Now, truly, these parties are insolvent, because they took the risk of not being able to pay cash when it was due. Illiquidity and insolvency are really the same thing, though many obfuscate. If you can’t pay cash, it doesn’t matter what your...
Get a Piece of the Schlock
There is a benefit to reading books on marketing for those that will never be marketers: it will immunize you to sales pitches. Think of it as studying the strategies of the enemy. When you talk to salesmen, you can flip their words back at them, or tell them “no,” to the questions that have...
Book Review: Manias, Panics, and Crashes (Sixth Edition)
This is the first book that I have reviewed twice. I reviewed the third edition of the book previously, but I am reviewing the sixth edition now. Kindleberger places the manias, panics, and crashes on a common grid, to see their similarities, In it he draws on a number of common factors: Loose monetary...
Bubbles are Easy to Spot, well almost…
Bubbles are easy to spot. Wait, don’t most people say that bubbles are impossible to spot? I’ll say that again: bubbles are easy to spot. Why? People have the wrong theory on bubbles. They listen to those that don’t understand the efficient markets hypothesis, and think, “Prices are always fair predictors of the future. I...
Book Review: The Greatest Trades of All Time
This book grew on me. Think of it as “How I hit a home run in investing.” Who are the sluggers that earned outsized returns? But, there is a problem here, and the book would have been better if it had recognized the problem. In a few cases, the “greatest” made one (or a few)...
Value Versus Growth — II
One of my readers posted the following comment, and I felt it was worth following up: I continue to struggle with the Growth vs Value designation (never mind where to invest). According to Buffet’s letter, they are joined at the hip (growth being an important part of value), whereas you indicate that there is a...
Eliminate Leveraged ETFs
Have a look at this article. He makes the case as to why leveraged ETFs should not be held over the long term, as I have argued before. There is a problem with this. Imagine for a moment that all users of leveraged ETFs extinguish their positions daily. There would be no shares to be...
An Insurance Hedge Fund
Some friends of mine asked me if I could create an insurance-centric hedge fund. I said that it was unlikely because I’m not good at shorting. They pressed me on it, because they knew if I had good longs, with my quantitative skills, I could create a credible short position that might hedge the longs....
