David Merkel posted an article on The Aleph Blog - Feb 8, 2012, 3:29 am
I thought that I had a really good proposal for dealing with money market fund problems.  And it is good, far better than what the SEC is proposing.  My proposal is better because it treats money market funds like ETFs — they are pass-through vehicles, and as such, do not need capital buffers. ...
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David Merkel posted an article on The Aleph Blog - Feb 7, 2012, 9:54 am
Here are two articles to read on risk parity: Pro: Pick Your Poison Con: The Hidden Risks of Risk Parity Portfolios I’m on the “con” side of this argument, because I am a risk manager, and have traded a large portfolio of complex bonds.  For additional support consider my article Risks, No...
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David Merkel posted an article on The Aleph Blog - Feb 6, 2012, 4:27 pm
Trying a new format here, I think readers will like it better.  Most things are better after additional effort.  Think of this as a news links by subject post. Economics If you look in the back, it seems that there were 58 respondents. From page 13: Methodology & Panel Selection Invi… http://t....
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David Merkel posted an article on The Aleph Blog - Feb 4, 2012, 11:59 pm
Many investment ideas are promising so long as few do them.  Yes, there is an opportunity, but it is limited.  “Shh, don’t tell everyone about it.” Thus, the concept of “risk parity.”  Lever every asset class up until it has the same volatility as common stocks. Under theoretical condi...
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David Merkel posted an article on The Aleph Blog - Feb 4, 2012, 9:49 am
Industry-Ranks-2-2012 I’m working on my quarterly reshaping — where I choose new companies to enter my portfolio.  The first part of this is industry analysis. My main industry model is illustrated in the graphic.  Green industries are cold.  Red industries are hot.  If you like to play mo...
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David Merkel posted an article on The Aleph Blog - Feb 2, 2012, 3:43 am
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 Gra...
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David Merkel posted an article on The Aleph Blog - Feb 1, 2012, 12:36 am
A medium-sized publisher has approached me to write a book on value investing.  I might do it, or I might not.  I also might try to do it with another publisher, or I might do it through Amazon.  I solicit advice from my readers on the prospect. Anyway, I thought about what the book might look l...
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David Merkel posted an article on The Aleph Blog - Jan 31, 2012, 5:24 am
In human terms, we are most often best off with the via media, that is, the middle way.  So it is with corporate cash.    The first article I wrote on the internet (in 2003) argued for the value of excess cash in the hands of intelligent management teams. But there is a limit to that, and more ...
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David Merkel posted an article on The Aleph Blog - Jan 31, 2012, 12:56 am
Probable RT @moorehn: Because I’m pretty sure John Reed was super-excited to bust Glass-Steagall until Sandy Weill outsmarted him. Jan 31, 2012 RE: @finadd I think the US has two possible ways out with $AIG. Take control, break it up, and auction off the piece… http://t.co/RjjxqMpG Jan 31, 2012 ...
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David Merkel posted an article on The Aleph Blog - Jan 28, 2012, 11:26 pm
Every 100 posts, I breathe a deep breath and try to catch up on where we have been.  It’s not always easy for me; I write about so many different issues, and I shift in response to changes in the markets. So, where have we been? Discussing finding jobs in the shrinking field of finance (one, two...
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David Merkel posted an article on The Aleph Blog - Jan 27, 2012, 5:04 am
Stinks RT @s_m_i: RT @hedgefundinvest: RT @financialpost: Twitter to censor content in some countries http://t.co/zhnzV1Qo Jan 27, 2012 When the Reps win, wants 2b FedChair RT @pdacosta: Fed activism harms US growth, former Fed board governor Warsh says http://t.co/Tht5YyHi Jan 27, 2012 I’m differ...
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David Merkel posted an article on The Aleph Blog - Jan 27, 2012, 5:01 am
If someone were to ask me my opinion on Junk Bonds at present, fool that he would be to ask me because I know real experts elsewhere, I would say this: They are good for a speculative trade, but dumb money has arrived.  Be ready to sell when the momentum fails. High yield ETFs sell at decent premi...
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David Merkel posted an article on The Aleph Blog - Jan 26, 2012, 1:45 am
There are two things that I want to comment on Fed policy this evening: Transparency is overrated, and Bernanke does not understand savings. Transparency is Overrated Ever heard of the phrase “data overload?”  Greenspan would do that verbally in his testimony to Congress, providing them with ...
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David Merkel posted an article on The Aleph Blog - Jan 26, 2012, 12:50 am
@The_Analyst does Hempton do Twitter? Bright guy. Jan 26, 2012 RE: @SoberLook It’s not a pledge, indeed, but it is an estimate.  The bond market has reacted quite strongly to the e… http://t.co/crpU3QpH Jan 26, 2012 RE: @SoberLook Does this post from Alea change your opinion at all? http://t.co...
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David Merkel posted an article on The Aleph Blog - Jan 25, 2012, 1:57 pm
December 2011January 2012CommentsInformation received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth.Information received since the Federal Open Market Committee met in December s...
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David Merkel posted an article on The Aleph Blog - Jan 25, 2012, 5:30 am
They may not have meant to publish it, but the results don’t seem too earthshattering — … http://t.co/MkmCtxnJ Jan 25, 2012 @Convertbond He was 1 of my professors @ Hopkins, & the only 1 w/a consistently free market viewpoint; Talked w/him @ http://t.co/k4mL15rp Jan 25, 2012 India to pay gold ...
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David Merkel posted an article on The Aleph Blog - Jan 25, 2012, 5:18 am
I appreciate Steve Randy Waldman, who writes the excellent blog Interfluidity.  Even before I started blogging, while I was at RealMoney, we interacted over CPDOs, along with Alea, and several others that were onto the scam.  That was a fun time, because aside from the Canadian rating agency Domin...
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David Merkel posted an article on The Aleph Blog - Jan 24, 2012, 3:47 am
There have been a lot of articles dealing with use of corporate free cash flow lately: Dividends — get them, are they sustainable?Buybacks — do they add value or not?Acquisitions — are they overpaying?  What are the synergies?But you never hear about the last one — internal investment for o...
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David Merkel posted an article on The Aleph Blog - Jan 22, 2012, 1:07 am
This applies more to private equity than hedge funds.  Adjust the headline. http://t.co/Zy4kRVlg Jan 21, 2012 Economists: A Profession at Sea http://t.co/86wZognH Too much math, & not enough knowledge of how people, business & finance really work $$ Jan 21, 2012 Clever article $$ RT @srussolillo: A...
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David Merkel posted an article on The Aleph Blog - Jan 22, 2012, 1:04 am
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 enterp...
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David Merkel posted an article on The Aleph Blog - Jan 18, 2012, 3:04 am
Definitely, just followed and added 2 RSS RT @tylercowen: Sober Look is an underrated, underdiscussed economics blog, http://t.co/aewQejQX Jan 17, 2012 DOL Makes Nice on Investment Advice http://t.co/1PDeFbDg Offers defined contribution plan sponsors new options 4 participant invt advice $$ Jan 17, ...
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David Merkel posted an article on The Aleph Blog - Jan 18, 2012, 2:59 am
I’ve long admired ECRI for their timely and accurate forecasts, and their willingness to stick by their models when things don’t seem to be immediately going their way.  I have also appreciated their lack of willingness to divulge their model elements; my thoughts were, “Hey, it’s probably ...
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David Merkel posted an article on The Aleph Blog - Jan 14, 2012, 1:38 am
@DavidSchawel Shrink the balance sheets then for true profit; sell AFS assets, & use proceeds to buy back debt. Makes BalSht cleaner also $$ Jan 13, 2012 Could protectionism, tariffs, & a VAT lead 2 inflation? RT @historysquared: $$ : Latest in the Ongoing Global Trade War http://t.co/QuwgmmxO Jan 1...
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David Merkel posted an article on The Aleph Blog - Jan 14, 2012, 1:35 am
In 2003 a financial gun was put to my head, telling me to relocate or be severed.  I took severance because of all the ties my family had to the area.  I landed at a hedge fund near me, one well enough run to be immune to the criticisms of this book. The first thing you have to understand is that...
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David Merkel posted an article on The Aleph Blog - Jan 14, 2012, 12:32 am
The world is a maze of debt.  Debts layered on debts. The Earth and its productivity is roughly the same or better than prior years.  What is the problem with the economy then? The problem is this: there are entities that made bad loans in the past that expect to be paid back in full.  They ass...
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David Merkel posted an article on The Aleph Blog - Jan 13, 2012, 12:15 am
Rebalancing of any sort in investing presumes an underlying stability to the economic system, and thus, market returns.  Rebalancing will not protect against socialism, war, or an overleveraged position. The concept of rebalancing requires the idea of reversion to mean.  It will not protect you w...
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David Merkel posted an article on The Aleph Blog - Jan 12, 2012, 1:36 am
Here’s A Credit Card That Looks To Trap ID Thieves By Making Them Think They’re Clever http://t.co/BjtE1Pcy Thieves that goof get fingered Jan 12, 2012 $MSFT Said to Plan Marketing Reorganization That Includes Job Cuts http://t.co/tnmiw372 Cuts s/b a last resort option 4 morale reasons $$ Jan 12...
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David Merkel posted an article on The Aleph Blog - Jan 11, 2012, 12:34 am
Turkey Said to Tell India Help on Iran Oil Payments May End http://t.co/smdFrxQK Lot of second order effects from the Iran embargo. $$ Jan 10, 2012 EU Is Said to Consider Iran Oil-Embargo Exemptions Rather Than Blanket Ban http://t.co/12qgDjBD Mainly to help Greece, Italy & ENI $E $$ Jan 10, 2012 @D...
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David Merkel posted an article on The Aleph Blog - Jan 10, 2012, 1:24 pm
A reader wrote to me: I periodically read your blog and it seems like you have a strong grasp of the insurance industry.  As well, given your background as a life actuary I imagine you might have some valuable insights on whole-life products.  I am having a baby in the late spring and have been c...
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David Merkel posted an article on The Aleph Blog - Jan 8, 2012, 12:25 am
Every now and then an idea strikes me, and I wonder if it would be worth trying.  Here’s one: much of the stuff that passes for analysis of stocks on the web leaves me cold.  It feels like a computer spit out a few ratios, with standard verbiage. What if I chose some stocks at random, and analy...
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David Merkel posted an article on The Aleph Blog - Nov 2, 2011, 1:34 am
It started with reading Abnormal Returns, something I do daily, and innocent enough.  But the article mentioned at SSRN was significant, and far more than a set of book reviews.  It cited a GAO study and a speech given by SEC Director Erik R. Sirri, which showed that the SEC did not materially mod...
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David Merkel posted an article on The Aleph Blog - Nov 1, 2011, 1:51 am
I’m working on changes in client portfolios (and mine as well, they mirror my portfolio; I eat my own cooking!), and I spend time looking at longer-term returns on a book value basis.  I agree with Buffett; growing book value per share grows market value per share over time. I write this because...
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David Merkel posted an article on The Aleph Blog - Oct 30, 2011, 12:57 am
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 ...
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David Merkel posted an article on The Aleph Blog - Oct 29, 2011, 5:59 am
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 sold the...
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David Merkel posted an article on The Aleph Blog - Oct 29, 2011, 12:53 am
After my trolling through 13Fs for the dream team, I decided to use the data, such that I would review all companies I have run across that have one member of the dream team owning it.  Beyond that, I looked at all companies that 2 or more members of the dream team own, and added to the list all co...
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David Merkel posted an article on The Aleph Blog - Oct 28, 2011, 6:35 am
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 th...
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David Merkel posted an article on The Aleph Blog - Oct 27, 2011, 12:51 am
... put together your own “dream team” of investment managers.  Would you want ... held by a large fraction of the clever managers. Note that ... Hathaway is listed twice because of the A & B shares ... N V2,164,765 9 Bank of America2,127,572 7 ... ,180,466 4 Bank of New York Mellon Corp.1...
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David Merkel posted an article on The Aleph Blog - Oct 27, 2011, 12:27 am
I have been contributing material to the website Wall Street All Stars.  Mostly I have contributed two things: They scrape my RSS feed.I post some of my best articles from the past, with commentary that brings it up to date.You can find my contributions here. I can give all my blog readers and twi...
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David Merkel posted an article on The Aleph Blog - Oct 26, 2011, 12:15 am
                What is this graph?  I’ll give you a hint — it has something to do with technical analysis where investors look for signals near turning points. Ideas?  Let me know in the comments.  I’ll have a post on this later.
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David Merkel posted an article on The Aleph Blog - Oct 26, 2011, 12:06 am
I don’t have much sympathy for the protests called “Occupy Wall Street,” and those modeled after it.  Real societal change comes through the political process, and I would challenge those “protesting” to form a new political party, and articulate a distinctive set of views, so that averag...
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David Merkel posted an article on The Aleph Blog - Oct 21, 2011, 12:21 am
Value Investing and Growth Investing are variants of the greater school of Fundamental Investing.  Quoting Buffett from his 1992 Shareholders Letter: Our equity-investing strategy remains little changed from what it was fifteen years ago, when we said in the 1977 annual report:  “We select our ...
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David Merkel posted an article on The Aleph Blog - Oct 20, 2011, 12:57 am
Correlations are high.  Risk-on, risk-off drives the market as market players trade ETPs and baskets rather than individual stocks.  Market players worry about policy, and whether it will be inflationary (bullish) or deflationary (bearish). What an ugly time to be a value investor, and a long-ter...
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David Merkel posted an article on The Aleph Blog - Oct 19, 2011, 3:23 am
I’ve been toying with an idea that I think would improve economic and biometric research, but will never get adopted.  Split research into two components: Generating research ideasDoing the researchBut here’s my twist: economists and biometricians could submit ideas to a central database, but w...
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David Merkel posted an article on The Aleph Blog - Oct 14, 2011, 2:38 pm
I want to start this evening with Twitter.  In the past, I used to do a decent degree of posts that summarized the news in a given area.  I don’t do those anymore.  Instead, I tweet significant articles 1-3 times a day. In general, I post the title of the article, a shortened link, and a quick ...
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David Merkel posted an article on The Aleph Blog - Oct 13, 2011, 11:10 am
I’m writing this post for the Society of Actuaries Annual meeting, to explain some of the nuances of building a blog, and using social media.  I write this knowing that I am still a learner after 4.5 years of blogging. Goals The first question is why do you want to blog?  What do you have to s...
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David Merkel posted an article on The Aleph Blog - Oct 12, 2011, 7:39 pm
Next Monday I head off to the Society of Actuaries Annual Meeting in Chicago.  I’m giving talks at two sessions: the first one on Monday afternoon is called Being Social–It’s a Game Changer.  It is meant to introduce and encourage actuaries in the use of social media.  My next blog post is ...
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David Merkel posted an article on The Aleph Blog - Oct 11, 2011, 6:16 am
When I was a kid, I liked to set up large arrays of dominoes so that I could watch them fall.  Early on, I realized the errors in setup were frequent enough that I left gaps such that if I accidentally knocked down a domino, it wouldn’t destroy all of the work.  I usually put in a number of gaps...
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David Merkel posted an article on The Aleph Blog - Oct 9, 2011, 1:02 am
... tops. Now for my poster child, the Legg Mason Value Trust.  Bill Miller is a ... was fond of saying “lowest average cost wins.” Legg Mason Value Trust enthused investors as they racked up significant returns in the ... , and the adulation persisted through 2006.  As Legg Mason Value ...
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David Merkel posted an article on The Aleph Blog - Oct 8, 2011, 1:37 am
I read an interesting article today called Dead Stocks Walking. Good article, but I want to point out a few things the article missed. The article deals with large companies that had moderately high valuations, but were still growing.  Today, they are growing more slowly, but their valuations have...
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David Merkel posted an article on The Aleph Blog - Oct 7, 2011, 12:29 am
Almost every asset funds a liability.  What gets pitched most frequently to the average American, investment-wise?  Save for your retirement. And that’s good, mostly.  We need to save as a society, and we don’t do it.  Even our government, who claims to save for us through Social Security a...
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