More on Related Themes
2014-07-09 Dealing With Red-Hot Markets by Mark Ungewitter of Charter Trust Company
This summer the streets are sizzling… and so is the stock market. To the chagrin of value investors, US equities have not experienced a normal correction since May 2013. But what is “normal” and what is “hot”? This article discusses a behavioral measure of market extremity, the put/call ratio, and offers some basic advice for dealing with the current environment.
2014-05-05 The 5 Commandments of Warren Buffett and Charlie Munger by William Smead of Smead Capital Management
Here you will find our review of the 2014 Berkshire Hathaway Annual Shareholder Meeting. As we consider these men pioneers of long-duration common stock investing, we wanted to share what we believe were the best nuggets of wisdom from the weekend.
2014-04-23 Poker Mentality?! by Jeffrey Saut of Raymond James
have often stated that the rarest trait on Wall Street is ?patience.? I have also repeatedly reprised Charles Dow?s quote that, ?The successful investor/speculator needs to ignore two out of every three potential money making opportunities.?
2014-03-09 The Problem with Keynesianism by John Mauldin of Millennium Wave Advisors
Keynes himself would appreciate the irony that he has become the defunct economist under whose influence the academic and bureaucratic classes now toil, slaves to what has become as much a religious belief system as it is an economic theory. Men and women who display an appropriate amount of skepticism on all manner of other topics indiscriminately funnel a wide assortment of facts and data through the filter of Keynesianism without ever questioning its basic assumptions. And then some of them go on to prescribe government policies that have profound effects upon the citizens of their nations.
2014-01-31 Buy What You Know? Not So Fast by Russ Koesterich of iSharesBlog
Buy what you know. It’s an old admonition, and on the surface a sensible one. Focusing your investments on those companies that you’re most familiar with should help mitigate the risk of a bad investment choice. Unfortunately, like a lot of conventional wisdom, it’s wrong. Concentrating your portfolio to local investments, while comforting, is a mistake for two reasons.
2014-01-18 Forecast 2014: 'Mark Twain!' by John Mauldin of Millennium Wave Advisors
The surface of the market waters looks smooth, but the data above suggest caution as we proceed. Perhaps slowing the engine and taking more frequent soundings (or putting in closer stops!) might be in order. The cry should be "Mark twain!" Let’s steam ahead but take more frequent readings and know that a course correction may soon be necessary.
2013-12-21 What Has QE Wrought? by John Mauldin of Millennium Wave Advisors
Now that we have begun tapering, we will soon see lots of analysis about whether QE has been effective. What will the stock market do? The US economy seems to be moving in the right direction, but the Fed has forecast Nirvana (seriously) - do we dare hope they can finally get a forecast right? Or have they jinxed us?
2013-12-17 Optimizing Asset Location: Is It Worth the Effort? by Joe Tomlinson (Article)
Asset location - the choice of whether to hold stocks and bonds in taxable or sheltered accounts - is receiving increased attention as advisors seek more ways to add value. New research has challenged long-held beliefs. I’ll examine that research and answer a question that should concern every advisor and client: Does the value provided by asset-location advice justify the fees for the work involved?
2013-12-03 Why Does the U.S. Have High-Cost Low-Quality Healthcare? by Michael Edesess and Kwok L. Tsui (Article)
The U.S. has worse mortality rates than virtually all other developed nations, and yet it spends twice as much per capita on health care. How on earth has the U.S. racked up such an appallingly bad health-care record, and what is the solution? A recent edition of the Journal of the American Medical Association identified many of the problems but was not persuasive in prescribing a cure.
2013-12-03 Coping with Sudden Power Syndrome by Justin Locke (Article)
Wealth managers are no doubt familiar with the phrase ’sudden wealth syndrome.’ Its symptoms include isolation from former friends, guilt over one’s good fortune and an extreme fear of losing one’s money. Money and power are closely related concepts, and so I would like to introduce the related condition - sudden power syndrome - which is what one experiences when thrust into a new position with significantly greater authority and responsibilities.
2013-11-24 Game of Thrones - European Style by John Mauldin of Millennium Wave Advisors
The Eurozone crisis is not over, and it will not end quickly or soon. Even if it seems to unfold in slow motion - like the slow build-up in a Game of Thrones storyline to violent internecine clashes followed by more slow plot developments but never any resolution, the Eurozone debacle has never really gone away. The structural imbalances have still not been fixed; politicians and central bankers have still not agreed to solve major fiscal problems; the overall economy still disintegrates; unemployment is staggeringly high in some countries and still rising; and the people are growing restless.
2013-11-19 Asset Class Allocation and Portfolios: Critique and Complication by Adam Jared Apt (Article)
In Part 1 of this essay, I explained that for asset class allocation to become an investment practice, it required a foundation of theory. And Modern Portfolio Theory was that foundation. But today, most financial journalists and investment advisors who proffer advice centered on asset class allocation are?if I may judge from their writings?oblivious of this. And why shouldn’t they be? Theory is abstract and difficult to apprehend.
2013-11-19 Research from Yale on Commodities by Robert Huebscher (Article)
Many would consider the practice of placing assets in a commodity fund to be speculation rather than investing. That perception was amplified by a recent Bloomberg article, which reported the dismal performance of many managed-futures funds and commodity-trading advisors (CTAs). Contrary to that image, Geert Rouwenhorst, a Yale University professor, claims he has found a way to construct a commodity-based fund that earns a significant premium over inflation.
2013-11-13 GameStop and Our Long-Term, Contrarian Investment Approach by Jay Kaplan of The Royce Funds
Because our contrarian approach emphasizes a long-term time horizon, we tend to invest in companies that we believe have the financial wherewithal to withstand out of favor periods. GameStop used trying times to build conviction and expand its core business rather than abandoning its discipline to meet outside expectations.
2013-11-12 Three Ways to Turn Casual Contacts into Clients by Dan Richards (Article)
Most advisors routinely cross paths with people who are attractive prospects, whether at their golf club, get-togethers with neighbors or through charitable activity in their community. The challenge is how to raise the possibility of working together without appearing to be one of those stereotyped hustlers who give salespeople everywhere a bad name.
2013-11-05 Letters to the Editor by Various (Article)
Several readers respond to Bob Veres’ article, Why Deficits Don’t Matter, which was published last week. A reader responds to Adam Apt’s article, Is Gold Overpriced?, which was published Oct. 15, and a reader responds to the commentary, Scrooge McDucks, by Bill Gross of PIMCO, which appeared Oct. 31.
2013-10-22 Rolling Returns: A Better Way to Measure Performance by Sponsored Content from The Royce Funds (Article)
Though calendar-year returns are among the more common measurements of a portfolio’s performance, rolling returns arguably offer a more compelling story. They provide a particularly robust analytical tool for evaluating manager performance, especially during volatile periods.
2013-10-22 How Many Monkeys Does it Take to Find a Successful Strategy? by Michael Edesess and Kwok L. Tsui (Article)
Give a monkey enough darts and she will eventually hit the bulls-eye on a dartboard. We wouldn’t dare consider that monkey an expert dart thrower, but investment professionals have been using essentially that same logic to assert that their strategies ? often called “smart betas” ? will outperform the market. New research exposes the faulty mathematics upon which such claims are based.
2013-10-15 Is Gold Overpriced? by Adam Jared Apt (Article)
New research, based on an econometric model of gold prices, has attempted to answer the question, “Is gold overpriced?”
2013-10-15 A Q3 client letter: Mike Tyson on Sticking to Your Plan by Dan Richards (Article)
Each quarter I post a template for a client letter, as a starting point for advisors who want to send clients an overview of the three months that just ended and the outlook for the period ahead.
2013-10-15 Why Customized Content Beats Canned Content by Neil Rhein (Article)
If you’re communicating syndicated (“canned”) content that is similar (or identical) to what every other advisor is saying, you’re just adding to the noise.
2013-10-14 Civilizing the Marketplace of Ideas by Niall Ferguson of Project Syndicate
Like any market, the marketplace of ideas needs regulation: in particular, its participants should be bound by norms of honesty, humility, and civility. Unfortunately, even our most influential intellectuals refuse to adhere to these principles.
2013-09-28 The Renminbi: Soon to Be a Reserve Currency? by John Mauldin of Millennium Wave Advisors
Contrary to the thinking of fretful dollar skeptics, my firm belief is that the US dollar is going to become even stronger and will at some point actually deserve to be the reserve currency of choice rather than merely the prettiest girl in the ugly contest the last currency standing, so to speak. But whether the Chinese RMB will become a reserve currency is an entirely different question.
2013-09-27 A Sensible Way to Evaluate Your Investment Performance by Robert Isbitts of Sungarden Investment Research
I recommend using at least two benchmarks for each portfolio or portfolio strategy: One based on the portion of the S&P 500’s volatility that the client is prepared to endure over time. The other is the S&P 500 Total Return Index as this has become, over time, a very common and recognizable indicator of performance of “the market.”
2013-09-24 William Bernstein ? “Stocks for the Long Run” by Michael Edesess (Article)
William Bernstein’s reading of history is that if you want to build a nest egg and protect against the “four horsemen” that threaten it over the long term, the best thing to do is invest in a globally diversified stock portfolio.
2013-09-24 Four Ways to Attract Affluent Clients by Dan Richards (Article)
Attracting HNW clients is all about credibility ? as a result, it’s typically lower key, takes longer and requires an upfront investment of time and effort to position yourself to interact with HNW prospects.
2013-09-17 How One Advisor Attracts HNW Clients by Dan Richards (Article)
Recently, a California-based advisor explained how she shifted her practice to focus on affluent clients. Her success was the result of a simple but thoughtful five-step plan.
2013-09-17 Investing for Real People by Sponsored content by Oppenheimer Funds (Article)
Investor goals are the same, but solutions have changed. Today, aiming to meet basic needs requires new solutions. Laser focus on investor goals will help uncover appropriate investment opportunities. Expanding the opportunity set beyond the usual suspects will be critical to long-term success.
2013-09-10 Should You Ditch Your Elevator Pitch? by Dan Richards (Article)
When someone asks what you do, should you focus on the benefits you provide and describe how your clients are better off? Contrary to what you may have read about crafting a persuasive “elevator pitch,” I say the answer is “no.”
2013-09-07 Unrealistic Expectations by John Mauldin of Millennium Wave Advisors
Two well-respected analysts of pension funds have produced reports this summer suggesting that pensions are now underfunded by more than $4 trillion and possibly more than $5 trillion. I would like to tell you that the underfunding is all the bad news, but when you probe deeper into the problems facing pension funds, it just gets worse.
2013-09-03 The Hidden Risk in Gold by Robert Huebscher (Article)
Since their introduction a little over a decade ago, gold-backed exchange-traded funds (ETFs) have accumulated more than $500 billion in assets. Investors’ most common rationale for owning gold is that it acts as a hedge against financial instability or a sudden shock to the markets, such as the 9/11 attacks. But what if the flow of assets into gold ETFs plays a greater role in the price of gold than do investors’ fears of instability? Is gold the hedge investors believe it to be?
2013-08-24 US Equities: Secular Bull Market? by Mark Ungewitter of Charter Trust Company
The Dow’s 10-year moving average currently near 11,500 provides one measure of risk in today’s uncertain environment. Though impossible to predict, a reversion to (or through) this long-term average would be entirely normal from a behavioral perspective.
2013-08-20 Which Crowd? Mulling the Investment Wisdom of the Masses by Steven Grey (Article)
With every investment or trade, the profits that accrue with the passage of time eventually prove one party the wiser. But of what practical value is the notion of collective wisdom if investors can’t consistently identify the ’wise’ crowd before the fact?
2013-08-13 Why Clients Don’t Give You Credit for Your Hard Work ? And What to do About it by Dan Richards (Article)
Advisors work incredibly hard, but clients take that effort for granted. How can advisors get credit for all they do for clients?
2013-08-10 We Can't Take the Chance by John Mauldin of Millennium Wave Advisors
What would it have been like to be a central banker in the midst of the crisis in 2008-09? You’d know that you won’t have the luxury of going back and making better decisions five years later. Instead, you have to act on the torrent of information that’s coming at you, and none of it is good. Major banks are literally collapsing, the interbank market is nonexistent and there is panic in the air. Perhaps you feel that panic in the pit of your stomach. This week we’ll perform a little thought experiment to see if we can extrapolate what is likely to happen in when the nex
2013-08-06 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Every investor is unique. Similarly, every investment opportunity is unique. Despite our desires to see otherwise, each situation must be measured on a paradigm of possibilities rather than being pigeon-holed into a structured definition.
2013-07-27 A Lost Generation by John Mauldin of Millennium Wave Advisors
This week we will briefly look at why weak consumer spending is going to become an even greater problem in the coming years, and we will continue to look at some disturbing trends in employment.
2013-07-16 Letters to the Editor by Advisor Perspectives (Article)
A reader responds to the ongoing exchange of letters regarding socially responsible investing, and a reader responds to Joe Tomlinson’s article, Retirement Portfolios: Fears over Rising Rates are Overblown, which appeared last week.
2013-07-10 Employer Mandate: A Pharma Bump in the Road by Bill Smead of Smead Capital Management
As long-duration value investors, we at Smead Capital Management have been very attracted to the conservative accounting, shareholder friendly dividends/buybacks and bright pipeline futures of major pharmaceutical/biotech companies like Merck (MRK), Pfizer (PFE) and Amgen (AMGN). Lately, there has been weakness in these shares and we’d like to review our best theory for recent fears and price weakness, while reviewing the merit of these high quality shares.
2013-07-02 Avoiding the Interest Rate Freight Train with Individual Bonds by Stephen J. Huxley, Jeremy Fletcher and Brent Burns (Article)
For bond funds, rising rates mean that total return has to fight losses on the underlying portfolio. As a fund’s net asset value (NAV) declines, coupon interest may not be enough to overcome the price loss. Making the same fixed-income allocation to high-quality individual bonds instead and holding them to maturity is a superior strategy when rates rise.
2013-06-25 The Price Your Clients Pay for Using Safe Withdrawal Rates by David B. Loeper (Article)
Safe-withdrawal rates (SWRs) are perhaps the most extensively studied topic in financial planning literature. But applying a single SWR-driven methodology to all clients neglects their unique and individual needs. A better approach is for advisors to assist clients in defining their ideal and acceptable goals and the relative priorities among them. Then they can demonstrate through Monte Carlo simulation the likelihood of the recommended plan becoming over- or under-funded relative to those goals.
2013-06-18 Retirement Income Designations ? Which Should You Choose? by Wade Pfau (Article)
With more than 50 certification programs based on the withdrawal phase of the planning lifecycle, advisors are faced with a paralyzing choice about which designation provides the most valuable curriculum. Here’s some guidance on choosing the right program for advisors.
2013-06-18 What Advisors Need to Know about Health-Care Planning by Dinesh Sharma (Article)
Guiding clients through the maze of the health-care choices retirees face is a way advisors can provide meaningful value. Here’s an overview of the Medicare and Medicaid programs to help advisors understand the key economic considerations that will impact their clients.
2013-06-11 How Specialist Advisors Earn Twice as Much by Dan Richards (Article)
In any profession ? medicine, dentistry, law, accounting ? the average income for specialists is more than double that of generalists with the same years of experience. My experience with successful financial advisors who’ve built a niche practice confirms this, but first they had to overcome three common myths about developing a niche positioning.
2013-06-04 Your Value Proposition: A Precursor to the Elevator Pitch by Teresa Riccobuono (Article)
Every business should stand on four legs: values, a mission statement, a vision statement and a value proposition. This fourth item, a value proposition, must provide concrete data about your organization, why it exists and who you serve.
2013-05-28 Economic Climate Change & the Long-Term View on Yields by Sponsored Content from Loomis Sayles (Article)
Will rates rise? It’s a logical question. US Treasury yields have been in a secular downward trend since the 1980s and almost frozen at historic lows for the last several months. While recent cyclical improvements suggest the US economy is heating up, we do not expect interest rates to start soaring to record highs. The interest rate environment will eventually undergo climate change, but the process will be gradual. There are secular headwinds cooling rates, and we expect them to persist for years to come.
2013-05-28 State and Local Pensions: What Now? by John Minahan (Article)
Alicia Munnell’s book, State and Local Pensions: What Now? is a comprehensive introduction to public pension funds for the newcomer and a useful reference for seasoned professionals. Munnell stakes out a position on an important debate between economists and actuaries regarding liability valuation, and develops a background narrative portraying economists as impulsive, argumentative and clueless.
2013-05-14 Framing the Referral Discussion by Beverly Flaxington (Article)
Last week, I was training a group of very successful Florida-based advisors who brought up what is a common issue with regard to client referrals. Even the best advisors, with the most satisfied clients, offering the highest levels of service often struggle with obtaining referrals.
2013-05-14 Letter to the Editor by Various (Article)
A reader responds to Robert Huebscher’s article, Niall Ferguson: Four Reasons Why the U.S. is Failing, which appeared last week.
2013-05-14 Nassim Taleb on the Anti-Fragile Portfolio and the Benefits of Taking Risks by Ben Huebscher (Article)
As we recover from the most recent financial crisis, how we can we learn from the mistakes to best prepare for the future? Nassim Taleb tackled this very question in his latest book, Antifragile: Things That Gain From Disorder, which built off his previous works and applies the lessons learned to today’s biggest challenges. Taleb examined how small doses of volatility can help systems handle larger disruptors in the future.
2013-05-07 How to Construct a Low-Cost Conservative Portfolio by Geoff Considine (Article)
One of the greatest challenges for investors today is constructing low-risk portfolios that provide the best returns using low-cost funds or ETFs. Doing so requires advisors to define risk as the potential for retirees to fail to achieve their financial goals, instead of as volatility, as it is traditionally measured. I will show how to construct a low-cost portfolio that minimizes this definition of risk while generating a reasonable real return.
2013-04-30 Implementing Behavioral Portfolio Management by C. Thomas Howard, PhD (Article)
Behavioral portfolio management is based on the notion that if the advisor can redirect his or her emotions and mitigate the impact of client emotions, it is possible to build superior portfolios by harnessing market emotions. This article describes how this can be done and presents evidence of the superiority of focusing on investor behavior when constructing and managing portfolios.
2013-04-24 The Road To Omaha by Bill Smead of Smead Capital Management
We have been discussing keys to the investment success of Warren Buffett and Berkshire Hathaway as we approach the 2013 annual meeting. In this week’s edition, we are considering a company which might make a good “elephant” for Berkshire to buy.
2013-04-20 Austerity is a Consequence, not a Punishment by John Mauldin of Millennium Wave Advisors
Austerity is a consequence, not a punishment. A country loses access to cheap borrowed money as a consequence of running up too much debt and losing the confidence of lenders that the debt can be repaid. Lenders don’t sit around in clubs and discuss how to “punish” a country by requiring austerity; they simply decide not to lend. Austerity is a result of a country’s trying to entice lenders into believing that the country will change and make an effort to restore confidence.
2013-04-16 Making the Numbers by Steven Grey (Article)
Among the innumerable clichés littering the financial pages, few are as perversely ironic as the phrase “making the number.” Anyone unfamiliar with investing would almost automatically take this as an explicit warning: ’Beware! These numbers are made.’ And yet the same declaration is almost universally received by the investment community as reassurance. It’s a twisted, dangerous dynamic that only reinforces careless reliance on the most potentially manipulated of all available financial information.
2013-04-16 Dealing with an Obnoxious Wholesaler by Beverly Flaxington (Article)
We have a wholesaler who calls on our office. He is completely and utterly obnoxious. I understand they are supposed to sell but he is over the top. I don’t like to be pushed into things. Is there a right way to tell a salesperson like this to back off?
2013-04-02 When the Boss is the Bottleneck by Beverly Flaxington (Article)
I have a thriving practice and am very proud of the way it has grown. I have reached a point where everything has to come through me. Every decision, new idea and project needs my attention or response. I have a competent staff, but I don’t have someone to whom I can delegate.
2013-03-19 Understanding the Role of SPIAs in a Retirement Portfolio by David B. Loeper (Article)
Wade Pfau’s recent article, Breaking Free from the Safe Withdrawal Paradigm, was well researched. Its goal was to accurately calculate the benefits of using SPIAs based on certain assumptions. I fear, however, that many readers may have not fully grasped the impact of a few key assumptions that drive his results.
2013-03-19 How My Firm Hires Great Employees by Teresa Riccobuono (Article)
Adding a team member is a big decision. If you are thinking the time is right to add to your roster, here are a few things to consider.
2013-03-12 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Although ecstasy reigned supreme last Tuesday as the Dow crossed into record territory, not everyone felt as if they shared in the bounty. It's at times like these that we must be mindful of the distinction between economic recovery and market recovery. Two phenomena which fly in tandem, on parallel tracks, are not always inextricably linked, and in this case the parallel disconnect is wide and obvious.
2012-12-18 Jeremy Siegel on 'Dow 15,000' by Robert Huebscher (Article)
Jeremy Siegel was one of very few individuals to have correctly predicted the strong performance of the equity markets over the last year. The Wharton professor and author of the renowned book, Stocks for the Long Run, forecasts continued strong performance for the year ahead.
2012-12-11 Letters to the Editor by Various (Article)
Readers respond to a series of articles that appeared over the last several weeks.
2012-12-11 Luck versus Skill in Investing: New Insights from the World of Sports and Beyond by Michael Skocpol (Article)
Skill exists in investing. Indeed, the most skilled managers today are likely the most skilled there have ever been. But there's more to it.
2012-12-11 The Next Generation of Income Guarantee Riders: Part 3 (The Income Phase) by Wade Pfau (Article)
In this third and final installment in my series on guarantee riders, I'll focus on the post-retirement income supported by income guarantee riders for variable annuities (VA/GLWBs), stand-alone living benefit riders (SALBs), and an unguaranteed portfolio of mutual funds. I'll highlight how differences among these products affect their end results, while also investigating what roles guarantees can most appropriately play in a retirement portfolio.
2012-12-04 Nate Silver's Message for Financial Advisors by Ben Huebscher and Michael Edesess (Article)
By now you are likely aware that Nate Silver of the New York Times correctly predicted the results for all 50 states (plus DC) in this year's presidential election and all but two Senate races. Silver's predictive capabilities across a range of disciplines have made him a near-deity among those whose livelihood depends on accurate forecasting - from poker players to counter-terrorism units. It's clear why: His methods work - at least in some cases. And their strengths and limitations carry important lessons for financial advisors.
2012-12-04 Surprising Choices in the Search for Safety Near-Certain Loss of Purchasing Power versus Short-Term by Jason Petitte, CFA (Article)
Risk, in its many guises, is unavoidable, and investors today are taking on significant amounts of credit risk, duration, and leverage to obtain high yields from many presumably safe bonds. But certain types of risk are often mispriced. By overweighting one's portfolio to those sectors that currently offer attractive risk-adjusted returns, investors will be better positioned to meet their long-term goals.
2012-12-04 How to Turn Acquaintances into Clients by Dan Richards (Article)
The transition from a casual social conversation to a business-related one is tricky, requiring us to do it in a way that's not intrusive and doesn't make the person uncomfortable. Here's an approach that worked for one advisor.
2012-11-27 A Critique of Grantham and Gordon: The Prospects for Long-term Growth by Laurence B. Siegel (Article)
The vigorous global economic growth of the last two centuries is over, according to Jeremy Grantham and Robert Gordon. That prediction, if correct, has profound and worrisome implications for investors. And the short-term trend is indeed disquieting: Growth has been close to zero over the last decade in advanced countries. But the most likely outcome is that per capita GDP growth going forward will approximate its U.S. historical average of 1.8%, and it will grow faster in developing markets.
2012-11-27 Over the Cliff: Alan Simpson and Erskine Bowles on the Looming Deficit Crises by Michael Skocpol (Article)
As President Obama and Congressional leaders hurtle Thelma-and-Louise-style toward a budgetary precipice, another deficit-tackling duo hit the road earlier this month to deliver a simple message: This all could have been avoided.
2012-11-13 How Well Does the Next Generation of Guarantee Riders Protect Your Income? Part 2 - Starting the Inc by Wade Pfau (Article)
Unlike traditional VA/GLWBs, the future payments from stand-alone income riders are tied to 10-year Treasury rates. That's bad news for retirees, who may find their future benefits compromised if interest rates remain at historically low levels - regardless of how the stock market performs.
2012-11-13 The Downside to Socially Responsible Investing by Robert Huebscher (Article)
Who wouldn't want a cleaner environment or a more just society? We can all agree these are worthy goals. But it's an established fact that pursuing them through one's investing is costly; environmental-, social- and governance-based investing (ESG) does fine on a gross basis, but loses money net of fees. Now, a recently published paper argues that that ESG is basically a waste of time.
2012-11-13 Harvard's #1 Strategy Guru on the Key Decision for Your Business by Dan Richards (Article)
Competition has brought many once-dominant names to the brink of survival - General Motors, Kodak, Sears and Xerox. Michael Porter, Harvard's top expert on strategy, explains why advisors ignoring the important lesson here do so at their peril.
2012-11-13 Voyages by Michael Lewitt (Article)
Anything short of drastic entitlement reform, serious cutbacks in defense spending, and serious tax reform that alters incentives away from speculation in favor of production will leave this country stuck on the dangerous path it is on today.
2012-11-06 Lacy Hunt on Our Economic Future by Robert Huebscher (Article)
Last week I spoke with Lacy Hunt, an unequivocal advocate of deficit reduction. Hunt defended ? as persuasively as few others can ? the need to address our fiscal imbalances. But equally respected economists are advocating for the other extreme, and he shares some common ground with them.
2012-11-06 The Three Most Important Hours for Your Business by Dan Richards (Article)
Rocky markets mean that you can't rely on referrals alone. If you've built a significant client base, you want to continue to dedicate the bulk of your time to communicating with them. But for your business to stay healthy, you need to bring in new clients ? advisors need to carve out three hours a week to focus on reaching out to prospective clients.
2012-11-06 Six Technology Integration Disasters to Avoid by Jennifer Goldman (Article)
Technology integration is the Holy Grail for today's top-performing financial advisors. When applications talk to each other, advisors can run their practices more efficiently, save money and reduce the size of their staff. That all sounds great, but I'm writing to offer a word of caution: I've seen many such efforts end in disaster.
2012-10-30 Building Portfolios that Beat their Benchmark: Measuring Nanometers with a Yardstick by Bob Veres (Article)
Using tools he co-developed with the Nobel-prize winning economist Bill Sharpe, one advisor has found that he can reliably outperform an appropriate benchmark. His work proves it is possible to build a portfolio knowledgably. You just need the right tools to get the job done.
2012-10-30 The Essential Skill for Advising Women: Building Trust by Kathleen Burns Kingsbury (Article)
Creating trust with a client is not a one-time event. It is a journey that starts at the first meeting and continues throughout the life of the advisor-client relationship. And, while trust is an integral part of any client relationship, it's especially important for your female clients.
2012-10-23 Understanding the Central Issue behind Entitlements by Michael Edesess (Article)
How should our government assure that its citizens have enough to get by - enough food, enough shelter, good enough health, etc.? It is easy to forget that today's fiercest political battles ultimately revolve around this simple question.
2012-10-23 When Portfolio Managers are Asked to be Marketers by Beverly Flaxington (Article)
I work for a large firm as a portfolio manager. We are increasingly asked to make sales presentations and find new business. Is managing money no longer important in this business?
2012-10-23 She Turns Sea Shells by the Sea Shore by Mariko Gordon (Article)
I love the sea. Always have. I explain how my seaside search for shells while unplugging on the Gulf Coast of Florida led to some useful insights related to uncovering an investment manager's process.
2012-10-16 Will Bonds Be ?Burnt to a Crisp?? by David Schawel, CFA (Article)
Bill Gross's recent monthly commentary painted a disturbing picture for investors - he foresees bonds being ?burnt to a crisp.? This isn't just hot air. Such a conflagration is possible, and investors in bond funds, especially those that are constructed similar to the widely followed Barclays bond index, need to heed risks inherent in today''s market.
2012-10-16 When Strong Client Relationships Aren?t Enough by Beverly Flaxington (Article)
Building strong personal relationships with your clients and consistently exceeding their expectations for direct, personal service ? these traditionally were the best ways to generate referrals. But what if that's no longer enough?
2012-10-16 The New World of Credit by Michael Lewitt, Editor, The Credit Strategist (Article)
In an era in which economies are driven by the creation of fiat money by central banks, and where the base of hard money is dwarfed by the volume of outstanding debt, every form of capital is tied to credit. In 1919, William Butler Yeats famously wrote that 'the center cannot hold.' A century later, there is no center.
2012-10-09 Dividend Income: Music to Our Ears by ClearBridge Advisors (Article)
The hunger for income among investors is helping put dividends in the spotlight, say Hersh Cohen and Mike Clarfeld of ClearBridge.
2012-10-09 High-Dividend Yield Strategy under the Microscope by Michael Nairne (Article)
High-dividend yield stocks have become the favorite recommendation of a host of advisors, but an undue focus on income alone obscures the irreducible fact that long-term investment success is based on the total return of a portfolio including both income and capital growth. This raises two questions. How has the total return of a high-dividend yield strategy fared relative to the market? How does its total-return performance compare to the returns of other possible stock-selection strategies?
2012-10-09 How to Manage an Overextended Team by Beverly Flaxington (Article)
I work for a large financial firm. I am continually frustrated by the fact that we generate lots of good ideas and talk about what we need to do, but rarely get things done. Many things stay open-ended, or up for discussion. I am part of the problem because I am so busy, as is my team. How can I be more of a doer and less of a talker?
2012-10-02 Confronting the Unemployment Crisis by Robert Huebscher (Article)
Policymakers seeking a path to economic recovery must first answer one crucial question: Is our persistently high unemployment structural or cyclical? If it's cyclical, then monetary and fiscal measures designed to boost consumer spending will restore the US to full employment in due course. But if we face a structural problem, then quick fixes won't work until we correct deeper imbalances that have left 12.5 million Americans without jobs.
2012-10-02 Woody Brock on Why to Own Stocks Now by Robert Huebscher (Article)
Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions and the author of American Gridlock. In a recent talk, he explained why investors should own stocks - particularly those with stable dividends - and why bonds are very risky in today's environment. This is the transcript; a video of this talk is also available.
2012-09-25 A Woman's View of Choosing a Financial Advisor by Beverly Flaxington (Article)
Here are five things I've learned about what women seek in the marketplace.
2012-09-25 Value Investing in a Macro-Driven Environment by Robert Huebscher (Article)
The GoodHaven Fund (GOODX) is managed by Larry Pitkowsky and Keith Trauner. For most of the previous decade, Larry and Keith held research, portfolio management, and executive positions with the Fairholme Fund. I spoke with them last week.
2012-09-25 How to Build a Portfolio by Adams Jared Apt (Article)
This is the first of a set of three articles intended for the educated layman, in which I will combine the core ideas presented in my preceding articles into a comprehensive description of how to put together a portfolio. In this one, I'll explain what is often called Modern Portfolio Theory.
2012-09-18 The Question that Prevents Client Defections by Dan Richards (Article)
Unless you take action, even the best advisors are going to lose more clients than you'd like. Fortunately, you can ask your clients a simple question that will counteract the dynamics causing those defections.
2012-09-18 Recognize the Relative Advantages of Natural Resource Equities vs. Commodities by RS Investments (Article)
This RS Investments research brief examines how shifts in commodity fundamentals presents the case for employing natural resource equities as a means to benefit from favorable long-term secular trends, while achieving superior risk-adjusted returns, similar diversification benefits, and more reliable inflation protection relative to commodities.
2012-09-18 Selling Your Practice ? After Negotiations Fall Apart by Beverly Flaxington (Article)
I was hoping to sell my firm to another financial advisor. When the time came to close the deal, he turned into a different person, trying to negotiate for all kinds of things and generally being very nasty. The deal fell apart. How do I find a suitable buyer who will treat me with respect and negotiate fairly?
2012-09-11 Hedged Equity Value Goes Beyond Performance by Emmett Maguire III, CFA (Article)
Advisors often overlook the value a hedged equity manager can inject into a portfolio, as recent outperformance of long only indices (S&P 500) has overridden other considerations. The case for hedged strategies, however, goes beyond relative returns.
2012-08-28 Who Benefits from High-Speed Trading? by Michael Edesess (Article)
Speed is a virtue in most competitive pursuits; the combination of speed and accuracy is almost always the ultimate advantage. No one knows this better than the purveyors of high-speed trading technology, who have profited mightily -not only by executing rapid-fire algorithmic trades, but also by exploiting the arcane rules that govern the stock exchanges. But at whose expense are they profiting, and how long is their advantage likely to persist?
2012-08-28 The Wrong Way to Ask for Referrals by Dan Richards (Article)
There's no shortage of ideas about how advisors should operate - which means you have to be discerning about whose guidance you take. Recently, though, I disagreed with some advice from a top practice-management expert on the topic of referrals.
2012-08-28 Why Don't Your Female Clients Like You? by Kathleen Burns Kingsbury (Article)
Over the next 40 years, women will inherit 70% of the $41 trillion in intergenerational wealth transfers, and the first thing they will probably do after receiving the money is fire you. The reasons are not what you think: not poor investment performance, not lack of expertise.
2012-08-28 Who?s Fooling Whom? by Michael Lewitt (Article)
Equity markets are exhibiting a remarkable degree of complacency. The VIX is currently at extremely low levels and it can maintain those levels for a long period of time. The worse things get in terms of the economic data, the higher the market goes on hopes of central bank stimulus. At this rate, the Dow will peak just as the world is coming to an end!
2012-08-21 The Profession's Faulty Assumptions: A Top Ten List by Bob Veres (Article)
In the financial planning profession, we make a lot of assumptions about the world in order to run spreadsheet models, retirement projections and sufficiency analyses, and generally determine how much a client should save and invest for the future. But many of the industry-standard inputs into our models are (how can I say this delicately?) garbage. Here are my top ten garbage inputs, with an explanation of how we might possibly improve on them.
2012-08-21 Is Too Much Vacation Bad for Your Business? by Dan Richards (Article)
Advisors face two big traps when it comes to vacations. The one that gets the most attention is not taking enough time off and burning out as a result; this is especially common in the early years of building a business. But there's a second, more subtle trap: Taking so much vacation that you compromise your ability to grow your business.
2012-08-14 How Safe are Annuities? by Joe Tomlinson (Article)
For many advisors, the possibility that insurance companies will run into financial difficulties makes recommending annuities a nonstarter. But annuities are the best way to mitigate longevity risk, which may pose a greater danger, and advisors can take steps to help protect clients from insurers' financial problems.
2012-08-14 How One Advisor Adds Three Clients a Month by Dan Richards (Article)
I've had several emails in response to last week's article on how investors are using LinkedIn to help select advisors. Indeed, one advisor told me of a systematic approach that is consistently yielding new business. Let's look at how this advisor is capitalizing on his online presence to attract an average of three new clients per month.
2012-08-14 Blind Faith by Michael Lewitt (Article)
Central banks are facing political and practical obstacles that will render it very difficult for them to deliver anything more than anodyne words and actions as summer moves into the always dangerous August holiday season. IPhones should be kept on alert at the beach through Labor Day.
2012-08-07 Why Hedge Funds Destroy Investor Wealth by Michael Edesess (Article)
If all the money that's ever been invested in hedge funds had been put in Treasury bills instead, the results would have been twice as good. So claims Simon Lack - a former JPMorgan executive whose job was once to help steer billions into hedge funds - in his recent book, The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to Be True. You'd think hedge fund advocates would immediately pounce on this and refute it; but it's irrefutable.
2012-08-07 Robert Shiller on the Social Benefits of Finance by Laurence B. Siegel (Article)
It's a bad sign for the finance industry that one of its leading minds - the distinguished Yale economist Robert Shiller - has felt compelled to write a book in order to defend the idea that finance itself is a constructive pursuit, worthwhile to modern society. Have things really gotten that bad?
2012-07-31 The False Promise of Gold as an Inflation Hedge by Michael Edesess (Article)
If you were a time traveler, hopping from one point in history 2,000 years forward or back, you'd best carry with you - if your time machine will allow it - a small stash of gold. Gold has been an effective hedge against inflation over the very, very long term. But that's about all it's good for. The other common reasons for owning gold - in particular, to use as a short-term or even a long-term hedge against inflation - are baseless.
2012-07-31 Beyond the Ultimate Death Cross by Georg Vrba, P.E. (Article)
Last week, I showed why the 'ultimate death cross' is not a bearish signal. But the methodology behind that signal - what's known as a 'golden-cross trigger' - can indeed offer a reliable guide to investors. And one can do even better with a simple improvement to the trigger that I have devised.
2012-07-24 Deciphering the Annuity Puzzle: Practical Guidance for Advisors by Wade Pfau (Article)
Economists love to try to explain why people may act irrationally; such 'puzzles' inspire numerous researchers to probe their possible solutions. The annuity puzzle, which ponders why retirees do not buy more annuities, is a classic example. After describing the basic theory behind why this is so puzzling, I will address a variety of potential explanations, and then turn to the practical guidance the puzzle offers for advisors and their clients.
2012-07-24 Integrating a Salesperson into Your Practice by Beverly Flaxington (Article)
I'm about to hire a salesperson for the first time. We need a go-getter who will find us new business. How do I avoid conflict between this new person and my advisors? I want everyone to work together. Do I wait for tensions to dissipate or are there things I can do to set up for success?
2012-07-10 Why Are Advisory Fees Lower Than They Have To Be? by Bob Veres (Article)
How much should you charge for your services? Is there any way to objectively calculate a fair price? Doctors, lawyers and accountants all charge relatively similar prices for their services. Why does the financial planning profession have fees that are all over the map?
2012-07-10 A Mid-Year Client Letter: Wisdom from Three Wall Street Veterans by Dan Richards (Article)
Here is a template for a letter to serve as a starting point for advisors looking to send clients an overview of the past 90 days and the outlook for the period ahead.
2012-07-10 Insights into the First Half of 2012 by Ron Surz (Article)
U.S. stock markets at mid-year have earned a respectable 9.5% return. A euphoric first quarter 12.6% gain gave way to a 2.8% minor setback in the second quarter. Foreign markets have not fared as well, earning only 3.4% over the first half of the year. The graph below provides the details, and adds a look at gold's performance.
2012-07-03 Regaining Confidence Amid Layoffs by Beverly Flaxington (Article)
We had to lay off a couple of people in our investment firm. As the founder and leader of the firm, the turmoil that resulted upsets me but I don't know what to do to give everyone confidence that I don't feel myself. Can you give me some tips about how to minimize the fear without being dishonest?
2012-06-19 How to Follow Up Without Being a Pest by Dan Richards (Article)
How do you value your business? We all know the obvious candidates: assets, income, recurring revenue, client loyalty or the extent to which you've built a strong team. But a recent discussion with some top-performing advisors illuminated one metric that is absolutely critical - and typically overlooked.
2012-06-19 Likelihood Ratios and their use in Recession Indicators by Georg Vrba, P.E. (Article)
In medicine, likelihood ratios improve patient outcomes and refine drug regimens by assessing the reliability of common diagnostic tests. In finance, likelihood ratios can quantify the reliability of an economic indicator such as one designed to identify recessions.
2012-06-12 The End of Economics by Michael Edesess (Article)
If Australian economist Steve Keen's book, Debunking Economics, doesn't end, once and for all, the terminally convoluted discourse that afflicts mainstream economics, nothing will. Although the book's purpose is to show that neoclassical economics is all bunk, however, it is also, remarkably, as good an introduction to neoclassical economics as any you're likely to find.
2012-06-05 The Father of Efficient Markets: Is Warren Buffett Smart or Lucky? by Dan Richards (Article)
Eugene Fama is generally regarded the father of modern finance. His research has expanded upon the capital asset pricing model to identify the value and small-capitalization contributions to risk. Dan Richards spoke with him on May 1, the day before his guest talk at the CFA Institute annual meeting. This is the transcript of the interview.
2012-06-05 Letters to the Editor by Various (Article)
A number of readers respond to our article, Can Krugman Fix Our Economy?, which appeared last week.
2012-05-29 The Bargains in Europe's Great Oversell by Bob Veres (Article)
When was the last time we saw negative headlines drive valuations as low as they have in Europe? Evermore's David Marcus, who succeeded Michael Price as manager of the Mutual European Fund, says this period of obsession with Greek debt, bank restructuring and single-digit P/Es may be known as The Great Oversell.
2012-05-29 Letters to the Editor - An Attack on Paul Krugman by Various (Article)
Two readers respond to Michael Edesess' article, An Attack on Paul Krugman, which appeared on May 15.
2012-05-15 An Attack on Paul Krugman by Michael Edesess (Article)
A foundational principle of modern economics is that the creation of credit leads to economic growth. That precept underlies need for quantitative easing, and it is central to the question of what role monetary policy can and should play in stimulating a faster recovery from the Great Recession. It is also the subject of a debate between one of the world's most prominent economic scholars, Paul Krugman, and a feisty Australian economist, Steve Keen.
2012-05-15 Lacy Hunt on Debt, Austerity and Recovery by Robert Huebscher (Article)
Global economies are experiencing unsustainable debt disequilibrium, according to Lacy Hunt. Economic textbooks preach that equilibrium, rather than transition, should be the predominant condition. But our attempts to reduce our indebtedness by taking on more ? and less productive ? debt are weakening our economy and creating unstable conditions.
2012-05-15 Ponzi's Children by Michael Lewitt (Article)
Europe, whose economic condition is nothing less than terminal, is about to receive what physicians refer to as a 'zetz' of morphine in the form of M. Hollande. A 'zetz' is the final dose that doctors give to dying patients to hasten their passage to the afterlife. In Europe's case, however, the medicine is not going to be painless, and its administration is not based on mercy but on resentment and stupidity.
2012-05-15 The Surprising Way to Deepen Client Relationships by Dan Richards (Article)
Among the countless ways advisors have attempted to increase client loyalty, I've found a simple approach that deepens relationships.
2012-05-08 Mohamed El-Erian and David McWilliams: The Key to Resolving Europe's Crisis by Robert Huebscher (Article)
Dealing with a crisis requires three things, according to Jack Welch, General Electric's former CEO. Define your reality - not as you would like it to be, but as it is. Do something about it. Then, third, acknowledge that the crisis wasn't half as difficult as you thought it was. Germany is the key player in Europe's crisis today, and it is still struggling to accurately define its reality.
2012-05-08 Three Qualities that Define Top Performers by Dan Richards (Article)
Regardless of market conditions or the business environment, some advisors inevitably expand their business at the expense of their peers. A new research report identified three common traits among those who were able to show sustained growth in their practices.
2012-05-08 Why the Best Conductors Sent Us Home Early by Justin Locke (Article)
As a professional speaker, I focus on leadership and management. But I have a major handicap to overcome: the conventional wisdom that a core goal of leadership is to motivate greater effort.
2012-05-01 A Proven Route to Business Breakthroughs by Dan Richards (Article)
Having ambitious goals is one thing - translating them into reality is another. And that's where most advisors stumble. Two recent articles provide insight on how to achieve progress towards lofty goals.
2012-04-24 65+5+Dividends: The case for quality dividend stocks in the first five years of retirement by Legg Mason ClearBridge Advisors (Article)
Retirees are living longer than ever before, and for many, outliving their money is a real concern. A good reason to consider quality large-cap dividend stocks in the early years of retirement - which have historically offered higher returns than fixed income with lower volatility than equities overall.
2012-04-17 Rethinking Safe Withdrawal Rates: The Meaning of Failure by Wade Pfau (Article)
Merely knowing the probability that an investor's wealth will be depleted at some point is not enough to build a retirement strategy. That is the traditional measure of failure in safe withdrawal studies, and it's time to move beyond it.
2012-04-17 Muppet Capers by Michael Lewitt (Article)
Investors enjoyed strong stock market and credit market gains during the first quarter of the year, but storm clouds may be forming on the horizon. Corporate profits have likely peaked. Stocks may be the best house in a bad neighborhood, but houses in that neighborhood appear to be fully priced for now. There are also some troubling signs in the bond markets, particularly the long end.
2012-04-17 Letters to the Editor by Various (Article)
We have several letters from readers, including one in response to Lisa Keung's article on myths about women and investing and one in response to a recent commentary by Dan Ariely.
2012-04-10 Super Macro - A Fundamental Timing Model by Theodore Wong (Article)
Rather than endure losses in bear markets - as passive investors must - I have shown that a simple trend-following model dramatically improves results, most recently in an Advisor Perspectives article last month. Now it's time to extend my approach by showing how this methodology can be applied to fundamental indicators to further improve performance.
2012-04-10 Advisor Networking for Fun and Profit by Wendy J. Cook (Article)
Over the years, I've seen what works well and what doesn't for advisors. I've noticed that even the best-intentioned, highest-minded advisor usually struggles if he or she operates in a vacuum.
2012-04-03 Fewer, Richer, Greener: Why Jeremy Grantham is (Partly) Wrong by Laurence B. Siegel (Article)
Is the human experience getting better or worse? This is a big question investors are rarely asked to confront, yet its answer has profound consequences for market returns.
2012-04-03 Gassed Up but No Place to Go by Geoff Considine, PhD (Article)
When a great investor points to a vastly underpriced asset, a natural first reaction is to devise the best strategy for buying it. Sometimes, however, the impediments to that strategy prove too great, something anyone will soon discover who listens to Jeremy Grantham's assertion that 'everyone who has a brain should be thinking of how to make money' long-term on natural gas.
2012-04-03 A Q1 Letter to Clients: Bernanke, Buffett and Siegel on the Prospects Ahead by Dan Richards (Article)
Here is a template for a letter to serve as a starting point for advisors looking to send clients a summary of what's happened in the past 90 days and the outlook for the period ahead.
2012-03-27 The Top Three Myths about Women Investors by Lisa Kueng (Article)
Successful marketing requires an understanding of your target market. Too often, however, advisors are misled by outdated industry ideas and strategies that have shifted over time. Advisors who target women investors should avoid myth-based errors that others have made.
2012-03-27 Success: The Enemy of Creativity by Justin Locke (Article)
Creativity and imagination are universal human traits, yet it's a common idea that certain countries are more creative than others. Can this notion have any basis in fact?
2012-03-20 The Wages of Denial by Michael Lewitt (Article)
Europe is insolvent, and hopelessly so. Her procurer - the European Central Bank (ECB) - can front her some money for a while, but in the end she is either going to have to repay him or suffer a very rough consequence. In the meantime, however, she can continue to entertain her customers, in this case those willing to extend her credit in one form or another. Sooner rather than later, however, these creditors are going to grow tired of her tricks and turn their attention otherwise. At that point, she will be left to deal with the ECB because nobody else will have her.
2012-03-20 A Look Back at the Performance of the Holy Grail by Theodore Wong (Article)
Back-tested results often look good on paper because stellar performance could have come from curve-fitting. If that were the case, then my 'Holy Grail' model would not have withstood the test of time. But in the 32 months that have passed since its publication, investors who heeded its advice would have outperformed the market on a risk-adjusted basis.
2012-03-13 Breakthrough Success Lies Outside your Comfort Zone by Dan Richards (Article)
Standout success is rare in every industry, including ours. That is the reality - by definition most companies are average performers. To achieve breakthrough results, you need to be willing to change your business model, as two top business strategists advocate.
2012-03-13 Concentrated Equity Triple Play Higher Returns, Lower Risk, Lower Correlations by C. Thomas Howard, Ph.D. (Article)
Concentrating a portfolio on a few choice assets dramatically increases an investor's chance of superior performance. Nonetheless, most advisors and investors shun portfolio concentration as unacceptably risky. To a great extent, this is driven by the myth that adequate diversification is impossible unless one holds many stocks - a myth I will debunk.
2012-03-13 Letter to the Editor - Tactical Asset Allocation v. Behavioral Finance by Various (Article)
Ken Solow, Michael Kitces and Sauro Locatelli respond to Christopher Sidoni's article, The Conflict between Tactical Asset Allocation and Behavioral Finance, which appeared on February 21.
2012-03-06 The Biggest Celebrity Estate Planning Disasters by Robert Huebscher (Article)
The lives of socialite Brooke Astor and the Grateful Dead's Jerry Garcia may have had little in common, but what happened after both of their deaths is unfortunately similar. A look at the disastrous probate wars that engulfed them ? and other celebrities ? carries important lessons for all of us.
2012-03-06 Why Invest? - Part 2 by Adam Jared Apt (Article)
Risk tolerance is a quality inherent in an individual or an institution. Whether quantified or not, risk tolerance is the amount of return the investor requires as compensation for the extra risk that comes with investing. It's a concept that is essential for making investment decisions, yet it is elusive and maddeningly difficult to specify. Even so, many investment advisors like to give the public the impression that they're proficient at determining it.
2012-02-28 Woody Brock on Healthcare Reform and Trade Relations with China by Robert Huebscher (Article)
Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions, an economic research and consulting service. In the second part of this two-part interview, he discusses his recently published book, American Gridlock, and focuses on how to fix two of our nation's most pressing problems: the crisis in health care - made worse by ObamaCare - and our trade relations with China.
2012-02-28 Globalization: Its Saboteurs and Its Chicken Littles by Michael Edesess (Article)
The word 'globalization' provokes both excitement and fear. The excitement has sold millions of Tom Friedman books and turned a drab annual business conference, the World Economic Forum, into one of the hottest events of the year. It is front-and-center in recent tensions between the U.S. and China, and makes the European Union's economic crisis a concern for the whole world. Should we fear or embrace globalization?
2012-02-28 The Problem with Target-Date Fund Glide Paths by James A. Colon, CFA (Article)
The attack on target-date funds (TDFs) continues to gain steam, and for good reason. Virtually all TDFs offer a mechanical approach to glide-path management, unnecessarily exposing investors to risk - most noticeably when they are on the verge of retirement. A superior approach would keep the long- and short-term volatility of an investor's portfolio within appropriate ranges by actively managing the glide path.
2012-02-14 Boosting the Liquidity of the Market Engine: Horsepower vs. Torque by Robert A. Jaeger, Ph.D. (Article)
Everything you need to know about market liquidity you can learn from the engine of your car. Liquidity is often viewed as market lubrication, but lubrication isn't everything, and, even more importantly, horsepower is different from torque. This fact leads us to appreciate the importance of contrarian investing and enables us to think more clearly about the impact of potential regulatory changes, such as the Volcker Rule and the Tobin Tax.
2012-02-14 The Dividend Yield Love Affair by Michael Nairne (Article)
Employee share-based compensation is now a significant expense deduction for public companies and hence, is already accounted for on the financial statements. Concerns that options-related stock issuance nullifies the impact of stock buybacks are accordingly overstated. This bolsters the view that you need to look at stock buybacks as an additional form of cash remittance to shareholders and not simply at dividends.
2012-01-31 Barry Eichengreen on the End of the Dollar by Dan Richards (Article)
Barry Eichengreen is a professor of economics and political science at the University of California, Berkeley and a former senior advisor to the International Monetary Fund. In this interview, he discusses the future of the dollar as the reserve currency and the role of the IMF in the Eurozone crisis. This is the transcript of the interview.
2012-01-24 Michael Lewis on the True Depth of the Crisis in Europe by Larry Siegel (Article)
Michael Lewis is a financial writer and author, most recently of Boomerang: Travels in the New Third World, in which he reported on the European debt crisis from several of the affected countries. In this interview, he discusses a range of topics, including the future of Wall Street and the challenges of great financial writing.
2012-01-24 Must Bond Investors Fear Rising Interest Rates? by Andrew D. Martin (Article)
Thirty-one years ago, in 1981, the one-year Treasury reached its all time high of 14%. Today it hovers around 0.10%. Never before have interest rates fallen so far. Many economists and investment advisors, seeing nowhere to go but up, expect interest rates to climb from these historic lows. But that would not be the catastrophe that many bond investors fear.
2012-01-17 GMO: Something's Fishy in China by Robert Huebscher (Article)
A wide gulf separates the two most prominent views regarding China's future. Faced with slowing economic growth, one side says its leaders will deftly navigate a soft landing, while the other claims it will face an implosion similar to those that befell Japan 20 years ago and the US in 2008. Count GMO, a firm that has built its reputation on its ability to identify a bubble about to pop, in the latter camp.
2012-01-17 An Essential Client Conversation ?Will I be able to pay for my hip replacement at age 85?? by Dan Richards (Article)
Advisors face a big challenge in planning for boomers. Your assumptions about how long they'll live and the nature and cost of their lifestyle as they age will dramatically impact your planning decisions. Conversations with boomers about those topics and about the implications of funding health care are difficult but important.
2012-01-17 Letters to the Editor - the Misreading of Reinhart and Rogoff by Various (Article)
Many readers responded to Robert Huebscher's article, The Misreading of Reinhart and Rogoff, which appeared last week.
2012-01-10 The Misreading of Reinhart and Rogoff by Robert Huebscher (Article)
If the cry for deficit reduction rests on an intellectual framework, it would be the work of Reinhart and Rogoff, whose book, This Time is Different, has been hailed for its historical study of financial crises. A key finding - that growth slows once the ratio of debt-to-GDP exceeds 90% - has been widely cited by those calling for decreased government spending. But those calling for deficit reduction have largely ignored a number of caveats that Reinhart and Rogoff gave with respect to their 90% threshold, and as a result many warn that the US faces a Greek-like sovereign-debt crisis.
2012-01-10 Safe Withdrawal Rates: A Do-It-Yourself Approach by Wade Pfau (Article)
Reconciling the assumptions that underpin safe withdrawal rate studies with one's own capital market expectations and constraints is a daunting task, since those studies rarely reflect the practical realities of an advisory practice. But new research now provides a generalized framework for determining a safe withdrawal rate for a given retirement duration, acceptable failure probability, asset allocation and capital market expectations. Advisors no longer must be constrained by the assumptions and choices of others.
2012-01-10 Using the ECRI WLI to Flag Recessions by Dwaine van Vuuren (Article)
In September 2011, the ECRI proclaimed a new U.S recession would begin sometime in the coming year. It based its prediction on a host of its own internal long-leading indexes, together with its widely followed weekly leading index (WLI). I want to focus on the proper use of the WLI and examine its accuracy in recession dating, in order to put this current recession call into context.
2012-01-10 2011: The Famine That Followed the Feast That Followed the Fiasco by Ron Surz (Article)
Ron Surz provides his award-winning commentary on the US and global markets.
2012-01-03 New Measures of Risk (and why markets are now very fragile) by Adam Jared Apt (Article)
Understanding risk is essential to successful investment management, yet most common measures, like beta, capture only risk within markets - disregarding systemic risk of the markets themselves. Fortunately, new research is now shining light on "fragility" or systemic risk - how fast and how severely an unanticipated event will propagate through the markets.
2012-01-03 How Top Execs Game Retirement Plans by Michael Edesess (Article)
Corporate executives and employee-benefits consultants have engineered a cascade of arcane methods to deprive ordinary retirees of benefits they thought they were promised, in order to fatten corporate profits and the benefit packages of top executives. That is the harsh message of Wall Street Journal reporter Ellen E. Schultz's meticulously-researched book, Retirement Heist.
2012-01-03 Ghosts of Christmas Past by Michael Lewitt (Article)
While Europe desperately needs the liquidity that the latest bailout scheme provides, nobody should mistake liquidity for solvency and think for a moment that the crisis is over. Much more work is needed to heal the wounds that European policy makers and business leaders have inflicted on their societies since the European Union was formed.
2012-01-03 US Recession - An Opposing View by Dwaine van Vuuren (Article)
A large number of reputable analysts and companies are forecasting a new U.S recession on the immediate horizon. Attracting the most attention is ECRI, which made a public recession call on September 30th and several television reaffirmations since. But an examination of a broader range of other composite economic indicators shows that sole reliance on ECRI's forecast would be misplaced.
2011-12-20 Wall Street Journal: Three Words of Advice for Million-Dollar Producers by Dan Richards (Article)
The financial advisor careers section of Wall Street Journal asked 60 advisors from all over the U.S. for suggestions to new advisors starting in the business whose goals were to be million-dollar producers. Their advice came down to three words.
2011-12-20 Expectations Creep by Jamie Cornehlsen (Article)
Today's generation of college students have it easier, at least in one respect, than any of their predecessors. Over the years, college professors had made it easier for students to get good grades, a phenomenon known more commonly referred to as 'grade inflation.' The reasons for this erosion of expectations continue to be debated, but there is ample data showing that the trend toward more generous grading is real. Today, a similar phenomenon plagues economic expectations.
2011-12-20 Letters to the Editor by Various (Article)
Readers respond to several articles: GLWBs: Retiree Protection or Money Illusion?, Did Congress Cash In on Insider Stock Trading?, and Can this be Serious?, all which appeared last week, and to John Mauldin's commentary, The Center Cannot Hold, which appeared on Saturday.
2011-12-13 Letter to the Editor by Various (Article)
A reader responds to Michael Edesess' article, The Unspoken Truth about Hedge Funds, which appeared last week.
2011-12-06 The Unspoken Truth about Hedge Funds by Michael Edesess (Article)
The popularity of the endowment model among advisors has been driven by the belief that hedge funds have produced positive risk-adjusted returns. But the basis for that notion has been statistics gleaned from hedge fund databases, and new research shows returns from those databases are even more upwardly biased than previously thought; the supposed alpha never really existed.
2011-12-06 Two Simple Questions to Motivate Your Assistant by Dan Richards (Article)
High on the list of holiday wishes for many advisors would be a cheerful, motivated, efficient team, united in the common goal of moving your business forward. And while you have no control over many things, you have a great deal of influence over how well your team operates.
2011-11-29 The Volatility Trap: Why Staying the Course Makes Sense by C. Thomas Howard, Ph.D. and Craig T. Callahan (Article)
Those who let emotions drive their investment decisions missed out on the October market surge, the largest monthly stock market return in 20 years. These investors have unwittingly fallen prey to the 'Volatility Trap,' failing to recognize - as our data show - that increased volatility is a precursor to higher returns.
2011-11-29 Do You Really Understand Rates of Return? Using them to look backward - and forward by Michael Edesess (Article)
The basic quantitative building block for professional judgments about investment performance is the rate of return. How well do we really understand it? And how can we use past rates to assess the prospects for future performance? You may be surprised to learn that 'expected return' may not be what you think.
2011-11-15 Are TIPS Really Safe and Worry-Free? by Wade Pfau (Article)
The Fed's aggressive monetary easing has many investors considering TIPS as a cornerstone of their retirement strategy. While TIPS' unique ability to protect against CPI-based inflation is undeniable, many investors neglect to consider the risks they pose, particularly for those who have not yet reached retirement.
2011-11-15 Michael Aronstein on Today's Key Macro Trends by Robert Huebscher (Article)
Michael Aronstein is the president and chief executive officer of Marketfield Asset Management. Since its inception in 2008, his fund has returned 31% while the S&P has been down 15%. I spoke with him about the key macroeconomic and strategic issues facing investors today.
2011-11-15 A Strategy with a 25-year Record of 25% Returns by Robert Huebscher (Article)
Indiana-based SBAuer Funds launched its inaugural mutual fund in December of 2007, after having established a successful track record with a separately managed account business. I spoke with Bob Auer, who has employed the same stock selection system used by the fund for the last 25 years, over which time returns have averaged 25% annually.
2011-11-15 The Problem with Many Performance Charts by Christophe Gauthron (Article)
Performance information conveyed on return charts from many financial sources is misleading. Investors reading these charts will be unfairly biased against income-producing assets.
2011-11-08 Bill Gross' Revised Paradigm: The New Normal Minus by Robert Huebscher (Article)
Following the financial crisis of 2008, PIMCO articulated its 'new normal' forecast of slow growth and mediocre capital market returns. Appending the even drearier modifier 'minus' to that outlook, Bill Gross said that expectations now appear worse than even he previously feared. Gross was pessimistic in both the near and long terms, and he startled the audience with his premonition that 'capitalism is at risk.'
2011-11-08 A Unique Way to Help Clients Close the Retirement Gap by Dan Richards (Article)
Clients facing a shortfall in retirement savings can bridge that gap in many ways. But one technique is often neglected: spending reductions - even small ones - in their everyday lives. A new web site gives clients the tools to quantify and manage those reductions.
2011-11-08 Letter to the Editor by Various (Article)
A reader responds to Michael Edesess' article, The Small Cap Falsehood, which appeared last week.
2011-11-01 The Small Cap Falsehood by Michael Edesess (Article)
The supposed outperformance of small cap stocks is a foundational precept on which many respected asset managers have staked their expertise over the years ? foremost among them, Dimensional Fund Advisors. A growing body of research, however, shows no such advantage for the last 30 years and, now, a new study seems to have proven that the supposed small-cap advantage may have never existed in the first place.
2011-11-01 A Better Way to do Financial Planning by Robert Huebscher (Article)
Simplicity is dangerous when it comes to financial planning. Easy-to-use tools that project your retirement savings based on minimal inputs such as your income and savings rate amount to a ?bait-and-switch,? according to Larry Kotlikoff, a Boston University professor of economics. To properly prepare for retirement, one should focus on maintaining a constant standard of living throughout their life ? what economists call consumption smoothing.
2011-11-01 Five Tips from Accountants on How to Get Referrals by Dan Richards (Article)
Over a recent lunch, three partners in a small accounting firm told me how financial advisors should go about getting referrals.
2011-11-01 Regulatory Armageddon by Bob Veres (Article)
Suppose you were somehow able to convince 40 advisors, who are all well-known thought leaders in the profession, to gather in the same room for a six-hour brainstorming session. The goal: to identify the single most important thing that the financial planning profession should be thinking about now. What do you think they'd come up with? Fasten your seat belts, because this may be the most important report you'll read all year.
2011-11-01 Why Invest? by Adam Jared Apt (Article)
Investing has its rational justifications, but like any human activity, it's contingent upon history. American society has come to regard investing in stocks and bonds as a matter of personal responsibility and even an obligation, which in part explains why we invest.
2011-10-25 A Jeopardy Champion and our Economic Future by Robert Huebscher (Article)
Several years ago, a group of IBM scientists watched the television quiz show Jeopardy at a local bar and decided that they could develop the technology to beat a human contestant. They succeeded, and the system they built, Watson, is situated at the leading edge of a wave of breakthroughs in artificial intelligence that will lower health care costs and accelerate economic growth.
2011-10-25 Miccolis, Bengen and Evensky on the New Challenges in Portfolio Construction by Michael Skocpol (Article)
Conventional wisdom about the best way to construct a portfolio has been discredited, according to three industry thought leaders ? Jerry Miccolis, Bill Bengen and Harold Evensky. Each has distinct visions of the ways in which advisors should build portfolios in the wake of the financial crisis of 2008, but all three agree that traditional methods must be scrutinized.
2011-10-18 Bob Doll: Why the US is Positioned Strongly by BlackRock (Article)
Investor unease has risen dramatically over the past quarter in the face of growing concerns about the world's economic and financial health. The focal point has been the intensifying debt crisis in Europe. The issues facing Europe are highly complex, but essentially are underscored by a single question: Is Europe facing a solvency crisis or a liquidity crisis?
2011-10-18 How to Fix Our Dysfunctional Tax Code by Robert Huebscher (Article)
Give an economist a clean slate, unencumbered by political ideology or allegiance, and charge him or her with designing an ideal tax system. What emerges will look nothing like the dysfunctional personal and corporate tax codes now administered by the IRS. Instead, it could resemble Larry Kotlikoff's 'purple tax plan,' one of five economic reform plans he designed to appeal to both Democrats and Republicans alike.
2011-10-04 Value Investing Lessons from Moneyball by Laurence B. Siegel (Article)
Is baseball a metaphor for life, as many literati have suggested, or for value investing? Michael Lewis' 2003 bestseller Moneyball argues the latter. More recently, the book has been adapted to make a thoughtful movie that will be of special interest to investors who believe in trying to find hidden bargains.
2011-09-27 Reexamining Bill Gross' Decision to Sell Treasury Bonds by Geoff Considine (Article)
Bill Gross made headlines in February by asserting that Treasury bonds were not providing enough yield to make them worth the risk and reducing his allocation to zero in the PIMCO Total Return Fund. The subsequent rally forced him to admit his mistake in August, but by then his fund was trailing 90% of its peers and having its worst year since 1995. I will examine Gross' decision in retrospect, to illustrate its tactical and strategic costs and benefits for his shareholders.
2011-09-27 When Greece Defaults by Keith Goddard (Article)
The Greek default is indeed inevitable, but there remain two possible ways the world may learn about it, and financial markets will react very differently depending on which of these two processes for default occurs.
2011-09-20 Counterparty Risk in Large Total-Return Funds by Robert Huebscher (Article)
We can add another to the list of concerns facing advisors: counterparty risk ? a potential loss from the failure of a bank or broker-dealer. Underscoring this threat, DoubleLine's founder and chief investment officer, Jeffrey Gundlach, recently warned advisors to avoid all funds with counterparty risk. Heeding his warning, however, is not easy; it is virtually impossible to gauge the extent of counterparty risk in most funds.
2011-09-20 A Simple Email ? Today's Best Prospecting Strategy by Dan Richards (Article)
How do you use the recent market turmoil to open conversations with prospective clients? Here's how one advisor used a simple email to solidify relationships with existing clients and to attract new ones.
2011-09-13 The Handicap of Experienced Investors by J.J. Abodeely, CFA, CAIA (Article)
In the investment business, assets under management are concentrated with the largest and most established firms. Understandably, investors tend to allocate capital to managers after they've established a good track record. Unfortunately, for many, the analysis stops there. By failing to separate good results from identification of what makes a great investment manager, investors are primed for disappointment.
2011-09-13 The Risks of Exchange-Traded Products by Dennis Gibb (Article)
Every major financial crisis has been foretold by timely but ultimately ignored warnings. At the end of mania, the rush to secure more fees, investment performance and status trumps common sense. In the last few months, the drumbeats of warnings from financial journals and regulators about exchange-traded funds have been sounding. Few seem to be listening.
2011-09-13 A Response to 'A Winning Endgame' by Guy Cumbie (Article)
A Winning Endgame, Robert Huebscher's review of John Mauldin's book Endgame, made some highly problematic claims about our energy usage. Moreover, Huebscher's claim is unfounded that an energy policy, such as the cap-and-trade policy he recommended, is the right step toward solving our economic crisis.
2011-09-06 Predictably Incorrect by Bob Veres (Article)
I had to read through this commentary by behavioral economics researcher Dan Ariely twice before I was willing to draw the obvious conclusion. It's the biggest bunch of hooey I've ever read in the financial planning press.
2011-09-06 How Advisors can Improve Client Returns by Dan Richards (Article)
There's a growing body of behavioral finance research on what investors can do to improve the performance of their portfolios. But how about advisors - what can they do to improve investor returns? Some new research answers that question.
2011-08-23 Why Investors are 'Mad as Hell' ? And what you can do about it by Dan Richards (Article)
Last Friday, Jason Zweig of the Wall Street Journal wrote about fear and anger as the two dominant attitudes of American investors today ? fear about their future and anger at those they see as responsible for the latest crisis. Today's investor psyche has fundamental implications that will require changes in how you interact with clients. Before getting into how to respond, let?s look at what's driving today's mindset.
2011-08-16 Matt Ridley Makes a Case for Optimism by Laurence B. Siegel (Article)
Matt Ridley's new book, The Rational Optimist, uses powerful examples from history and compelling logic drawn from economic theory to remind us that human achievement is cumulative, and the future looks bright, particularly for the less fortunate in the world. It is especially welcome at this discouraging moment in time.
2011-08-16 How Doing a Perfect Job Can Drive Clients Away by Justin Locke (Article)
Nobody is perfect, and having a plan to deal with your imperfections is just as important as improving your performance. That lesson has been deftly illustrated by my local grocer.
2011-08-09 Does Government Intervention in Financial Markets Slow Economic Growth? by Michael Edesess (Article)
As we saw with the Dodd-Frank legislation and the Consumer Financial Protection Bureau, the question underlying the debate over financial regulation is whether it stifles economic growth. Leo F. Goodstadt's book, Reluctant Regulators, provides useful insights from the experiences of Hong Kong and China. It also causes us to ponder whether our measurement of economic growth is fundamentally flawed.
2011-08-09 Can American Become Greece? by Keith C. Goddard, CFA (Article)
Investors face four possible implications from the recent downgrade of America's long-term credit rating by Standard & Poor's: 1) Lower prices for financial assets; 2) Higher volatility in the asset markets; 3) Greater potential for trend-following investment strategies, and 4) Attractive opportunities in 'blue chip' stocks.
2011-08-02 A Winning Endgame by Robert Huebscher (Article)
Reducing our nation's debt burden is no longer only the rallying cry of Tea Partiers and fiscal conservatives. As the debate over the debt ceiling proved, it is now the goal of the president and many fellow Democrats. John Mauldin and Jonathan Tepper's book, Endgame, published earlier this year, makes a compelling argument as to why reducing the deficit is so critical and why we face a long, slow and ultimately painful period of deleveraging. I will explain their thesis and then provide the counterargument.
2011-08-02 Solving the REAL Debt Crisis by Michael S. Falk, CFA, CRC (Article)
Now that the debt ceiling impasse (circus) has been resolved, it's time to address this country's real debt crises. Our leaders need to conquer the far more daunting entitlement issues we face. Our choice is simple - either reduce costs and face austerity, or raise taxes. Those alternatives need not be as painful as you or they might think, as I will demonstrate.
2011-08-02 Hitting a Moving Target: Matching Portfolio Risk to Client Expectations by Scott Smith (Article)
Much of the angst faced by investors and advisors over the last several years was caused by mismatched perceptions regarding investors' appetite for portfolio risk. Advisors overestimated the amount of risk investors were comfortable being exposed to within portfolios.
2011-07-19 You and the Internet, Part II - Places to Go, People to See by Wendy J. Cook (Article)
In my last article, How to Waste Time and Influence People, we covered productive ways to wander on the Internet. You also can benefit from harnessing the Internet as it relates to your advisory practice.
2011-07-12 The Titanic Has Sailed by Michael Lewitt (Article)
It was entirely predictable that the U.S. equity market would rally on the news that Greek would not default this month, but it does little to convince me that the long-term outlook for European sovereign debt or the global economy has improved. Markets - particularly the equity markets - are trying to pretend that the global economy is experiencing a self-sustaining recovery. A hard look at the economic numbers would tell an objective observer that no such recovery is occurring.
2011-07-12 Unexpecting the Expected by Justin Locke (Article)
This is a story of a kid who lived on a farm in the Midwest. A family friend gave him an old, beat-up plywood string bass, and he started to play it just for something to do. His family couldn't afford lessons, so he taught himself out of a method book.
2011-07-05 Three Steps to a Better Web Design by Kristen Luke (Article)
You have several options for web development: hire a web designer, purchase a template website, or create your own. Whichever you choose, spending some time in the planning stages will make the process quicker, easier and perhaps even cheaper.
2011-06-28 An Important Challenge to ?Stocks for the Long Run? by Geoff Considine (Article)
Jeremy Siegel's dictum - to invest in stocks for the long run - faces a new challenge. A recent paper by Robert Stambaugh, a Wharton colleague, and Lubos Pastor of the University of Chicago says that once you take into account the uncertainty of estimating future returns, stocks are not nearly as attractive to retirement-oriented investors as Siegel has claimed.
2011-06-28 The Diversified Portfolio Index by Charles Fahy, Sr. (Article)
Investment rates of return that are average but consistent are the products of exceptional performance. Over longer time horizons, these returns become increasingly difficult to outperform. One such example is the Diversified Portfolio Index - a buy-and-hold strategy deployed across all major asset classes.
2011-06-28 Where are Long Bond Yields Heading? The Bond Value Ratio as a Predictor of Future Yields by Georg Vrba, P.E. (Article)
Are long-maturity bond funds still a good investment? My analysis shows that there is currently a maximum potential appreciation of only about 10% for long-bond values. The 30-year bull market for bonds will be ending soon and the risk-reward ratio is too high to warrant buying long-bond funds now.
2011-06-21 Investing Based on Jeremy Grantham's Forecast for Diminishing Resources by Robert Huebscher (Article)
In his most recent commentary, Jeremy Grantham became one of the first mainstream investment professionals to publicly forecast a world economy threatened by diminishing natural resources. A survey of our readers showed that an overwhelming majority agree with Grantham's views. But constructing a portfolio positioned to capitalize on those themes is exceedingly difficult.
2011-06-21 The Greek Comedy by Michael Lewitt (Article)
It is no longer prudent to dismiss the possibility of a worst-case outcome for the Greek debt crisis. Greece is not only laying bare the flawed structure of the European Union, but the fragility of the global financial system. An interconnected and networked global economy cannot ignore problems on its so-called periphery because there is no longer any periphery. Derivatives and other counterparty relationships have seen to that.
2011-06-14 Bruce Berkowitz - Ignoring the Crowd on Financials by Sam Parl (Article)
Bruce Berkowitz has said that his deep value and contrarian investing style will not guarantee short-term results, but he promises his shareholders will be rewarded for their patience over the long term. Last week, he explained why some of his positions - especially those in the financial services sector - are among the best opportunities in the market.
2011-06-14 What Fama and French?s Latest Research Doesn?t Tell Us by Michael Edesess (Article)
With the high name recognition and respect that the team of Eugene Fama and Kenneth French enjoys in the world of finance, anything they publish warrants attention. Their latest offering, Size, Value, and Momentum in International Stock Returns, offers some interesting data on global equity performance. But they fail to offer any insights that explain the reasons behind their findings.
2011-06-14 A Proven Path to Business Breakthroughs by Dan Richards (Article)
In my conversations with advisors, implementing change often tops the list of business challenges and frustrations. To advance your business, one proven strategy that has demonstrated remarkable success over not just years but decades is tapping into the power of peer-performance groups.
2011-05-31 Letter to the Editor On Absolute Return, Market Neutral and Long-Short Funds by Todd Huster (Article)
A reader responds to a market commentary, What is conservative about Absolute Return, Market Neutral, or Long/Short Mutual Funds?, by Kendall Anderson of Anderson Griggs, which appeared on May 23, 2011.
2011-05-31 Hedging In an Inflationary World by Andrew Foster (Article)
These days, given the complex web of global financial transactions in which companies are enmeshed, it is unrealistic to expect management to avoid hedging. When I invest, however, I search for companies that follow simple, consistent, and short-term hedging policies ? and whose business models are strong enough to adapt to the inherent volatility and uncertainty of the marketplace.
2011-05-24 Stop Making 'House Calls' by Kristen Luke (Article)
If a client or prospect isn't willing to come to your office and meet, find out why and develop a solution. Below are two common excuses advisors hear and solutions that avoid having traveling around town to meet someone.
2011-05-24 Ownership in an Operating Business by David L. Blain (Article)
There was a time when the three legs of the retirement stool were Social Security, pensions, and personal savings, but those days are gone for good, and the stool needs new legs. Paper assets and real estate are classic asset classes that can help fill the void, but where else can investors turn for the stable income they need?
2011-05-17 Four Steps to a Top-Performing Team by Dan Richards (Article)
Over the past 25 years, I've observed many high-performing teams and spent a lot of time talking to advisors and their support staff about the keys to their success. Here are four observations about what it takes to have a well-functioning team.
2011-05-17 Your Top Priority Should Be Your Top Priority by Justin Locke (Article)
How do you determine your top priority? Too often, leaders get bogged down by routine, and they fail to meaningfully answer that question.
2011-05-10 Howard Marks on the Human Side of Investing by Robert Huebscher (Article)
Howard Marks is widely regarded for his thought-provoking essays on the discipline and process of value investing. He is the chairman and co-founder of California-based Oaktree Capital, and he delivered the keynote address at the Value Investing Congress in Pasadena last week.
2011-05-10 What Return can we Expect from Stocks? by Adam Jared Apt (Article)
What return can we expect from stocks over the long term? This sentence contains four problematic terms: 'return,' 'expect,' 'stocks,' and 'long term.' Intended for the educated laymen, this article considers each in turn.
2011-05-10 When You Can?t Say It Nicely ? But It Still Needs To Be Said by Wendy J. Cook (Article)
Perhaps because social media is so, well, social, I find it particularly painful to see someone go on a poorly rendered rant on the Internet. As Gilbert K. Chesterton says, 'A good novel tells us the truth about its hero; but a bad novel tells us the truth about its author.' How do you speak your mind about strongly help viewpoints without revealing a fool?
2011-05-10 Howard Marks on the Human Side of Investing-Q & A by Robert Huebscher (Article)
Howard Marks is widely regarded for his thought-provoking essays on the discipline and process of value investing. He is the chairman and co-founder of California-based Oaktree Capital, and he delivered the keynote address at the Value Investing Congress in Pasadena last week. Here are excerpts from the Q&A.
2011-05-03 Martin Barnes - How Safe is the Equity Market? by Robert Huebscher (Article)
When members of the Federal Reserve Board seek counsel on tough issues, one of the economists to whom they turn first is Martin Barnes. Speaking publicly last week, Barnes addressed two themes in the US economy and markets: the potential for a sustained bear market in equities and the likelihood of higher taxes. These two distinct questions are both critically important to investors.
2011-04-26 A Unique Way to Engage Key Clients by Dan Richards (Article)
Many advisors struggle with ways to deepen relationships with top clients. My conversations with top-performing advisors have shown that many succeed at building those relationships by rejecting the approach most advisors employ, and instead adopting an unconventional and low-cost approach built around special events.
2011-04-19 Gundlach: Treasuries will Rally When QE2 Ends by Robert Huebscher (Article)
The bonds that PIMCO's Bill Gross sold to take a 3% short position in the Treasury market may have found a buyer in Doubleline's Jeffrey Gundlach. In a conference call with investors last week, Gundlach said that Treasury prices would rise in the near term, once QE2 expires on June 30.
2011-04-05 Is Alpha Dead? by Andreas Steiner (Article)
While beta has been declared dead several times in the past, alpha is a survivor. My diagnosis is that alpha, however, is in very critical condition itself, even under the most optimistic interpretation. A more realistic assessment is that alpha is dead.
2011-03-29 Change Isn't So Hard by Justin Locke (Article)
Change always encounters resistance. While our natural instinct may be to fight back against that resistance, I have found that a better path is to lessen the original resistance, rather than trying to surmount it.
2011-03-29 Are Financial Stocks Value or Growth? by Ron Surz (Article)
Financial stocks have been hit hard by the current economic crisis, causing most index providers to categorize them as deep value. But this categorization is arbitrary, potentially misleading and can distort reported performance calculations.
2011-03-22 Consensus: Groundhog Decade for Stocks by Ed Easterling (Article)
Just as Bill Murray woke up to the same thing day after day in the movie 'Groundhog Day,' it's likely that your outlook foretells a groundhog decade for the stock market that will repeat its near-breakeven returns from the past decade.
2011-03-22 Statistical Insights into Everyday Problems by Sam Parl (Article)
You know that the volatility of an investment matters as much as its overall return. But you may not know that research into this fundamental investment principle has been applied in many other disciplines to explain phenomena as unexpected as waiting times in lines at Disney World.
2011-03-15 Mason Hawkins and Staley Cates on Today?s Opportunities for Value Investors by Robert Huebscher (Article)
Southeastern Asset Management's Mason Hawkins and Staley Cates, two of today's most respected value investors, discuss their portfolio and the principles behind their Graham and Dodd methodology. They explain why they like certain commodity-based companies and why they disagree with Bruce Berkowitz on the opportunities in the financial sector.
2011-03-15 Margin Shrinkage - It Can Happen to You by Vitaliy Katsenelson (Article)
Profit margins are a tick away from all-time highs and are creating the impression of cheap equity valuations. But that impression is a mirage, because today's generous margins are destined to shrink.
2011-03-08 Five Strategies for Older Clients by Robert Huebscher (Article)
What do a woman who volunteered with the Peace Corps in Africa, a teacher from Spanish Harlem who took up Samurai sword fighting, and a former IT manager who earned a medical degree at age 76 have in common? They are all part of a group that David Monday calls 'second-half champions.' Monday offers a five-part plan for building a practice that caters to today?s reinvigorated seniors.
2011-03-08 The Clued-in, the Clueless, the Oblivious and the Conflicted by Michael Edesess (Article)
I?ve now read perhaps 10 books about the financial crisis. Maybe I?m a junkie, but each has given me new information or a fresh way of looking at events. 'All the Devils Are Here' offers a treasure trove of information about company behavior during the crisis, notably Fannie and Freddie, Goldman Sachs, Merrill Lynch, AIG, Countrywide, and Ameriquest.
2011-03-01 Eight Key Lessons from an Oscar Winner by Paul Rutherford (Article)
Like lost car keys, learning turns up in the most unexpected places. Sunday?s Oscars were swept by The King?s Speech ? a movie which provides some powerful lessons for financial advisors.
2011-03-01 Subsuming the Efficient Market Hypothesis by Keith C. Goddard, CFA (Article)
A recent article highlighted important gaps in the efficient markets model (EMH) that limit its practical applications. It encouraged a search for a new theory of markets that builds upon EMH by rendering it as a special case within a broader, more general theory. Mordecai Kurz? Rational Belief Equilibrium is such a theory.
2011-03-01 Simon Johnson on the Unconscionable Risks We Face by Dan Richards (Article)
Simon Johnson is a professor of economics at MIT and was the chief economist for the International Monetary Fund. In this interview, he explains why the underlying factors which led to the financial crisis remain unresolved. This is the transcript; a video is also available.
2011-02-22 Bruce Berkowitz on the Exceptional Value in the Financial Sector by Robert Huebscher (Article)
Fairholme's Bruce Berkowtiz, US stock-fund manager of the decade, discusses his large position in the financial sector and why he believes the big bets he is making do not amount to Russian roulette. He also comments on his recent nomination of former Florida Governor Charlie Crist to the board of St. Joes.
2011-02-22 Stop Wasting Time and Money on Client Communication by Dan Richards (Article)
The world has changed in all kinds of ways. What worked in terms of client communication as recently as five years ago doesn't work nearly as well today. As a result, you need to fundamentally change how you communicate with clients.
2011-02-22 Winning New Business, Growing Your Firm by Michael Slemmer, CFA (Article)
How are advisors reaching prospects and winning new business today? What's working well for advisors as they seek to grow their businesses, and where are they finding challenges? To answer these questions, we conducted a survey in late November, 2010, aiming to learn the most common and successful business-building tactics for wealth managers, investment advisors and related professionals.
2011-02-15 Toward an Understanding of Risk by Robert Huebscher (Article)
How should clients think about risk in their portfolios? Advisor Perspectives put that question to a cross-section of prominent advisors and academics. Their answers encompassed diverse opinions and underscored how crucial that question is to the investment process.
2011-02-15 The Stuxnet Paradigm by Michael Lewitt (Article)
Michael Lewitt discusses the situation in Egypt, the economy, rising risk appetites in the market, sovereign debt and municipal bonds. 'It might be very easy,' he writes, 'to be impressed by the 'two years and thousands of man hours' that Ms. Whitney spent researching the fiscal condition of the 15 largest states. What in the world required so much time and effort? It shouldn't have taken nearly so long to determine that these states are in severe financial trouble and that their options for dealing with it are limited.
2011-02-08 Undoing Meredith Whitney's Damage by Hildy Richelson, Ph.D. (Article)
Meredith Whitney did the municipal bond market an immense disservice with her misguided comments on 60 Minutes when she predicted massive defaults. Two recent articles in this publication provided accurate rebuttals to her analysis, but they failed to clarify important reasons why muni bond investors do not face the imminent peril that Whitney predicted.
2011-02-01 Four Ways to Get Prospects Off the Fence in 2011 by Dan Richards (Article)
Dithering prospects - we've all been frustrated when someone who would be a really great client takes forever to make a decision. That's why getting prospects to make faster decisions should be your first resolution for 2011.
2011-01-25 The Power of Dividends by C. Thomas Howard (Article)
New evidence refutes long-held beliefs about the role of dividends. Research shows that the higher a stock portfolio's dividend yield, the greater its return. And just as surprising are new findings about the relationship of dividends to volatility.
2011-01-25 Should Advisors Care about Short-Term Volatility? by James Colon, John Gambla and Rob Guttschow (Article)
How can advisors construct portfolios that meet their clients' risk preferences across economic environments? You may be surprised to learn that tactical asset allocation has an important role to play.
2011-01-25 Beyond the Efficient Market Hypothesis by Michael Edesess (Article)
John Cassidy's 2009 book, "How Markets Fail," drives the final nail in the coffin of the Efficient Market Hypothesis. Well, perhaps the penultimate nail - as I'll explain. It is the most compelling argument I have read that we need a new and improved theory of markets, a theory that subsumes the efficient market hypothesis, much as Einstein's relativity theory subsumed Newtonian physics.
2011-01-25 Ten Resolutions for Greater Prosperity in 'The Year of the Fiduciary' by Jeffrey Briskin (Article)
If you think selling and servicing 401(k) plans isn't easy today, ERISA is about to make it even harder. The good news is that firms that adjust to these challenges can use them to their competitive advantage Here are ten steps your firm can take to prepare for The Year of the Fiduciary.
2011-01-18 Marketing Ideas I've Learned from My Clients by Kristen Luke (Article)
One of the favorite parts of my job is learning new ideas. Sometimes they come from campaigns that my clients have implemented over the years and sometimes these ideas come from collaborating with clients to find a solution to a problem they are facing. Here are my three favorite ideas from the past year.
2011-01-18 Letters to the Editor by Various (Article)
A number of readers respond to Nancy Opiela's article, Tactical Asset Allocation and Market Timing: What's the Difference?, and one reader responds to Michael Lewitt's article, The Wages of Growth. Both articles appeared last week.
2011-01-11 Tactical Asset Allocation and Market Timing: What's the Difference? by Nancy Opiela (Article)
Why is it that the industry dismisses significant changes to portfolio allocations as "market timing" transactions but embraces the subtler "tactical shifts" many advisors are making in the current, transitional market? As advisors debate the nuances of that question, the more relevant question may be: How would you respond if a client asked you to explain the difference between market timing and tactical asset allocation?
2011-01-11 Managing People Who Are Already Motivated by Justin Locke (Article)
As a professional speaker, I am often confused by audiences who want to understand the secret to motivating their employees. Most professionals, including financial advisors, aren't constrained by workers who lack motivation. Their challenge is harnessing their employees' pre-existing energy and drive, and directing it toward a common goal.
2011-01-11 2010: A Truth Odyssey by Ron Surz (Article)
I review some of the lessons learned in the last two years. I review the last year, discuss 2008's lessons, and conclude with my traditional review of the longer-term history of U.S. markets over the past 85 years.
2011-01-04 Your First Resolution for 2011: A Better Alternative to Face-to-Face Meetings by Dan Richards (Article)
In 2011 you need to rethink your approach to client meetings. For larger clients who you meet with regularly, you should consider replacing some of those face-to-face meetings with structured phone meetings.
2011-01-04 The Wondrous Value of Incompetence by Justin Locke (Article)
Ignorance and incompetence are underappreciated. There may be a lot to say for training, knowledge, and expertise, but with so much emphasis being placed on acquiring more and more knowledge (especially by those in the knowledge-peddling business) a dose of ignorance these days can offer incredible value.
2010-12-28 The Squam Lake Report: Reforming the Financial System by Dougal Williams (Article)
Ken French and Robert Shiller were among a group of leading economists who, in the fall of 2008, convened what was to become known as the Squam Lake Group. Their recently released and much-talked about book offers its authors' collective best answer to a defining question of our day.
2010-12-21 Debunking Ken Fisher by Robert Huebscher (Article)
In his latest book, Debunkery, Ken Fisher achieves his goal of dispelling many common investment myths and, in doing so, offers his philosophy on how individuals should manage their money. While most of the advice he offers is unequivocally correct, he also makes egregious errors on some serious matters.
2010-12-21 Two Words that Get Prospects? Attention by Dan Richards (Article)
When approaching business owners, some advisors talk about taking a wealth management approach to provide integrated advice around their finances. That approach, however, is too vague and generic.
2010-12-21 Three Ways to Tweak Your Marketing by Kristen Luke (Article)
Even the best marketers can improve upon their existing successful campaigns and marketing messages. Here are my three recommendations for how to tweak your marketing for better results.
2010-12-14 What the Music Business Taught Me about Selling by Justin Locke (Article)
You provide a service to each of your clients, some of whom may have similar needs but all of whom are unique. Asking your clients what more you could be doing for them is the only way to make sure you're offering the advice they truly want.
2010-12-06 The Worst Boss in the World by Justin Locke (Article)
Since good bosses are the exception and not the rule, early in my professional life I decided to strike out and work for myself. It was an alternative that sounded great on paper, but there's one little thing that I wish someone had told me: When you work for yourself, you are working for many clients, and they are often the worst bosses imaginable.
2010-11-30 Why You Aren't Getting Referrals - And What to Do About It by Dan Richards (Article)
When it comes to attracting new clients, every advisor knows that nothing beats referrals from satisfied clients. However, many advisors hold fundamental misconceptions about what it takes to get quality referrals. As a result, they either don't talk about referrals at all or do so ineffectively.
2010-11-30 The Word that Defines Effective Communication by Dan Richards (Article)
Fairly or not, if clients initiate a call, many will believe that the conversation wouldn't have taken place otherwise ... even though it's precisely the same conversation, advisors get much more goodwill and credit if they take the first step in making that call happen.
2010-11-23 Five Words that Get Emails Opened by Dan Richards (Article)
The escalating volume of email means that fewer and fewer emails are being opened. A key challenge is creating a sense of urgency around opening your emails - something that can be achieved with five key words in the subject line.
2010-11-23 The Kings of Cash Flow: Investing in Tomorrow's Potential Winners Today by David Vincent and Kevin Collins (Article)
Companies generating a lot of free cash flow generally represent attractive investment opportunities over time. The 'Kings' - companies with the highest free cash flow yields - have historically outperformed companies with lower free cash flow yields and are currently experiencing what may be one of their longest and most drastic periods of underperformance in the last 50 years.
2010-11-23 Why Diversify? by Adam Jared Apt (Article)
Although diversification is commonly regarded as a good thing, there are nonetheless those who regard it as a guarantee of mediocrity. It isn't, but there are right ways and wrong ways to go about diversifying a portfolio. Let's explore how diversification works.
2010-11-16 Through the Looking Glass with Steven Rattner by Jack Falvey (Article)
Steven Rattner, the one-time 'Car Czar' and author of Overhaul, has been busy redefining terms while trying to put his considerable spin on history. He wants to convince us that the auto industry was magically transformed from a cash-bleeding rusting hulk to a paradigm of corporate profitability. The auto industry was not overhauled. In fact, Dismembered would have been a far more accurate title.
2010-11-16 A Reading List for 2010: Part 2 by Vitaliy Katsenelson (Article)
Updated for 2010 and in time for the holidays, here is the latest installment of my recommended books. I originally wrote this list in 2008 and again last year. I intend to keep adding to and revising it every year. It contains seven sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, Risk and Books for the Soul. The first three sections were presented last week and the remaining four are presented here.
2010-11-16 Reducing Portfolio Risk through Sustainable Investing by Jon Quigley (Article)
By incorporating a broad swath of extra-financial data as a risk factor and tilting a portfolio away from companies with poor environmental, social and governance policies, we can better reduce that portfolio's risk of extremely negative outcomes.
2010-11-09 New Strategies in Alternative Investments by Robert Huebscher (Article)
Alternative investments, broadly speaking, and hedge funds, more specifically, have performed as intended over the last 20 years, modestly increasing returns and significantly reducing risk when added to a traditional stock-bond portfolio. Selecting the appropriate vehicle is the challenge, and that task has been made easier by the introduction of new exchange-traded strategies.
2010-11-09 A Reading List for 2010 by Vitaliy Katsenelson (Article)
Updated for 2010 and in time for the holidays, here is the latest installment of my recommended books. I originally wrote this list in 2008 and again last year. I intend to keep adding to and revising it every year. It contains seven sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, Risk and Books for the Soul. The first three sections are presented below and the remaining four will be presented next week.
2010-11-09 Keynesian Confusion by Michael Lewitt (Article)
Keynesian policies are inflicting untold damage on the U.S. and global economies today. Keynes did not have to be misread. The reason that the current recovery is below par is that the economy is experiencing a massive paradox of thrift. We doubt that reducing already low rates is going to stimulate much of anything other than more frustration on the part of savers. Sooner or later, everything being earned on the upside of this liquidity-induced rally will be given back in spades - the only question is when.
2010-11-09 Finding Your Alternatives by Beverly D. Flaxington (Article)
In everyday life, you know that the first idea you think of to meet a need, or address a problem, may not always the best one. But when it comes to running a firm, far too many advisors never go through a proper brainstorming process to determine which option may be the best one for their firm.
2010-11-09 Serenity Now by Emilio Vargas (Article)
Hope has transformed into fear - not about making money but about the prospect of another bubble. The recent statements and actions of the Federal Reserve Bank may be laying the groundwork for the third massive asset mispricing in ten years.
2010-11-02 Four New Ways to Beef Up Your LinkedIn Profile by Kristen Luke (Article)
If you have logged into LinkedIn in the last couple of weeks, you may have noticed some new changes. The professional networking site has new sections for individual profiles, and Kristen Luke explains how to use them.
2010-10-26 An Exceptional Resource for Asset Allocation by Michael Edesess (Article)
Roger C. Gibson's fine and exemplary book, Asset Allocation: Balancing Financial Risk, Fourth Edition, shows that character and conscience-based counseling still exist, even in the financial profession. It is still possible for advisors to look out for their clients' long-term interests.
2010-10-26 What Drives High-Yield Bonds (and Why You Should Listen to the Ratings Agencies) by Robert Huebscher (Article)
High-yield bonds are attractively priced - or they aren't - depending on how likely you think a double-dip recession is and how severe you think it might be. What drives the high-yield market was the subject of a talk last week by Martin Fridson, a global credit strategist with BNP Paribas Asset Management who is a highly regarded expert on distressed debt.
2010-10-26 Identifying - and Overcoming - Obstacles Second in a Series of Five Articles by Beverly D. Flaxington (Article)
Obstacles that haven't been identified and aren't removed will rise again and again for most people and firms, and will prevent you from achieving your goals. Here is a framework to identify and categorize the obstacles you face.
2010-10-26 Improving on Buy and Hold: Buy by Georg Vrba, P.E. (Article)
Georg Vrba updated the model described in his article, Improving on Buy and Hold: Asset Allocation using Economic Indicators. The ECRI U.S. Weekly Leading Index and its annualized growth rate published on October 22, 2010, together with the most recent values of the other indicators used, have been incorporated and generated a buy signal.
2010-10-19 Developed Markets and Capitalism in Crisis by Robert Huebscher (Article)
We are not in a globalized world today, according to Ian Bremmer. "The state is back," said the 40-year old president and founder of Eurasia Group, a political consulting firm. Both in the U.S. and throughout the world, governments are exerting their influence through regulation, trade restriction, subsidies, and bailouts, and are threatening the nature of free markets.
2010-10-12 Does Your Marketing Match Your Business Structure? by Kristen Luke (Article)
Marketing strategies differ depending on the structure of a firm, writes Kristen Luke. Solos and silos focus on marketing the individual advisor while ensembles market the firm. Ensembles also tend to have more sophisticated marketing campaigns since they generally have larger marketing budgets and higher revenue streams.
2010-10-05 The Information Risk Premium: A New Danger to Client Portfolios by Bob Veres (Article)
Michael Aronstein, who manages the Marketfield Fund, connected two dots that most of us are aware of intuitively, but may not have consciously considered. As Bob Veres writes, Aronstein says that the primary challenge for investment advisors, financial planners and money managers today, which is different from the challenges you faced in the past, is the sheer amount of attention that investors are now able to pay to the ups and downs in their portfolios.
2010-10-05 Leadership Lessons from the Dance Floor by Justin Locke (Article)
The classic image of leadership is the symphony orchestra conductor, who, standing tall in front of his charges, ensures the perfect synchronization necessary to create the harmony, rhythm and melody that defines great music. That idealized artistic symbolism is not unique, though. An equally compelling example of leadership can be found on the dance floor, writes Justin Locke.
2010-10-05 Charles Brandes on Investing Lessons from Benjamin Graham by Dan Richards (Article)
In this interview, Charles Brandes, the founder and Chairman of the Brandes Investment Management, discusses the lessons he learned from legendary value investor Benjamin Graham. Brandes also offers his forecast for equity market performance, as well as why he believes value stocks have an inherent, sustainable advantage over growth stocks. This is the transcript of the interview.
2010-09-28 Three Traps that Chew Up Your Day by Dan Richards (Article)
Time has always been the scarcest resource for successful financial advisors. Given all the demands advisors face, today it's essential to make maximum use of your workday. To make that happen, Dan Richards says you have to overcome three common traps.
2010-09-28 Building your Digital Identity through Blogging by Stephanie Sammons (Article)
Blogging is a modern-day marketing platform for cultivating client, prospect, and center-of-influence relationships. A well-designed and properly structured blog, writes Stephanie Sammons in this guest contribution, can provide you with an opportunity to proactively manage your online reputation and attract new clients into your business.
2010-09-21 The One-Sided Fallacy by Richard E. Cripps, CFA (Article)
The current tenor of political debate has amplified one-sided arguments as each party attempts to sell their view to voters. The same polarization has become evident in approaches to investment, and market bears are exhibiting all the classic symptoms of confirmation bias. But we know better than to let these slanted arguments sway our market convictions. As Richard Cripps explains in this guest contribution, there are plenty of reasons to remain invested in equities.
2010-09-14 Identifying Opportunities in the Municipal Bond Market by RidgeWorth Investments (Article)
Ridgeworth Investments shares its perspective on the muni bond market in a recent white paper entitled "Identifying Opportunities in the Municipal Bond Market" which outlines the historical benefits of municipal bonds, the changing market dynamics in 2009 as well as RidgeWorth's outlook for municipal bonds in 2010 and potentially beyond. RidgeWorth concludes that despite a challenging market environment, munis still offer attractive investment opportunities. We thank them for their sponsorship.
2010-09-07 Jeffrey Gundlach on Bonds, Stocks and Gold by Robert Huebscher (Article)
DoubeLine's Jeffrey Gundlach recently reduced his position from "overweight" to "small underweight" in Treasury bonds, and cited "divergent behavior across the yield curve." In this interview, he discusses that behavior and the rationale behind his move, as well as his thoughts on other asset classes, including equities and gold.
2010-09-07 Mistake Management Symphony Style by Justin Locke (Article)
Mistakes happen - often. Eliminating them is impossible. The real question is: How do you manage the inevitability of making them? In this guest contribution, Justin Locke shares a few lessons he learned while playing the bass in a professional orchestra.
2010-08-24 This is No Way to Run a Railroad by Michael Lewitt (Article)
In the latest edition of the HCM Market Letter, This is No Way to Run a Railroad, Michael Lewitt says the railroad known as the United States economy is chasing its own tail these days. Driven by misbegotten fiscal and monetary policies that ignore the lessons of history in favor of discredited financial and economic theories, the economy is trapped in a cycle of boom and bust. Lewitt also comments on the bond market, the European stress tests, GM, and the private equity industry.
2010-08-24 Build America Bonds Power the US States by Hildy Richelson, Ph.D. (Article)
A skeptical attitude toward new products has long served the best interests of advisors and their clients, almost without fail. However, in this guest contribution, Hildy Richelson argues that advisors should not be afraid to embrace one of the market's most prominent recent innovations: the Build America Bond (BAB).
2010-08-24 How to Choose the Right Social Media Archiving Strategy by Blane Warrene (Article)
Advisors who have embraced social media as an important component of their marketing and service toolbox must monitor and manage the content they distribute. In this guest contribution, Blane Warrene discusses how to collect and store postings and comments made by you and others on social media platforms and store the information in a readily accessible database.
2010-08-10 When Active Management Matters by Kenneth R. Solow, CFP and Michael E. Kitces, MSFS, MTAX, CFP (Article)
Financial planners have eagerly awaited any research that could finally, definitively prove - or disprove - the pesky notion that active management is effective. Though no one has yet risen to that challenge, past academic studies have been improperly interpreted to show that portfolio policy, or asset allocation affects portfolio returns far more than active management. As Ken Solow and Michael Kitces write in this guest contribution, the most recent study to tackle the active management debate, by Yale professor Roger Ibbotson, shares two weaknesses with previous research.
2010-08-10 Public Pension Showdown: Actuaries vs. Economists by Charlie Curnow (Article)
Public pensions are severely underfunded, at least according to the economists. Actuaries disagree, and at stake is nearly $2 trillion. We look at why these groups arrive at such different valuations, and which one is likely to be correct.
2010-08-10 Taking Exception: 'Fiduciary' is Much Ado about Something! by Scott MacKillop (Article)
All financial advisors who provide investment advice directly to clients or exercise investment discretion over client assets should be subject to fiduciary standards. In this guest contribution, Scott MacKillop takes exception to the article by John Lohr entitled 'Fiduciary': Much Ado about Nothing! that appeared here last week.
2010-08-10 Confessions of a First-time Manager by Justin Locke (Article)
When you have a certain degree of skill at a given task, people often assume that you will naturally be able to manage other people who do that same task. That's how Justin Locke because a first-time manager in the orchestral business, and he shares a few important lessons to apply when you receive that important promotion that elevates you above your coworkers.
2010-08-10 Is the Market Efficient? by Adam Jared Apt (Article)
After Marxism, no economic theory today may be as derided and despised as the hypothesis of market efficiency. The idea is often misunderstood, sometimes willfully. So what does "market efficiency" mean? In the latest installment of his series for the educated layman, Adam Jared Apt provides some answers.
2010-08-10 Performance that Plan Sponsors Value Most by Jeffrey Briskin (Article)
Advisors serving 401(k) plans may successfully improve investment performance, only to find out that the plan sponsor is totally unsatisfied. In this guest contribution, Jeffrey Briskin relates a recent conversation that made that painfully obvious, and a recent study by his company confirmed that such outcomes occur all too often.
2010-08-03 Woody Brock: How to Achieve Growth without 'Bad' Deficits by Robert Huebscher (Article)
Of all the challenges facing our nation, none is as daunting as trying to achieve economic growth and reduce unemployment without adding layers of debt to our already bloated deficit. Legislators and economists have debated the merits of stimulus measures, changes in tax rates, and monetary policies, but they are no closer to a consensus than they were at the onset of the financial crisis. H. 'Woody' Brock, however, says a genuine solution is possible.
2010-08-03 'Fiduciary': Much Ado about Nothing! by John Lohr (Article)
The most overused, misused and misunderstood word in the investment industry is 'fiduciary.' Independent advisors, trade organizations and self-styled 'expert' groups have called for stockbrokers to adopt the 'fiduciary' standard to achieve a grand leveling of the playing field for those who provide investment advice. This is nothing more than unnecessary marketing hype, says securities lawyer John Lohr in this guest contribution.
2010-08-03 Ten Retirement Lessons from the Smartest People I Know by Paul Merriman (Article)
Since the mid-1960s, Paul Merriman has helped people manage their money and their lives before and during retirement. He has seen the good, the bad and the downright ugly, and in this guest contribution he shares 10 retirement lessons from the smartest people he knows.
2010-07-27 Rediscovering Your Listening Skills by Justin Locke (Article)
Listening may be the most critical part of your job, both for acquiring new clients and for maintaining current relationships. Everyone's listening abilities are unique, but many common fears and anxieties can interfere with your innate listening skills. In this guest contribution, Justin Locke identifies a few common problems and suggestions for how to work around them.
2010-07-20 Jeremy Siegel on Why Stocks are Undervalued by Dan Richards (Article)
The Wharton School's Jeremy Siegel remains an outspoken proponent of stocks for the long run, as he demonstrates in this interview with Dan Richards. In the transcript of this interview, Siegel explains why equity investors should not be deterred by sour economic forecasts or by signals of apparent overvaluation based on Shiller P/E ratios.
2010-07-20 Beyond The Stars: Improving Active Fund Selection Based On Manager Skill by Michael Ervolini (Article)
After a brief review of known shortcomings of common fund evaluation methodologies, Mike Ervolini introduces a new approach based upon analytics that his firm has developed. Rather than relying on non-predictive metrics such as past performance, his approach looks at investment processes in relation to deeper skills that managers possess regarding buying, selling, and position-sizing.
2010-07-20 The Opportunity in Build America Bonds by Jeff Westergaard (Article)
While the unique aspects of Build America Bonds (BABs) and recent Treasury Department actions are meaningful, the risks to investors have been over-emphasized. BABs remain an attractive vehicle for investors and issuers, and the market for them is likely to grow.
2010-07-13 A Marketing Guide for RIAs: Part 2 ? Craft Your Message by Kristen Luke (Article)
As part of her series on low-budget marketing for startup RIA firms, Kristen Luke discusses how to craft your message.
2010-07-13 A Marketing Guide for RIAs: Part 3 ? Build a Website by Kristen Luke (Article)
Kristen Luke discusses the steps to take to build your website.
2010-07-06 Template for a Mid-Year Letter ? Navigating through this Calamitous Decade by Dan Richards (Article)
It's always important for clients to feel they're being kept informed of what's happening in markets - but never more so than in markets like we've seen in the past few months. Dan Richards provides a template for a mid-year market commentary to clients, adaptable to your own opinions and circumstances, based on a recently rediscovered speech by Benjamin Graham.
2010-07-06 Stock Markets and a Sea of Change by Ron Surz (Article)
Ron Surz provides his award-winning market commentary, analyzing performance across global markets during the first half of this year. He also addresses several other topics, including the fiduciary standard, developments in target date funds, and distortions in style assignments created as a byproduct of the financial crisis.
2010-06-29 Timber as an Asset Class: If a Tree Falls in the Forest, Should you Buy It? by Charlie Curnow (Article)
"If the sun shines and it rains, the trees grow about on schedule," wrote Jeremy Grantham, chairman of Boston-based investment firm GMO, in his quarterly newsletter in April 2007. Grantham's enthusiasm for timber, which remains true to this day, may be excessive, despite the fact that, on the surface, historical data seems to support his optimism. If a tree falls in the forest, should you buy it?
2010-06-29 Winning Clients...By Being Dumb by Justin Locke (Article)
In this guest contribution, Justin Locke says "looking dumb" is a better strategy than trying to be smarter than your clients and prospects. Locke is a professional musician and author of a book we previously reviewed, The Principles of Applied Stupidity, and he outlines a key tactic to persuade prospects.
2010-06-22 Inexpensive Protection Against Rising Rates by Geoff Considine, Ph.D. (Article)
As is too often the case, the biggest risks are those that we discount. The possibility of a surge in interest rates appears to be today's ignored risk, despite the warnings of many experts, including David Einhorn, Bill Gross, and Seth Klarman. We discuss an inexpensive strategy to protect your portfolios from the tail risk of rising rates.
2010-06-22 Niall Ferguson on Japan, China, and the US by Dan Richards (Article)
Harvard's Niall Ferguson is arguably today's leading economic historian. In part two of this interview, Ferguson explains why he fears the future is bleak for Japan, why China may someday be the leading global superpower, and what all this means for the US. We provide a video and a transcript.
2010-06-08 Barfing Your Way to Investment Success by Mariko Gordon (Article)
When it comes to air travel, turbulence is to be expected. If you're not of the same mindset with your investments, you may be in for a bumpy, barfy ride, says Mariko Gordon of Daruma Asset Management in this guest contribution.
2010-06-01 Three Ways to Improve Safe Withdrawal Rates by Geoff Considine, Ph.D. (Article)
Using Monte Carlo analysis, Geoff Considine examines three ways safe withdrawal rates can be increased beyond the baseline 4% guideline. He compares and quantifies the benefits of increasing diversification beyond equities and bonds, increasing allocations to fixed income, and employing tactical asset allocation.
2010-06-01 Social Media & Reputation Management for Financial Advisors by Dan Sommer (Article)
As a financial advisor, your reputation is one of your most important prospecting tools. While the internet presents a wealth of marketing benefits, one downside is potentially losing control of your reputation. In this guest contribution, Dan Sommer shows how to make sure that doesn't happen.
2010-05-25 Ken Rogoff Expects Slow Growth and Sovereign Defaults by Robert Huebscher (Article)
Among the crush of analysis devoted to the financial crisis, perhaps none has been as influential as that of Kenneth Rogoff and Carmen Reinhart, co-authors of the book This Time is Different. Looking back at 800 years of data on emerging and developed economies, they showed that financial crises - and the recoveries from those crises - follow a highly predictable pattern, and the title of their book was a jab at those who suggest otherwise. Rogoff also spoke at the CFA conference.
2010-05-25 Sleeping with the Enemy by John W. Pfenenger II, CFA (Article)
When it comes to investing, our worst enemy may be the one we see in the mirror every morning - ourselves. In this guest contribution, John Pfenenger looks at how emotions affect investment decisions, and how understanding behavioral economics can help advisors work with their clients.
2010-05-18 Spain: After the Bubble by Charlie Curnow (Article)
Today, Barajas Terminal 4 one of the most visible artifacts of the profligacy that fueled Spain's property bubble and led to the country's current financial crisis. Spain, like several other European states, has continued to spend rapidly over the past two years, even as its economy has contracted. As a result, the Spanish government's debt has skyrocketed, raising fears of a possible sovereign default.
2010-05-11 Why Some Hedge Funds Made Money in 2008 by Robert Huebscher (Article)
Steven Drobny is the co-founder of Drobny Global, an international macroeconomic research and advisory firm that counts many of the leading global hedge funds and money managers as clients. He is also author of a recently released book that identifies why some hedge funds made money in the 2008 crisis, while the majority did not. In this interview, he discusses the common themes among successful strategies.
2010-05-11 Predicting Financial Crises by Charlie Curnow (Article)
MIT Sloan School senior finance lecturer Mark Kritzman thinks he has found a warning signal to predict the onset of financial crises in a new statistical model called the absorption ratio. The absorption ratio predicts systemic risk by measuring how tightly markets are coupled, and thus how vulnerable they are to the spread of negative shocks.
2010-05-11 Talking to Clients about Expected Returns by Dan Richards (Article)
Of all the assumptions that go into clients' retirement plans, none has a bigger impact than the expected return on their investments, says Dan Richards. That number determines how much investors need to save, when they can afford to retire and the kind of lifestyle they can anticipate. Richards provides a context for discussing expected returns with clients.
2010-05-11 Join a Professional Association ? Just Not Your Own Profession by Kristen Luke (Article)
Don't limit your involvement in professional associations to your own profession, says Kristen Luke. To actively market your business, spend more time with professional associations that pertain to your prospective clients than for your own industry.
2010-05-11 Tagline, You?re It by Wendy J. Cook (Article)
Have you ever noticed that it can be easier to write a 6,000-word treatise than to come up with six perfect words, like, say, "You're in good hands with Allstate®"? As Wendy Cook writes, sometimes less is more - more frustrating, that is. How do you say a lot with a little in corporate taglines?
2010-05-04 Iran, Iraq and Embracing the Devil by Robert Huebscher (Article)
Just as imbalances arise in economics, so they do in geopolitics. Its power weakened, the US now faces a difficult choice in the Mideast, where its best option is now to strike a deal with the regional player it most demonizes, Iran, according to George Friedman, founder and CEO of the geopolitical consulting firm STRATFOR.
2010-05-04 The Future of Consumer Financial Protection by Charlie Curnow (Article)
Among the items that headline the proposed financial reform legislation is a new Consumer Financial Protection Agency (CFPA) that would consolidate regulatory responsibilities for consumer financial products, currently handled by four separate agencies, in one central office. Charlie Curnow looks that the goals of the CFPA and its implications for consumers.
2010-05-04 How Much is that Investment Worth in Real Money? by Adam Jared Apt (Article)
In the latest installment of his series of articles geared to the educated layman, Adam Apt looks at the topic of the time value of money, and how discount rates can be used to determine the value of a security. He shows the practical applications of present value calculations and its limitations.
2010-04-27 The Hidden Risk in Target Date Funds by Ron Surz (Article)
Choosing the appropriate target date fund (TDF) for an investor is not easy, given the large number of products in the marketplace and the lack of tools to easily compare those offerings. That choice, however, is made a lot easier if one focuses on the component of TDFs where investors are exposed to the greatest risk - what guest contributor Ron Surz calls the "risk zone."
2010-04-20 The Random Walk Spoiled: A Flawed Assumption for Long-term Equity Portfolio Simulation by Manish Malhotra (Article)
To optimize portfolios, the investment and wealth management industry still assumes a random walk of prices when running long-term simulations of equity portfolios, despite plenty of existing research pointing to serial dependency in returns, writes Manish Malhorta in this guest contribution. The random walk assumption for equities gives results that are counterintuitive and unobservable in practice. He recommends against using it.
2010-04-20 Unconventional Wisdom: An Interview with Robert Shiller by John Heins (Article)
"Few macroeconomic prognosticators have been as publicly right as Yale's Robert Shiller,whose first and second editions of the book Irrational Exuberance laid bare, with remarkable timing, the speculative bubbles forming first in the Internet-crazed stock market and next in residential real estate," writes the highly regarded newsletter Value Investor Insight in its preface to this interview with Shiller and excerpt from his latest book. Value Investor Insight, which bills itself as the "Leading Authority on Value Investing, offers a no-obligation, one-month free trial subscription.
2010-04-13 Are Public Employees Bankrupting the Nation? by Charlie Curnow (Article)
While markets may be recovering, public debts are still mounting. Charlie Curnow reviews Plunder, the new book by Steven Greenhut, which blames public sector unions for a large portion of these debts. To Greenhut, we the taxpayers are helpless villagers, while corrupt public employee unions are barbarians at the gate, raiding government treasuries and leaving us with nothing but unfunded liabilities.
2010-04-13 Unforeseen Pitfalls of Social Media Success by Kristen Luke (Article)
There is a pitfall that is rarely anticipated and only occurs for those who are the most successful using social media, writes Kristen Luke. Social media can create more relationships and opportunities than one person can reasonably handle.
2010-04-06 Liz Ann Sonders on the US Economic Recovery by Robert Huebscher (Article)
Liz Ann Sonders is Senior Vice President and Chief Investment Strategist at Charles Schwab & Co. In this interview, she discusses her positive outlook for the US economy, which she believes has been recovering since last summer.
2010-04-06 A Review of "The Big Short" by Michael Lewis by Michael Edesess (Article)
"The Big Short" tackles the financial meltdown as seen by four relatively minor, but colorful players. (Minor means running only hundreds of millions, not billions.) All of them were voices in the wilderness, writes Michael Edesess, our reviewer. All of them bet heavily against the subprime real estate bubble that, for a while, fueled huge gains.
2010-03-31 days of dreck by tom brakke of the research puzzle
For whatever reason, it seems that hype is in full bloom right now. While evidence supports the view that post-crisis, the average investor has become more cautious, the claims of easily available riches seem to get wilder by the day. What is common among these schemes is that they all use some movement in price to grab the attention of the electronic village, and then the game is on. 'Some movement in price' can be remarkably easy to come by. The really sad part is that these promotional tactics are common and have been adopted to a degree throughout the investment industry.
2010-03-30 Making the Sale by Michael Ervolini (Article)
Because investors are "hard-wired to like buying more than selling," writes Cabot Research CEO Michael Ervolini in this Value Investor Insight article, the sell decision-making process is typically less rigorous and analytical than the decision to buy. Ervolini explains the problems that can cause and offers a framework for how make better, return-enhancing sell decisions.
2010-03-23 The Best Books on Passive Investing by Indudeep Chhachhi & Edward R. Wolfe (Article)
Two finance professors, Edward Wolfe and Indu Chhachhi, survey the literature on passive investing and offer their recommendations for authors and books. Whichever side of the active-passive debate you take, these books should be required reading. The evolution through which the literature on passive investing has gone is striking. Early writers started out with a point to prove: that passive investing is the only way to invest that makes sense. Today, the writing in this area has moved beyond "proving a point" to expanding on what is a settled issue.
2010-03-23 Quadrophobia: Predicting the Next Enron? by Charlie Curnow (Article)
Accounting scandals such as HeathSouth, Chiquita, AIG, and most infamously, Bernard Madoff Investment Securities have sent many academics and financial professionals in search of new formulas to predict "the next Enron." A professor and a graduate student at Stanford recently revealed one such approach, which they dubbed Quadrophobia, which showed that, in earnings announcements, the digit four was underrepresented to the right of the penny's place.
2010-03-23 Quadrophobia: Predicting the Next Enron? by Charlie Curnow (Article)
Accounting scandals such as HeathSouth, Chiquita, AIG, and most infamously, Bernard Madoff Investment Securities have sent many academics and financial professionals in search of new formulas to predict "the next Enron." A professor and a graduate student at Stanford recently revealed one such approach, which they dubbed Quadrophobia, which showed that, in earnings announcements, the digit four was underrepresented to the right of the penny's place.
2010-03-23 Tobin?s Q: A Stone?s Throw from a Sell Signal by Robert Huebscher (Article)
One of the most reliable measures of broad market valuation is Nobel Prize-winning economist James Tobin's Q-ratio. Data released less than two weeks ago show that the ratio is generating a bearish signal over the next three, five and ten years. Over the next year, though, the signal is neutral.
2010-03-16 Implications of the Current Shiller P/E Ratio by Keith C. Goddard, CFA and Channing S. Smith, CFA (Article)
In this guest contribution, Keith Goddard and Channing Smith expand on ideas presented in a previous article, Return Distributions and the Shiller P/E Ratio. They study the historical behavior of U.S. stocks during three-year holding periods that began at with valuations comparable to recent market conditions, as measured by the Shiller P/E ratio.
2010-03-16 Rational Deficit: An Interview with Dan Ariely by John Heins (Article)
Through creative research and clever articulation of his ideas, behavioral economist Dan Ariely has established himself as one of the brightest thinkers today on the subject of human decision-making, particularly with respect to influences of which we are largely unaware. In this wide-ranging interview with the investment newsletter Value Investor Insight, Ariely describes the unwitting biases that can lead to bad decisions and what investors can do to guard against them.
2010-03-16 Paul Romer: What Drives Economic Growth? by Dan Richards (Article)
Paul Romer is a senior fellow at the Stanford Institute for Economic Policy Research, and the focus of his research is the drivers of economic growth. In this interview with Dan Richards, Romer identifies what sets apart fast growing countries, and which policies best stimulate economic growth. We provide a transcript and a link to a video of the interview.
2010-03-16 No Shell Game? Then What Is It? by Dave Loeper (Article)
Wealthcare's Dave Loeper responds to Roger Schreiner's recent article, It's No Shell Game. Loeper contends that the rules of Schreiner's challenge ensure that Schreiner will win and, from a larger perspective, active management advocates sacrifice their clients' wealth by exposing them to risks those advocates cannot control.
2010-03-09 Lesson's from an Investing Time Machine by Dan Richards (Article)
Time travel is every investor's fantasy - imagine if you could go back forty years and make investment decisions, knowing then what you know now. That's precisely the opportunity that Dan Richards gave a group of investors one recent evening.
2010-03-02 Asset Allocation for Grantham?s Seven Lean Years by Geoff Considine, Ph.D. (Article)
Followers of Jeremy Grantham know his consistently accurate long-term forecasts well, as well as his ability to identify and avoid asset bubbles and steer clients into high-performing asset classes. Grantham's prescience is remarkable but not irreplicable. Geoff Considine shows that his Monte Carlo simulations nearly match Grantham's forecasts, and he reviews the implications for asset allocations.
2010-02-23 Jason Zweig on Protecting your Wealth by David Raileanu (Article)
Jason Zweig is a senior writer and columnist for Money magazine and frequently writes for the Wall Street Journal. In this interview, he discusses strategies for protecting client wealth, proper asset allocation, and the role of advisors in a fiduciary relationship.
2010-02-23 Drilling for Dummies by Mariko Gordon (Article)
"In our experience, both investors and clients find comfort in believing that there exists a steady flow of new ideas," says Mariko Gordon. "But we shouldn't collude in that desire for comfort. The commonly asked question, 'Where do your new ideas come from?' is largely missing the bigger, more essential point."
2010-02-19 best in show by Tom Brakke of the research puzzle
Picking a fund manager can be like choosing the winner of the Westminster Dog Show. Choices can come down to small things noticed at the last minute, or may have been in the cards for months, with the process just existing for show. The stock-by-stock choices of the individual investor can also be similar in that they require us to carefully and objectively examine the reasons for the choices we make.
2010-02-16 Seven Steps to Making 2010 a Breakthrough Year for your Business by Dan Richards (Article)
Dan Richards says many advisors started the year full of enthusiasm and ambitious objectives, yet at the end of January felt bogged down and out of steam. Despite starting with good intentions, the difficulty is that we quickly get caught up in the day-to-day demands on our time, and Richards offers a seven-step plan to overcome this inertia.
2010-02-16 How Professionals Select Investments by Adam Jared Apt (Article)
In this guest contribution intended for the educated layman, advisor Adam Apt discusses the process by which investment managers select individual securities, contrasting the disciplines of fundamental and technical analysis.
2010-02-09 Overconfidence and Excessive Trading Harm Investor Returns by Dan Richards (Article)
The question Terrance Odean asks is if someone sells a stock and then buys another stock, on average does the stock they bought outperform the one they sold by enough to cover their trading costs? Odean, a professor at Berkeley, has researched this question and the role of excessive trading and overconfidence in investor decisions.
2010-02-05 Discounts and Relative Performance by Rob Arnott of Research Affiliates
Arnott reviews the methodology behind fundamental indexing. Over the short term, fundamental indices take on much greater exposure in volatile markets to companies which underperformed relative to their economic size. This article explores the performance implications of the difference in relative valuation multiples.
2010-02-02 More Government in the Financial Sector to Save Capitalism by Vitaliy Katsenelson (Article)
In this article, Vitaliy Katsenelson argues that, despite his free market bias, the "too big to fail" banks will benefit from tighter regulation.
2010-01-26 The Potemkin Market by Michael Lewitt (Article)
We are again privileged to publish the current issue of Michael Lewitt's newsletter, titled The Potemkin Market. Lewitt updates his forecast for the S&P 500, criticizes the current financial reform efforts and the ongoing GSE bailout and Fed Chairman Bernanke. Lewitt argues that risk is overpriced in many segments of the market.
2010-01-26 Punctuated Equilibrium by Dan Richards (Article)
Dan Richards says we're dealing with a more fundamental issue than the recent market turmoil. "We're going through one of those rare periods of ground-shaking change that have taken place throughout history, something that was in the works well before last fall's market excitement," he says, and explains how advisors should deal with more demanding customers, new technology and global competition.
2010-01-26 Letters to the Editor by Various (Article)
In our letters to the Editor, readers comment on recent articles about Paul Krugman, health care, John Cochrane and the need for trust in advisory relationships.
2010-01-20 Liars Who Believe Their Own Lies? by Dan Ariely of Predictably Irrational
What do Williams Gehris, America?s most decorated war hero, and Walter Williams, our last Civil War veteran to pass away, have in common? Both were frauds: they spun tales of military heroism, duped
2010-01-19 A Market for Contrarians by Robert Huebscher (Article)
Along with Steve Leuthold, Rob Arnott, Doug Kass and DoubleLine co-founder Joe Galligan were among the speakers at Fortigent's conference. These three speakers' bearish sentiment extended across a wide range of asset classes, opening lots of possibilities for those who prefer contrarian bets.
2010-01-12 Bruce Berkowitz on the Keys to Success for the Fairholme Fund by Robert Huebscher (Article)
Bruce Berkowitz, manager of the Fairholme Fund, was just named Morningstar's US fund manager of the year. In our interview, he discusses current market conditions, the thesis behind several of his largest positions, his views on health care reform, and the elements of the macro environment that concern him most.
2010-01-12 Olivier Blanchard on Global Stability by Dan Richards (Article)
Olivier Blanchard is the chief economist at the International Monetary Fund, a position he has held since September 1, 2008. In Dan Richards' interview, Blanchard discusses the steps being taken to revive the global economy and what he believes is in store for beleaguered debtor nations - particularly Greece.
2010-01-12 Competing for Referrals by Dan Richards (Article)
In past articles, Dan Richards has discussed how to get prospects off-the-fence when they are thinking about leaving their advisor - by providing concrete proof as to why they would be better off with us than where they are now. Now, Dan provides a strategy to use when you are competing with other advisors for referral business.
2010-01-11 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
2010-01-05 Capture Ratio as a Tool to Measure Investment Performance by David Vincent and Ray Pinelli (Article)
In this guest contribution, David Vincent and Ray Pinelli of Fred Alger examine the correlation of traditional up- and down-capture ratios to investment performance. They show that combining these two measures results in a metric with much higher correlation.
2009-12-22 ECRI: Recovery and Jobs Growth are Underway by Robert Huebscher (Article)
Lakshman Achuthan, the managing director of the Economic Cycle Research Institute (ECRI), provides an upbeat forecast in our interview. He says the economic recovery has been underway since the summer and he expects to see jobs growth in the coming quarters. ECRI is a global research firm serving buy- and sell-side institutions and Fortune 500 companies.
2009-12-22 The Holiday Spirit and Better Networking by Nancy Opiela (Article)
If you aim to integrate the spirit of the holiday season into your practice, consider a networking strategy that emphasizes providing support without the direct expectation of receiving referrals. Nancy Opiela describes a new networking group that brings together people who serve the advisory profession and how the group's goals are unfolding.
2009-12-22 Six Words that Open the Door to Accountant Referrals by Dan Richards (Article)
Put together a list of the things that frustrate advisors targeting high-end clients and roadblocks to referrals from accountants are sure to be close to the top. Successful advisors recognize the power of a recommendation from a HNW prospect's most trusted advisor, and Dan Richards reveals the six words that facilitate those referrals.
2009-12-22 How to Succeed Without Knowing Anything by David Raileanu (Article)
The most commercially successful musical conductor of all time was not Leonard Bernstein. That honor goes to the Boston Pops' Arthur Fiedler, who gained fame - and commercial success - by being different. Justin Locke's book, The Principles of Applied Stupidity, shows how being different often is more important for success than being smart.
2009-12-15 The Next Black Swan? Underfunded Public Pensions by Robert Huebscher (Article)
The plights of California and other states reveal an ominous threat our economy faces: underfunded public pension liabilities. We examine the size and scope of this problem, focusing on whether the underlying assumptions used to calculate liabilities are realistic.
2009-12-08 Attracting Clients through Event Marketing by Jason Lampa (Article)
When he meets with financial advisors, Jason Lampa always asks them whether they have integrated event marketing into their strategic marketing plan. In this guest contribution, he writes that rarely are such programs part of a firm's overall marketing strategy; moreover, most advisors have no process in place to execute an event marketing plan.
2009-12-01 To Roth or not to Roth, That is the Question by David B. Loeper, CIMA, CIMC (Article)
With the new Roth conversion rules about to be lifted next year and a "one-time special offer" available to allow investors to spread the tax bite of conversion over two years, more and more Roth conversion calculators are showing up every day. Be wary, says Dave Loeper of Wealthcare Capital. If you use one of these calculators, don't say he didn't warn you about how misleading the results can be.
2009-12-01 Think Like a Marine by David Raileanu (Article)
Retired Marine Patrick Gould has just published a book, Prudent Decision Making in an Imprudent World, and his theories prove useful for understanding decision-making in all arenas, not just those that involve life-and-death decisions. He applies many of his theories of risk, reward, preparation, security, and asset management to the financial world, working from modern portfolio theory and ultimately offering a practical decision method.
2009-11-24 Dan Fuss and the Long-Term Outlook for Interest Rates by Robert Huebscher (Article)
Dan Fuss, the highly respected bond manager at Loomis Sayles in Boston, says we are in the early stages on a long-term rise in interest rates. His view was shared by two other panelists, Carl Kaufman of Osterwies and Margie Patel of Evergreen. If you accept this consensus, you must ask whether your fixed income allocation is appropriate.
2009-11-24 Interview: Brian McMahon of Thornburg Investments by Robert Huebscher (Article)
We speak with Brian McMahon, CEO and CIO of Thornburg Investment Management about the Thornburg Income Builder Fund (TIBAX) and the challenges of finding income-producing securities in today's markets.
2009-11-24 Get Personal with your Clients and Prospects by Kristen Luke (Article)
Financial advisors are, or at least should be, in the relationship business. So what better way to build a relationship than to interact with your clients and prospects outside the sphere of your business? Kristen Luke offers her suggestions.
2009-11-24 The Jedi Knight's Guide to Real-Life Investing by Mariko Gordon (Article)
The term "textbook investing" suggests a perfect approach. But as a recent visit with a class of college students reminded Mariko Gordon of Daruma Asset Management, there's still much to be learned beyond textbooks and lecture halls. She takes a look at five insights from the "real world" of investing.
2009-11-17 Client Gifts that Stand Out by Dan Richards (Article)
Having trouble with ideas for holiday gifts for your clients? Dan Richards offers four strategies for selecting a gift with a meaningful impact.
2009-11-17 Five End-of-Year Marketing Tips by Kristen Luke (Article)
The slow period in November and December doesn't mean you should halt your marketing efforts. As Kristen Luke writes, you need to adjust your strategies and take advantage of the unique opportunities that are available during this period. Here are five tips to help make the most out of your end-of-year marketing.
2009-11-10 Not by Return Alone: Judging Investment Performance by Adam Jared Apt (Article)
In the latest installment of his articles intended for an educated layman, Adam Apt addresses the relationship between risk and return, and shows that the connection between them is neither rigid nor obvious, and that we can be cheated of our money by disregarding risk and fixating only on return.
2009-11-03 Absolutely ? Maybe by Robert Huebscher (Article)
Since Putnam introduced its absolute return funds earlier this year, over 4,200 advisors and $650 million in assets have flocked to the new financial products. Putnam's four funds seek to beat inflation by 100, 300, 500 and 700 basis points, and their performance over their first nine months (3.1%, 6.4%, 8.4% and 12.2%, respectively) was encouraging for their investors. Impressive as those results may be, the question is whether they are sustainable.
2009-11-03 The Best Books on Investing by Vitaliy Katsenelson (Article)
Author and fund manager Vitaliy Katsenelson provides us with his list of the best books on investing. It contains six sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, and Books for the Soul.
2009-11-03 I am a Fiduciary Financial Advisor by Ron A. Rhoades, J.D., CFP (Article)
The fiduciary standard of conduct is necessary to properly align investors' interests with those of the advisors who serve them, says Ron Rhoades in this guest contribution. Moreover, the fiduciary standard of conduct is not onerous and should not be feared. Advisors who embrace a fiduciary standard of conduct must simply follow the guidelines he sets forth.
2009-11-03 The Expense Paradox by John F. Doyle (Article)
A convenient reason to eliminate a fund from consideration is high expenses. While that criterion alone is often a good guideline, blindly relying on it can cause you to overlook otherwise attractive funds, says consultant Jack Doyle in this guest contribution.
2009-10-27 Managing Downside Risk in Retirement Planning by Geoff Considine, Ph.D. (Article)
Boston University professor Zvi Bodie advocates a retirement investment strategy that offers investors some of the upside potential in equities tempered with downside protection against bear markets and a low-risk inflation hedge via heavy allocation to TIPS. Geoff Considine examines Bodie's strategy and shows that it will work very effectively, including in a bear market like the one just experienced.
2009-10-27 The Power of Proactive Client Calls by Dan Richards (Article)
Dan Richards often asks advisors how many proactive calls they make to clients in the average day. The most common response is one or two ... and often the answer is zero. Many advisors underestimate the impact of proactive calls on clients.
2009-10-20 Letters to the Editor - Fama-French and the Active-Passive Debate by Various (Article)
Last week's article, Luck vs. Skill in Mutual Fund Alpha Estimates, on the latest research from Ken French and Gene Fama drew plenty of responses. We publish two of them, both in support of active management.
2009-10-20 Life in and after the NBA Financial Planning for Professional Athletes by Robert Huebscher (Article)
During a 13-year career that began in 1987, Chris Dudley was called on to defend some of the greatest centers in NBA history - among them Shaquille O'Neal, Robert Parish, and David Robinson. While developing a reputation as an exceptional shot-blocker and rebounder, Dudley also devoted time to preparing for his post-basketball career - as a financial advisor - and he shares with us his thoughts about financial planning for the professional athlete.
2009-10-06 Ten Tips from Advisors Down Under by Terry Bell (Article)
The question for advisors is what's going to happen to their role and how they can best adapt to a changing world. Irrespective of the details, change will continue. Perhaps the Australian experience can provide a few pointers for US advisors.
2009-10-06 SpeedReading® People for More Productive Client Relationships by Paul D. Tieger (Article)
In our relationship-driven industry, it is critical to understand how to best communicate with each client and prospect. Most people assume that people want to be communicated with in the ways that they prefer. However, as Paul Tieger explains in this guest contribution, different personality types require information to be communicated differently.
2009-09-29 Social Networking is Still Networking by Kristen Luke (Article)
Why do some expect that social networking should produce results in a matter of a couple of months? It is still networking and should be handled in the same manner. As Kristen Luke explains, merely advertising your business may work if you are a restaurant or hotel, but it doesn't work in a relationship-oriented business like financial advising.
2009-09-29 A Tale of Two Investors by Brian Murphy (Article)
Just as Dickens contrasted the fortunes and misfortunes in England and France in his classic novel, A Tale of Two Cities, today the divergence is painfully apparent in those who plan to accumulate wealth for their retirement and those who seek excess returns in their portfolios. In this guest contribution, advisor Brian Murphy tells the tale of two clients - one who aggressively sought alpha and the other who passively built retirement wealth.
2009-09-22 Three Ways to Market Your Business Using Facebook by Kristen Luke (Article)
Kristen Luke explains three ways advisors can promote their practice through Facebook: utilizing a basic personal profile, creating a business page and creating a group page.
2009-09-15 The 'Cash For Clunkers' Economy by Michael Lewitt (Article)
We are once again privileged to offer the latest edition of the HCM Market Letter, edited by Michael Lewitt, titled The 'Cash for Clunkers' Economy. Lewitt examines the drivers behind the current market rally, the health of the banking system and the housing industry, the the future for derivatives regulation. If you enjoy this newsletter, we encourage you to subscribe directly though the link provided with our article.
2009-09-15 Five Reasons to Avoid the Gold Rush (Updated) by Vitaliy Katsenelson (Article)
The reasons why one should sell the cat, pawn the mother-in-law, and use the proceeds to buy gold are well known. However, in this guest contribution, Vitaliy Katsenelson offers arguments why one should think twice before jumping in bed with the gold bugs, or at least remain sober while determining gold's weight in the portfolio.
2009-09-15 Theoretical Support for the Moving Average Crossover by Keith C. Goddard, CFA (Article)
In this guest contribution, Keith Goddard matches an appropriate descriptive theory about how asset markets work with recently published normative theory using Ted Wong's moving average crossover as an indicator for timing portfolio changes in active portfolio management strategies. He proposes that the theory of "Rational Belief Equilibrium" in asset markets, developed by Stanford professor, Mordecai Kurz, helps to explain why moving average crossovers have demonstrated predictive value in the stock market, and why they might continue to offer predictive value in the future.
2009-09-15 Practical Advice for Students Entering University by Dan Richards (Article)
If you have clients with children heading off to college or university this fall, consider emailing these tips which Dan Richards provides, both for them to read and perhaps to pass on to their children. Chances are those tips will be particularly appreciated where kids are leaving home and living on their own.
2009-09-08 Advisor Survey Shows Best Ways to Business Growth by Michael Slemmer, CFA (Article)
Many investment advisory and wealth management firms have struggled to increase assets in the recent difficult markets. In order to understand how advisors feel they are faring - and the keys, and obstacles, to success - we partnered with Advisors Trusted Advisor to survey advisors on the state of their business-building efforts.
2009-09-08 Tapping into Your Prospect?s Hot Buttons by Dan Richards (Article)
Experienced advisors know the importance of identifying and responding to the emotions that drive client's and prospect's behavior - and tailoring the way they interact with each individual's hot buttons. Dan Richards discusses how you can simplify your clients' lives with respect to communication, and provide a valuable service at the same time.
2009-09-01 The Levers to Financial Freedom by Russ Thornton (Article)
Virtually the entire financial services industry is built upon spending vast amounts of time, money and other resources on things over which we have absolutely no control - like attempting to manage investment returns. In this guest contribution, advisor Russ Thornton shows that, by focusing on those things you can control, you as a financial planner can build better, more resilient plans for your clients.
2009-08-25 Letters to the Editor by Various (Article)
In our letters to the Editor, a reader responds to Dougal Williams' article last week, A Crash Course in Investing: Six Lessons from the Market Meltdown, and other readers respond to our article on Actively Managed TIPS and to an Advisor Market Commentary on healthcare policy.
2009-08-18 A Crash Course in Investing Six Lessons from the Market Meltdown by Dougal Williams, CFA (Article)
The market decline from October 2007 to early March 2009 was the worst since the late 1930's. Stocks dropped 60%, investor uncertainty skyrocketed, and trust and confidence were shattered. The age-old rules for personal investing are now being questioned: Is Buy-and-Hold dead? Has Asset Allocation outlived its usefulness? Does Diversification still work? In this guest contribution, Dougal Williams provides answers to these questions that can serve as a guide for long-term investment success.
2009-08-11 At the Risk of Repeating Ourselves by Michael Lewitt (Article)
We have said before that Michael Lewitt's newsletter is a must-read, and this edition is no exception. Lewitt questions whether we are witnessing a summer calm before the storm, comments on the secured and unsecured debt asset classes, and opines on the abuses of unregulated dark pools of capital. We encourage you to subscribe to this valuable publication through the link we provide.
2009-08-11 Behavioral Finance Traps En Route to Investment Success by Dan Richards (Article)
To understand why investors fail to stick to their plans, economists and academics are studying the rapidly growing field of "behavioral finance," analyzing the patterns of behavior that cost investors serious money. Dan Richards looks at the current research and its implications for investors and advisors.
2009-08-04 Uncovering the Mayhem in 2008 in the TIPS Market by Robert Huebscher (Article)
In an interview two weeks ago, Yale Endowment manager David Swensen singled out TIPS as the best way to protect against inflationary and deflationary scenarios. We review a comprehensive study of the history of the inflation-indexed bond market, including an explanation for the extreme volatility in TIPS last year.
2009-08-04 How to Think about Return and Risk at the Same Time by Adam Jared Apt (Article)
In this guest contribution targeted to the educated layman, Adam Apt discusses the relationship between return and risk. Only when you can keep in mind at one and the same time these two concepts can you properly understand how to invest. And you will also understand why you should invest. Without the marriage of the concepts, you will be playing the market-or shunning it-as if it were a casino.
2009-07-21 Change or be Changed by Bob Padgette, CFA, CIMA and Ted Ponko, CFA (Article)
New financial services regulation will touch on many areas, and mutual fund evaluation and monitoring is one likely candidate. Over the past two decades, screening has been at the core of most mutual fund evaluation processes. The advisor picks the criteria, sets a minimum or maximum level for each, and comes up with a list of funds that survive all screens. Bob Padgette and Ted Ponko of Klein Systems demonstrate several inherent flaws in this process.
2009-07-21 SIFMA?s Proposed by Ron Rhoades (Article)
On July 17, 2009, the Securities Industry and Financial Markets Association ("SIFMA") announced that its Private Client Group Steering Committee unanimously supports a new federal fiduciary standard for broker-dealers and investment advisors, embracing a proposal advanced by the Obama administration a week earlier in a draft of the "Investor Protection Act of 2009." Ron Rhoades looks at whether this shift in direction by SIFMA poses a radical change in business models, or whether the "new federal fiduciary standard" is something else in disguise.
2009-07-14 Behavioral Finance ? A Three-Part Model for Client Relationships by Susan B. Weiner, CFA (Article)
Behavioral finance can improve your client relationships during market turmoil, if you recognize your clients' emotional right-brained reactions before you offer insights based on your analytical left-brained analysis. By applying a three-pronged process of Recognize-Reflect-Respond, you can adapt to new information in a thoughtful and effective framework.
2009-07-14 Billie Jean, YOU are the One by Mariko Gordon (Article)
Michael Jackson's Billie Jean wasn't the first to make headlines. Back in 1973, Billie Jean King moved the sports world a big step forward ... a step that the financial services industry is still waiting to take. Guest contributor Mariko Gordon of Daruma Asset Management explains why our overwhelming male-oriented industry necessarily leaves investment returns on the table.
2009-07-14 Three Steps to a Referral Conversation that Works Today by Dan Richards (Article)
Recommendations initiated by someone looking for an introduction to an advisor doing a good job for a friend have always been an important driver of referrals, but this will be especially true this summer. In some instances, your clients will be asked outright how they feel about the job you've done and if they are comfortable recommending you. Dan Richards provides a three-step plan to make this happen.
2009-07-07 Marty Whitman: The Outlook for Distressed Securities by Robert Huebscher (Article)
Marty Whitman is the founder, Co-Chief Investment Officer, and Portfolio Manager of the Third Avenue Value Fund and a veteran value investor with a long, distinguished history as a control investor. In our interview, he discusses the opportunities in distressed securities created by the financial crisis.
2009-06-30 Getting Prospecting into First Gear by Dan Richards (Article)
"A year ago, all kinds of new clients were coming on board - I was firing on all cylinders" a veteran advisor told Dan Richards recently. "Today, I'm having trouble getting prospecting into first gear. I feel like I'm stuck in a rut and I'm not sure how to get out." Dan sketched out a plan for two low cost prospecting lunches, with six simple steps taking ten to twelve hours per lunch.
2009-06-23 The Road to Zimbabwe by Robert Huebscher (Article)
John Williams of Shadow Government Statistics is best known for exposing inaccuracies and biases in government reporting of data - most notably the understatement of the CPI index. Williams says the US economy is on the brink of hyperinflation which will render the dollar worthless, as happened recently to Zimbabwe's local currency.
2009-06-16 What Separates Great from Ordinary CRM Systems by Gary Kinghorn (Article)
In this guest contribution, Gary Kinghorn of AdviceAmerica says that effective CRM system must be centralized applications where all team members can view, share and update information, such as client tasks, documents, data and portfolios. This ensures everyone has current and accurate information at a glance.
2009-05-26 What the ?Missing Out? Argument Misses by Theodore Wang (Article)
Market timing is discredited by passive investment advisors as a voodoo ritual. Buy-and-hold proponents argue most compellingly by citing the "missing out" scenario - they show a dramatic drop in return, to Treasury Bill levels, if investors are out of the markets for only a few good days. In this guest contribution, Ted Wong debunks the missing out argument, using 137 years of market data.
2009-05-19 David Swensen's Ascent by Mebane Faber (Article)
Mebane Faber provides an excerpt from his new book, The Ivy Portfolio, on the ascent of David Swensen and the development of the tools employed to manage Yale's endowment. Faber shows the data Swensen used to determine Yale's aggressive allocation to alternative asset classes.
2009-05-19 Turning Corporate Downsizing into Prospecting Success by Dan Richards (Article)
Optimists in the investment business claim "Crisis breeds opportunity." Dan Richards looks at the worst consequence of the current crisis - corporate downsizing - and shows how advisors used five different approaches to create opportunities while helping those faced with job losses.
2009-05-19 Here Come the Brides by Mariko Gordon (Article)
When it comes to selecting a money manager, many clients today are casualties of the same opaqueness the Japanese face in arranged marriages. Hiring a money manager does not include the same solemn, lifelong commitment as choosing a spouse, according to fund manager Mariko Gordon. But, in this guest contribution, she argues that the hiring process, if not handled well, can also lead to disappointment.
Facing Reality by Questioning Some Common Beliefs by Ron Surz (Article)
I've decided to do something different in this quarterly commentary. I begin as usual with a review of first quarter market performance. Then I turn my attention to some commonly held beliefs that I regard as mistaken, as shown in the figure below.