Good morning.

This week, Warren Buffett announced that Berkshire Hathaway would buy Alleghany Corp. for $11.6 billion in cash.

Many investors have never heard of Alleghany, but I've long regarded it as a model of how companies should be run -- and treat their shareholders.

Alleghany is almost the polar opposite of many financial-services firms, where mediocre management gets showered with fat bonuses and jumbo stock options for taking excessive risks, knowing that a catastrophic mistake could be cushioned by a bailout from the taxpayers.

In 2009, I sat down with Weston Hicks, then Alleghany's chief executive (he stepped down at the end of last year). When I suggested we chat over lunch, he startled me by asking to meet not at a lavish steakhouse or an elegant European restaurant, but at a humble diner in midtown Manhattan where top-of-the-line is a tuna melt.

As I wrote in my column on May 2, 2009:

Stock options? Forget it. "We don't want to be in the position of betting against the shareholders," says Mr. Hicks, Alleghany's chief. (Many CEOs who exercise options promptly sell.) Alleghany pays its long-term incentive awards as "performance shares" that go up or down with the market. Last year, when the stock fell 28%, "the value of my total compensation was negative," Mr. Hicks says, "as it should have been, since the shareholders didn't make anything."

Look at this summary from Alleghany's 2021 proxy statement:

It's a shame more companies -- a lot more -- aren't run like Alleghany.

Yesterday, when Federal Reserve Chairman Jerome Powell said the central bank is willing to raise rates in half-a-percentage-point hikes if need be, some bond investors took a beating.

Vanguard Extended Duration Treasury ETF, which holds long-term U.S. bonds, fell 2.7% to its lowest close since May 2019. It's down 15% so far in 2022 and off by 33% since its all-time high on March 9, 2020, according to Dow Jones Market Data.

Bonds have been in a four-decade-long bull market. Only investors who are at least in their early 60s have ever experienced a period of sustained losses in the bond market.

One important caveat: Contrary to popular belief, gradual, moderate rises in interest rates aren't lethal to most investors.

It's a different story for those who hold long-term bonds.

If inflation stays high and interest rates keep rising, those folks could suffer real pain, the kind of protracted losses that bond investors endured throughout the 1960s and 1970s.

Wall Street loves acronyms. Investors shouldn't.

As a general rule, it's bad karma when an investment or financial innovation starts to be called by its initials. The collapse of 2008-09 was heralded by CBOs, CDOs, CLOs and CMOs, not to mention NINA and NINJA loans; much of the speculative madness of 2020 and 2021 came pouring through PIPEs and SPACs. 

An earlier helping of alphabet soup was the BRICs: Brazil, Russia, India and China. In 2001, Goldman Sachs analyst Jim O'Neill wrote an influential research paper proclaiming that those economies would grow at roughly twice the rate of developed markets.

At the peak of the hype, asset managers raced to offer mutual funds and exchange-traded funds with BRIC in their names.

But portfolios built on BRICs crumbled. By 2013, the results were so bad that Mr. O'Neill told The Wall Street Journal that if he had to do it all over again, he would delete the B, the R and the I: "If I were to change it, I would just leave the 'C.' But then, I don't think it would be much of an acronym."

Turns out he was wrong about the "C," too.

Since Mr. O'Neill said he would keep the "C" for China, the iShares MSCI China ETF has gained less than 4.3% annualized, while the iShares Core S&P 500 fund returned 14.3% annualized. Russia lost an average of 50% a year; Brazil gained less than 1% annually. India was the only BRIC that generated a robust return (just under 11% annualized):

Almost all the BRICs funds have since disappeared. Earlier this month, the iShares MSCI BRIC ETF meekly dropped the R, shrinking its name to BIC.

I happen to think emerging markets are worth owning over the long run -- but they certainly weren't worth buying hand over fist when they morphed from a buzzword into an acronym.

So maybe the lesson from all this is sad but simple. I propose one acronym that all investors should take to heart: AMT (Acronyms Mean Trouble).

How is the customer service at the investment firms you use? Have you had any unusually good or bad experiences lately involving your taxes, depositing checks, receiving retirement distributions, or other dealings with fund companies, brokers or financial advisers?

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Be well and invest well,

Jason

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Behold, we know not anything;
I can but trust that good shall fall
At last — far off — at last, to all,
And every winter change to spring.
—Alfred, Lord Tennyson