The Best of the Aleph Blog, Part 15
This stretches from August 2010 to October 2010: The Education of a Corporate Bond Manager, Part VII On the value of credit analysts. The Education of a Corporate Bond Manager, Part VIII On price discovery in dealer markets, and auctions gone wrong. I never knew that I could haggle so well. The Education of a...
The Best of the Aleph Blog, Part 14
This period of the Aleph Blog covers May through July of 2010. The one big series that I started in that era was “The Education of a Corporate Bond Manager” series. The idea was to describe how a neophyte was thrust into an unusual position and thrived, after some difficulties. The Education of a Corporate...
The Best of the Aleph Blog, Part 13
This portion goes from February 2010 to April 2010. Probably the biggest new thing I did at the blog was start “The Rules” series. Personally, I think all of them are best articles, because they proceed from deeply held beliefs of mine. So I start with those: The Rules, Part I There is no net...
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 XXIX
Risk premiums should never be capitalized, they should only be taken into income as earned. This may end up being another odd post of mine. I’m going to start writing about bank regulation, but I will end up talking about monetary policy. There are many people who hate the rating agencies. They hate them because...
The Rules, Part XXVIII
Rebalancing of any sort in investing presumes an underlying stability to the economic system, and thus, market returns. Rebalancing will not protect against socialism, war, or an overleveraged position. The concept of rebalancing requires the idea of reversion to mean. It will not protect you when profound shifts are happening, where the market are moving...
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...
The Rules, Part XXIV
Every excess eventually unwinds. When an excess unwinds, the fall gets exacerbated by trend-followers blowing out of mutual and other pooled funds with lousy relative performance. If you had a list of who owned a given publicly-traded asset, and when they bought it, you would know a lot about how patient, intelligent, indebted, etc.,...
The Rules, Part XXIII
A Ponzi scheme needs an ever-increasing flow of money to survive. Same for a market bubble. When the flow’s growth begins to slow, the bubble will wobble. When it stops, it will pop. When it goes negative, it is too late. Here’s how a Ponzi scheme works for the promoter: Prior Net Assets + Receipts...
The Rules, Part XXII
Rapid money supply growth with no consumer price inflation can only really occur within the confines of an asset price bubble, or else, where does the money go? Interest rates are low at such a time because of the incredible liquidity, and complacency of lenders that they will get an equal amount of purchasing power...
The Rules, Part XXI
Before I start this evening, I have a request for readers, and a comment for new readers. (Note: if you are reading this anywhere but directly at my blog, please realize that you have to come to my blog for me to hear what you are saying. I do not read comments anywhere else but...
Book Review: Inflated
This book was not what I expected. I expected a book on the current crisis, and got a book on monetary/credit policy over the whole of the existence of the US. What is more, unlike most books that cover a long sweep of history, this book is even, and does not overemphasize the recent past,...
