The transaction is fundamentally unfair and undervalued.

While the sector's had a great run, there are still a number of companies that are fundamentally undervalued. But as the industry continues to prosper, investors need to be extremely selective.

Sadly, in the highest levels of economic thought in government, questions are not tolerated. It is as if we're dealing with the binary thinking of a fundamentalist religion.

Credit-default swaps remedied the problem of open-ended risk for me. If I bought a credit-default swap, my downside was defined and certain, and the upside was many multiples of it.

Fresh, clean water cannot be taken for granted. And it is not - water is political, and litigious. Transporting water is impractical for both political and physical reasons, so buying up water rights did not make a lot of sense to me, unless I was pursuing a greater fool theory of investment - which was not my intention.

Common hedging techniques include shorting stocks, buying put options, writing call options, and various types of leverage and paired transactions. While I do reserve the right to use these tools if and when appropriate, my firm opinion is that the best hedge is buying an appropriately safe and cheap stock.