More on Related Themes
2015-07-01 00:00:00 The Smartest Man is Wild about Innovation by Byron Wien of Blackstone
For the past fifteen years I have written annually about a person I have come to call “The Smartest Man in Europe.” For new readers, he is a finance person in his 80’s who has built his reputation by identifying important trend changes early and putting serious money behind his conclusions. Descended from a mercantile family that operated canteens selling food and weather protection along the Silk Route, he was educated in Europe, trained in New York and returned home to take advantage of the wealth-creating opportunities resulting from the post-war recovery.
2015-07-01 00:00:00 Greece Firestorm Won't Stifle Consumer Comeback by Kristina Hooper of Allianz Global Investors
Investors should expect more volatility in the stock market and larger flows into US Treasuries this week given the increased likelihood of a Grexit. Rather than hide, investors could view this crisis as a buying opportunity—a chance to position their portfolios for the second half of 2015. Over the longer term, fundamentals like job creation and a healthier consumer play a far more important role.
2015-07-01 00:00:00 The Whole Story: Factors + Asset Classes by Jason Hsu of Research Affiliates
Every year we invite some of the investment industry’s most creative thinkers to speak about their work at the Research Affiliates’ Advisory Panel conference. Along with Nobel laureates Vernon Smith and Harry Markowitz, the speakers at our 14th annual meeting included Campbell Harvey, Richard Roll, Andrew Karolyi, Bradford Cornell, Andrew Ang, Charles Gave, Tim Jenkinson, and our very own Rob Arnott. The richness of the speakers’ presentations beggars any attempt to summarize them; I’ll limit myself to the points I found most intriguing and illuminating.
2015-07-01 00:00:00 A Return to Fundamentals? by Niels Jensen of Absolute Return Partners
June was a very eventful month, in particular here in Europe. Greece went from bad to worse, and the Greek people have now been asked to vote on their own destiny in a referendum scheduled for Sunday 5 July, which we expect to return in a 'Yes' vote. However, Greece is not the only subject in the July Absolute Return Letter. Financial markets have in many ways behaved oddly since the near meltdown in 2008. The objective of this month's letter is to look at whether we are finally beginning to see some sort of normalisation - as in a return to the conditions we had prior to 2008...
2015-07-01 00:00:00 Growth Matters by Mark Mobius of Franklin Templeton Investments
We have found that companies in the consumer or retail space with a high market share can benefit from rising consumption and GDP per capita. These investments are particularly attractive if profit margins can be improved.
2015-07-01 00:00:00 Greece and Puerto Rico Spark Global Volatility by K. Sean Clark of Clark Capital Management Group
More than five years after first entering investors’ view, the Greek drama has again hit center stage and has investors fretting about a market collapse.
2015-06-30 00:00:00 A Mid-Year Assessment of Our Ten Predictions by Robert Doll of Nuveen Asset Management
We have described 2015 as the year when investors transition from disbelief to belief, or from skepticism to optimism. Sir John Templeton coined the phrase, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” We believe we are entering the “optimism” phase.
2015-06-29 00:00:00 Don’t be Surprised - Speech to CFA Society of Chicago by Stephen Romick of FPA Funds
I’m reminded of a gentleman who discovers a genie in a bottle. Granted one wish only – apparently even genies have pricing power – the man asks for peace in the Middle East. The genie backs away and says, “That’s way too difficult. Give me something easier.” The man ponders his options and asks the genie instead, to help him pick a good mutual fund. The genie quickly responds, “Let me get to work on the Middle East.”
2015-06-29 00:00:00 Emerging Markets After the Fed Hikes Rates by Nouriel Roubini of Project Syndicate
The prospect that the US Federal Reserve will start exiting zero policy rates later this year has fueled growing fear of volatility in emerging economies’ currency, bond, and stock markets. But, with a few exceptions lacking systemic importance, widespread distress and crises need not occur.
2015-06-27 00:00:00 World Markets Weekend Update: The Shanghai Selloff Continues by Doug Short (Article)
The top performers in our world market focus group over the past week were the two Eurozone indexes. France's CAC 40 rose an impressive 5.06%, and Germany's DAXK was up 4.10%, both bouncing back a bit from the European selling associated with the ongoing and rather tedious Grexit drama. But the bigger international story is the mounting evidence of the Shanghai Bubble. The benchmark Shanghai Composite dropped another 6.37%, following up on its 13.32% plunge the previous week.
2015-06-27 00:00:00 $8 Trillion Alternative Energy Boom Is a Win for Copper by Frank Holmes of U.S. Global Investors
As the world’s population continues to grow, and as more people in developing and emerging countries gain access to electricity, the role alternative energy sources such as wind, solar and geothermal play should skyrocket. Between now and 2040, a massive $8 trillion will be spent globally on renewables, about two thirds of all energy spending, according to Bloomberg New Energy Finance. Solar power alone is expected to draw $3.7 trillion.
2015-06-25 00:00:00 Unconstrained Global Investing in an Extraordinary Monetary Policy Enviornment by Michael Hasenstab of Franklin Templeton Investments
As we see it, it is only a matter of time before US wages start to rise to levels where inflation is triggered. Using the Fed’s own estimates, we are quite close to what’s considered to be full employment. To us, this does not justify 0% interest rates.
2015-06-25 00:00:00 Outrunning the Bear: Pension Strategy in a Low Return World by Jared Gross of PIMCO
Pension investors often seek to meet two conflicting objectives: delivering high absolute returns and managing risk relative to liabilities. Unfortunately, this approach has not produced the desired result because the strong absolute performance of risk assets has been eclipsed by even-faster growth in liabilities. With the era of surging liability values most likely behind us, a realistic goal today may be a relative one: outperforming the value of liabilities, by a smaller margin perhaps, but with more diversification and less risk.
2015-06-25 00:00:00 Batteries Not Included: Midyear Stock Market Outlook by Burt White, Jeffrey Buchbinder of LPL Financial
Expect the bull market to continue through 2015. In the stock market, 2015 has felt like déjà vu. In 2014, the year began with a tough first quarter and finished strong. After a weak start to the year, we believe that corporate America will provide a much needed boost for the second half and 2015 may also finish strong?—?providing the seventh year of positive returns, in the 5?–?9% range we forecast.
2015-06-25 00:00:00 Building for the Future: Infrastructure in Emerging Markets by Mark Mobius of Franklin Templeton Investments
Emerging economies in general have experienced stronger economic growth trends than developed markets over the past decade, a trend that I expect to continue. That growth, combined with rising populations and a trend toward urbanization, requires more infrastructure.
2015-06-24 00:00:00 Putting the Pieces Together: Midyear Economic Outlook by John Canally Jr. of LPL Financial
We continue to expect that the U.S. economy will expand at a rate of 3% or slightly higher over the remainder of 2015, once economic conditions recover from yet another harsh winter—and other transitory factors—that held back growth in the early part of 2015. This forecast matches the average growth rate over the past 50 years, and is based on contributions from consumer spending, business capital spending, and housing, which are poised to advance at historically average or better growth rates in 2015. Net exports and the government sector should trail be hind.
2015-06-24 00:00:00 Handicapping Bubbles and Shocks by Kristina Hooper of Allianz Global Investors
Kristina Hooper, US Investment Strategist for Allianz Global Investors, explains the results of the 2015 Allianz Global Investors RiskMonitor Survey, a global study of prevailing views on portfolio construction, asset allocation and risk among a cross-section of institutional investors.
2015-06-23 00:00:00 Equities Gather Momentum on Positive Indicators by Robert Doll of Nuveen Asset Management
U.S. equities finished higher last week as the S&P 500 increased 0.8%, recording its highest weekly gain since April. The dovish message from Wednesday’s FOMC announcement boosted markets. Contagion from Greece appears relatively contained. The sell-off in equities in China did not impact global markets. The health care, consumer staples and utilities sectors rallied. Financials lagged as banking lost momentum and energy underperformed.
2015-06-22 00:00:00 Global Review and Equity Commentary: May 2015 by Team of Thomas White International
The decline in U.S. economic activity during the first quarter was more than earlier estimates, and appears to have weakened business sentiment in other parts of the world. Most of the fall in U.S. aggregate output was due to temporary factors such as adverse weather and port disruptions that led to delayed export shipments. The stronger dollar also reduced the earnings growth of large U.S. corporations with a global footprint.
2015-06-19 00:00:00 Gold and Health Care Stocks Get a Clean Bill of Health by Frank Holmes of U.S. Global Investors
Even though the Federal Reserve announced this week that it would wait a little longer to raise rates, spooked investors fled to gold bullion, helping to drive prices above $1,200 an ounce. It was the greatest single-session surge by percentage in nearly a month and a half for the yellow metal, widely seen as a safe-haven investment. As I told MarketWatch yesterday, $1,200 is an important threshold for gold miners because it helps increase profitability and spur production.
2015-06-19 00:00:00 Northern Trust Perspective by Jim McDonald of Northern Trust
While we expect U.S. growth to see some improvement from the slow start to the year, we think optimists are likely to be disappointed at the overall pace of growth. The U.S. economy has averaged 2.2% growth since the financial crisis, and we don't see a material acceleration during the near-to-intermediate term. The prospect of a pending increase in the Fed funds rate has contributed to a rise in interest rates and strengthening of the dollar, both of which serve as a constraint on growth. We also don't see much upside to the U.S. economy through materially better growth outside the U.S.
2015-06-09 00:00:00 Can We Recover from the Public Debt Crisis? Of Course We Can by Laurence Siegel (Article)
Is the world facing a public-debt crisis, or is too much debt just another headache we will muddle through? How can investors distinguish between countries that are likely to default or otherwise injure debtholders, such as through high inflation, and those that will resolve their debt problems and emerge stronger? How can countries deal with high and rising levels of debt and return their finances to a sound footing?
2015-06-09 00:00:00 Four Reasons Why We Do Not Hedge Against Currency Volatility by Sponsored Content from Invesco (Article)
Currency volatility has continued to be a clear theme so far in 2015. Our International Growth strategy doesn't hedge for currency exposure, and never has. In essence, the team is much more concerned with what company managements are doing than central bankers.
2015-04-14 00:00:00 Stock Market Returns - The GDP Growth Rate Myth by Baijnath Ramraika, CFA® (Article)
The idea that nominal equity market returns approximate the country's GDP growth rate is historically uninformed and intellectually dishonest. If there were any merit to the idea that equity market returns should approximate GDP growth rate, we would see this in a tight relationship between the two variables across countries. But we don't.
2015-04-07 00:00:00 Behind Arnott's Strategy for PIMCO's All Asset Funds by John Coumarianos (Article)
If you thought a stretch of subpar performance would shake a fund manager's confidence, you'd be wrong in the case of Rob Arnott. Through Research Affiliates, his Newport Beach firm most famous for its fundamental indexing strategies, Arnott manages PIMCO's All Asset funds. These include PIMCO All Asset (PAAIX) and PIMCO All Asset All Authority (PAUIX).
2015-02-10 00:00:00 Mohamed El-Erian: Beware the Bubble in Liquidity by Robert Huebscher (Article)
In 2000, it was technology stocks. In 2007, it was real-estate prices. Among today's overvalued asset classes, which one will crash most spectacularly when the bubble bursts? Mohamed El-Erian, the chief economic advisor at Allianz, thinks he knows the answer.
2015-01-27 00:00:00 Key Issues for 2015: The View from Western Asset by Sponsored Content from Legg Mason Investor Services LLC (Article)
The U.S. represents a bright spot in a global recovery best characterized as "two steps forward, one step back." Sector and issue selection remain crucial in this environment, but so do macroeconomic strategies, which may help provide ballast when the pace of recovery slows.
2015-01-20 00:00:00 Seeking Strong Int'l Growth Stocks Amid Mixed Macro Signals by Sponsored Content from Invesco (Article)
Previously stretched valuations have become reasonably constructive in Europe's stalled economy. China's structural reforms and corruption crackdown could be positive in the long term. The commodity cycle downturn hurts resource-dependent emerging markets but benefits net commodity importers.
2014-12-22 00:00:00 A Look Back at 2014 (and a 2015 Preview) by Robert Doll of Nuveen Asset Management
At the beginning of this year, we had three broad thoughts about what it would look like. First, we expected U.S. economic growth would accelerate moderately. Second, we believed Federal Reserve tapering would occur slowly and that global monetary policy would remain accommodative. And third, we forecasted that the U.S. equity market would grind higher due to central bank liquidity, modest economic acceleration, solid corporate earnings, contained inflation and an improving fiscal situation. These views formed the basis for the predictions we made in January. And at this point, we can offer a
2014-12-13 00:00:00 Bulls, Bears and Pigs by Robert Isbitts of Sungarden Investment Research
So, the global stock markets have your attention. Whether you are focused on declining economic prospects in Europe, Emerging Markets weakness or the recent slide in the U.S. stock market, we are all forced to contemplate something that may now be driving up beside us, not merely in the rear-view mirrora stock bear market.
2014-12-06 00:00:00 Five Ways to Tackle Risk in Emerging Equities by Nelson Yu and Morgan C. Harting of AllianceBernstein
Emerging-market (EM) equities are far more turbulent than their developed-world peers. But there are several things investors can do to capture the attractive return potential while reducing volatility. Staying active is the lynchpin for success.
2014-11-27 00:00:00 Pick and Mix: Fresh Ideas for Diversifying Bond Exposure by John Taylor of AllianceBernstein
Policy backdrops and growth trajectories around the world are showing increasing signs of divergence. Yet many bond investors continue to congregate in a few selected pockets of the fixed income universe. In our view, its a perfect time to reconsider diversification tactics.
2014-11-25 00:00:00 Jeremy Siegel - Fair Value for the S&P 500 is 2,300 by Robert Huebscher (Article)
During the post-financial crisis period, no person has been more accurate at forecasting U.S. equity market returns than Jeremy Siegel, the Russell E. Palmer Professor of Finance at the Wharton School. In this year's interview, he explains why the fair value of the S&P 500 is 11% higher than its valuation today.
2014-11-24 00:00:00 Equities Benefit as U.S. Growth Solidifies by Robert Doll of Nuveen Asset Management
The dominant news story last week was President Obamas announcement of new executive actions on immigration policy, but investors chose to look past any political risks and focused on the positives. Specifically, markets reacted well to signs that the European Central Bank would expand its monetary easing and to a surprise interest rate cut in China.
2014-11-18 00:00:00 How AQR's New Fund Adds Value - An Alternative Approach to Alternatives: Investing with Style by Larry Swedroe (Article)
The conventional justification for alternative investments has been their ability to effectively diversify against core equity and fixed-income allocations. But, in many cases, the empirical data doesn't support that view. A new fund provides a different way to obtain returns from sources that have low to negative correlation to stocks and bonds, as well as each other - an alternative to alternative investment vehicles.
2014-11-11 00:00:00 The Opportunity in Japan is Not Over by Christopher Gannatti, of WisdomTree
We believe that the ultimate success of Abenomics will be judged over a period of multiple years, and while certain actionsespecially those from the Bank of Japanhave been significant, others, like structural third arrow reforms, will take time.
2014-10-28 00:00:00 How Moving Average Strategies Can Really Work by Jerry A. Miccolis, CFA®, CFP®, FCAS, CERA, Marina Goodman, CFA®, CFP® and Rohith Eggidi (Article)
In a previous article, Paul Allen explored the universe of moving average crossover (MAC) strategies. In his thorough and even-handed analysis, Allen concluded that MAC strategies can effectively decrease periodic drawdowns in portfolios but can materially underperform during bull markets. In this article, we propose how to improve MAC strategies so that they may perform better during bull markets and still provide protection during bear markets.
2014-10-28 00:00:00 Will the Ebola Scare Haunt the Stock Market? by Kristina Hooper of Allianz Global Investors
Kristina Hooper prescribes four key takeaways from the Ebola epidemic and what it means for investors.
2014-10-27 00:00:00 Equities Recover Some Ground and Still May Have Room to Run by Robert Doll of Nuveen Asset Management
With global deflation and growth fears fading, U.S. equities snapped their four-week losing streak last week with the S&P 500 Index gaining 4.1%. This advance marked the largest weekly gain since January 2013. Following the correction from the mid-September to mid-October, the S&P 500 has now rallied 8%, leaving it only 3% from its all-time high.
2014-10-21 00:00:00 The Skinny on Fatter Tails for Fed Policy by Kristina Hooper of Allianz Global Investors
Kristina Hooper comments on escalating fears that a slowdown in global growth could hamstring the US recovery and what that means for monetary-policy outcomes in the United States.
2014-10-20 00:00:00 Equity Losses Continue, but This Correction May Be Ending by Robert Doll of Nuveen Asset Management
Markets endured a sharp pullback and higher volatility, but technical factors suggest we may be nearing the end of the current correction. Long-term, we believe fundamentals remain sound, the U.S. economy should continue to grow and equities should be able to grind higher.
2014-10-20 00:00:00 Five Ways to Keep Out of the Bond Liquidity Trap by Douglas Peebles of AllianceBernstein
Bond investors are used to managing interest-rate risk and credit risk. But the financial crisis should have taught us that there are times when liquidity risk can be just as important to manage. Now is one of those times.
2014-10-13 00:00:00 Five Ways to Keep Out of the Bond Liquidity Trap by Douglas J. Peebles of AllianceBernstein
The good news is that liquidity risk is manageableand can even offer attractive opportunities, given the right time horizon. When liquidity dries up in one sector, it can be plentiful in another. If managed properly, it can be an additional source of returns. Here are five things investors can do to stay afloat.
2014-10-07 00:00:00 A Q3 Letter to Clients: How to Navigate Rough Waters 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 an outlook for the period ahead. Be sure to customize the letter to reflect your views, especially when it comes to recommendations for the period ahead.
2014-10-07 00:00:00 Most Risk Assets Should Continue to Find Support by Robert Doll of Nuveen Asset Management
Equity prices continued to slide in the face of uncertainty over global growth and pending changes to monetary policy. U.S. growth is continuing to improve, and shows further signs of divergence from the rest of the world. Markets may remain sloppy for a while, but fundamentals suggest most risk assets should continue to perform well.
2014-10-06 00:00:00 The Most Important Chart in the World by Mark Ungewitter of Charter Trust Company
One of todays most glaring inter-market divergences is the relative performance of US versus non-US equities. For dollar-based investors, non-US stocks have underperformed US stocks by an astounding 40% over the past five years.
2014-09-29 00:00:00 Looking Past the Risks, Equities Still Appear Attractive by Robert Doll of Nuveen Asset Management
Last week featured some positive economic news, but equity markets sank nonetheless, with the S&P 500 Index falling 1.3%. On the bright side, we saw some strong data from the housing market and an upward revision to second-quarter gross domestic product growth (GDP).
2014-09-22 00:00:00 A Lack of Surprises Helps Equity Markets Make Gains by Robert Doll of Nuveen Asset Management
Equity markets rose again last week, with the S&P 500 Index climbing 1.3% and reaching another record high. Bond yields and the U.S. dollar drifted higher, while emerging market equities and commodities struggled. Two major events that resulted in a continuation of the status quo helped market sentiment.
2014-09-19 00:00:00 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The choice for Europe: coming together or breaking apart; Scotland votes nay; The dollar has been the beneficiary of global uncertainty
2014-09-16 00:00:00 Of Kilts, Ballots, Bankers and Dots by Kristina Hooper of Allianz Global Investors
Kristina Hooper breaks down the hairy mix of economic data, central bank policy and geopolitical events, including Scotland's potential exit from the UK, that markets are combing through right now.
2014-09-04 00:00:00 What's Next for the Dollar and Gold? by Axel Merk of Merk Investments
One reason markets tend to get a little nervous in September is that its time for investors to ponder about their asset allocation for the remainder of the year and beyond. With the markets at or near record highs and the US dollar on a roll, what could possibly go wrong? Lets look at whats next for the dollar, gold, and currencies.
2014-09-03 00:00:00 International Developed and Emerging Markets by Riad Younes of R Squared Capital Management
This commentary explores what the author believes to be the best opportunities in international investing along with challenges facing investors in developed and emerging markets.
2014-08-23 00:00:00 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Company
Sometimes, Im tempted to write same as last time. This is one of those times.
2014-08-20 00:00:00 Is a Big Equity Correction Imminent? Not Yet by Vadim Zlotnikov of AllianceBernstein
Many investors think US stocks are due for a correction: They feel that the market has run too far, that the Fed has been slow to act, that complacency has created pockets of excess. Do these gut feelings mean a major equity correction looms? Not yet, in our view.
2014-08-19 00:00:00 Not A Single Developed Sector Is Trading Below 22x P/E by Team of GaveKal Capital
Markets rarely turn on valuation levels alone. Most of the time it takes a case of irrational greed or fear to mark a turning point in the stock market. However, it is always wise to keep one eye on valuations in order to calibrate just how much more greed or fear can be squeezed out of current earnings.
2014-08-13 00:00:00 Time to Consider Korea Hedged Equities by Jeremy Schwartz of WisdomTree
The Korean won has been on a tear as one of best-performing emerging-market currencies in 2014. And this has the Korean government and central bank officials worried that the rising Korean won is eroding the competitiveness of Koreas exports.
2014-08-12 00:00:00 What a Credit-Shy Consumer Means for Growth by Kristina Hooper of Allianz Global Investors
Consumers have been cautious about running up credit-card debt since the financial crisis. But is that necessarily bad for the economy? Kristina Hooper breaks it down.
2014-08-06 00:00:00 What Asset Class Rallied Last Week amid the Sell-Off? by Luciano Siracusano III of WisdomTree
Last Thursdays sell-off in U.S. stocks (the Dow was down 317 points, the S&P 500 Index was down nearly 2%) marked the biggest stock market decline in nearly four months. The S&P 500 Index closed at 1,930 after it broke its 50-day moving average for the first time since April.
2014-08-04 00:00:00 Mounting Pressure Weighs on Equities by Robert Doll of Nuveen Asset Management
U.S. equities experienced a sharp pullback last week, with the S&P 500 Index falling 2.7%, its largest weekly decline in over two years. A number of factors contributed to the downturn, including rising geopolitical tensions, concerns over Federal Reserve policy, Argentinas debt default, a slowdown in the housing recovery and a sense that the market rally has been getting tired. Not all of the news was negative, however, since we also saw some strong economic and earnings data and increasing merger and acquisition activity.
2014-07-15 00:00:00 Information That Will Increase Your AUM by Daniel Solin (Article)
You most likely approach investing based on a defined set of sound academic principles. In contrast, many advisors approach meeting with prospects on an ad hoc basis. If this dichotomy describes the way you do business, you should consider making some changes.
2014-07-15 00:00:00 Flip Floppers Drive Stocks Lower by Kristina Hooper of Allianz Global Investors
In the course of one slow news week, stocks went from celebration to selloff. What changed? Not the strong economic data, says Kristina Hooper. Its a classic flip-flop from investors who had time to mull over recent numbers and change their minds.
2014-07-08 00:00:00 Blowout Jobs Data Wont Trigger Quicker Rate Hike by Kristina Hooper of Allianz Global Investors
The markets are digesting a stellar jobs report, which may fuel debate over when the Fed will start raising rates. But its important for investors to understand the Feds holistic approach in order to avoid a kneejerk reaction, writes Kristina Hooper.
2014-07-05 00:00:00 2014 Mid-Year Outlook Update: Living Actively Forecast Continues by Stephen Wood of Russell Investments
Does 2014 at mid-year remain a year of living actively for investors as outlined in Russells 2014 Annual Global Outlook issued last December? In that report, my colleagues on the global team of investment strategists agreed on the macro-view that 2014 would be better represented as a year of validation than a year of appreciation. And now, as we examine the underlying fundamentals in the macro- data at mid-year, I dont see a reason yet to alter our year of validation call.
2014-06-24 00:00:00 A Mosaic Approach to Raising the Fed Funds Rate by Kristina Hooper of Allianz Global Investors
The Federal Reserve is using a wide swath of economic data and anecdotal evidence to determine when to raise its benchmark interest rate. While prudent, it may stir up anxiety and volatility for equity investors, writes Kristina Hooper.
2014-06-17 00:00:00 Gundlach: A Big Moment for the Economy and the Markets by Robert Huebscher (Article)
The benchmark 10-year Treasury bond is an attractive investment, according to Jeffrey Gundlach, although its yield is likely to stay between 2.2% and 2.8% for the remainder of the year. Despite that narrow range, Gundlach foresees pivots in other parts of the investment landscape.
2014-05-28 00:00:00 Value Offers a Cushion: Why Last Years Winners Are Now Losers and Vice Versa by Russ of BlackRock
A trend in markets this year has been the poor performance of last years stock market winners, and the resilience of some of last years losers. Russ takes a look at whats behind this trend, specifically with retailers and emerging markets.
2014-05-27 00:00:00 Economy Begins to Accelerate While Equities Push Higher by Robert Doll of Nuveen Asset Management
U.S. equities finished higher last week as the S&P 500 advanced 1.3%, snapping a two-week losing streak and ending at a new record high. Markets seemed to lack conviction, but the path of least resistance appeared skewed to the upside as momentum for the economic recovery was positive.
2014-05-22 00:00:00 Russian Interests by Mark Mobius of Franklin Templeton Investments
Tensions between Russia and Ukraine remain high, and have spilled onto the international stage. The Western world seemed to be caught off guard by Russian President Putins reaction to civil unrest in Ukraine, leading to Russias annexation of Crimea and spreading into a broader question of regional sovereignty. The situation remains fluid, so its difficult to predict just exactly how it might play out. But given escalating conflict in Eastern Ukraine, we do not envision an easy or quick end to the conflict.
2014-05-13 00:00:00 Equity Markets Remain Mixed as Fundamentals Slowly Improve by Robert Doll of Nuveen Asset Management
U.S. equities finished mixed last week as the Dow Jones Industrial Average was the only major index to end in positive territory. The overall macro narrative appears favorable despite the lack of market direction. Scrutiny of beaten-down momentum stocks resurfaced, although broader market spillover remained muted.
2014-05-06 00:00:00 The U.S. Economy Reached a Turning Point in April by Robert Doll of Nuveen Asset Management
U.S. equities finished higher last week with the S&P 500 advancing nearly 1.0%. Positive sentiment has been supported by growing traction for the economic recovery, key economic data and corporate commentary. Although the upbeat dynamics were mentioned in the latest FOMC statement, policy normalization expectations have not changed. Another widely discussed tailwind was M&A headlines. Although tensions continue in Ukraine, geopolitical risks were mostly on the back burner.
2014-04-28 00:00:00 Equities Awaiting Stronger Growth Before Next Move by Robert Doll of Nuveen Asset Management
U.S. equities finished modestly lower last week with the S&P 500 nearly unchanged. Most of the damage occurred on Friday when escalating tensions surrounding Ukraine weighed on sentiment. Positive dynamics included an improvement in first quarter earnings metrics, a notable pickup in M&A activity and deal speculation. A broader macro narrative reflects better traction for the recovery and gradual policy normalization. With momentum plays under renewed scrutiny, several internet, software and biotech companies sold off despite an expected cushion from solid first quarter results.
2014-04-25 00:00:00 A Creative Approach to Revitalize South Korea?s Economy by Mark Mobius of Franklin Templeton Investments
South Korea has been an exciting country to follow since Templeton started investing in emerging markets in 1987. The country represents one of the great success stories of the modern age, rising from extreme poverty at the end of the Korean War to become an affluent, democratic and highly technologically advanced country. However, we believe recent years have seen signs that the methods and structures that gave rise to the years of dramatic economic progress have started to lose their effectiveness.
2014-04-25 00:00:00 Income Market Insight by Payson Swaffield of Eaton Vance
Fans of NASCAR racing, and most other motorsports, know what it means when the yellow flag is being waved: proceed with caution. For investors in today?s credit markets, we believe that is an appropriate image to keep in mind. After five years of generationally low rates, investors are ?stretching? for yield ? that is, they are scooping up deals at yields that, in our opinion, barely compensate them for the risk.
2014-04-24 00:00:00 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Company
Most of the economic and market trends we've been discussing for the past few years remain in place. Russia's action in the Ukraine/Crimea may have long-term implications, particularly for Europe, but the near-term economic implications are modest. It remains to be seen whether this gets added to our long-term worry list or not.
2014-04-22 00:00:00 Unloved Emerging Markets May Hold Value for Opportunistic Bond Investors by Kathleen Gaffney of Eaton Vance
· Emerging markets have come under pressure over the past year due to the Federal Reserve tapering its asset purchases and increased expectations of higher interest rates in the U.S. · We think investors should consider emerging markets to find opportunities that may provide a yield advantage and diversification away from U.S. interest-rate risk. · A multisector approach that uses bottom-up, fundamental credit analysis may be helpful in finding opportunities in emerging markets.
2014-04-15 00:00:00 Equity Market Insight by Thomas Faust, Jr. of Eaton Vance
After a powerful rally in 2013, the first quarter of 2014 saw the bull market demonstrate a measure of resilience in the face of several headwinds. In the latter half of January, stocks fell sharply on emerging-market concerns, with volatility spiking to more "normal" post-financial crisis levels. The market bounced back strongly in February and went on to record a new all-time closing high on March 7. Performance was choppy in the final few weeks of the quarter, as investors digested mixed economic reports, geopolitical issues and the latest U.S. Federal Reserve (Fed) meeting.
2014-04-14 00:00:00 Economic Insight: Fed Policy Goes Back to the Future by Thomas Luster of Eaton Vance
We fully expected the strength the economy showed in late 2013 to carry over into 2014; however, that simply was not the case. Instead, we saw weaker-than-expected economic data across a wide range of economic indicators. Not surprisingly, interest rates fell modestly during the quarter rather than continuing their trend higher from last year, while U.S. stocks (as measured by the S&P 500) reacted similarly ? barely advancing after a 32% gain in 2013.
2014-04-11 00:00:00 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Co.
Most of the economic and market trends we?ve been discussing for the past few years remain in place. Russia?s action in the Ukraine / Crimea may have long-term implications, particularly for Europe, but the near-term economic implications are modest. It remains to be seen whether this gets added to our long-term worry list or not.
2014-03-31 00:00:00 Will Jobs Benefit From a Spring Thaw? by Kristina Hooper of Allianz Global Investors
The upcoming jobs report, a bellwether for the health of the US economy, could reveal that the harsh winter has created a coiled spring in the labor market, writes Kristina Hooper.
2014-03-26 00:00:00 Unleashing Africa?s Potential by Michael Hasenstab of Franklin Templeton
Many investors who have never traveled in Africa probably have preconceived ideas about it, perhaps as a land of safaris and political strife, rich in coveted natural resources that have failed to bring widespread wealth and development to the continent. Many also might not realize how diverse the landscape, the economies and the people are on the continent, which boasts more than 1,000 languages spoken in more than 50 countries and climates ranging from hot deserts and tropical rainforests to frozen glaciers.
2014-03-24 00:00:00 Stocks Rise as Economic Backdrop Slowly Improves by Bob Doll of Nuveen Asset Management
U.S. equities finished higher last week, with the S&P 500 increasing 1.4%. Ukraine seemed to be receding in investors? minds. Despite the volatility and sharp increase in bond yields on Wednesday, the hawkish takeaways from the FOMC meeting were not a lingering overhang.
2014-03-18 00:00:00 Gundlach - Rates Will Remain Low in 2014 by Robert Huebscher (Article)
Slowing economic growth, low inflation and a lack of motivated sellers will keep interest rates depressed, at least for the rest of this year, according to Jeffrey Gundlach. But investors should prepare for an eventual rise in rates, he said, because he is skeptical of the Federal Reserves ability to successfully exit from QE.
2014-03-18 00:00:00 Can the Fed Fend Off the Ides of March? by Kristina Hooper of Allianz Global Investors
Mid-March hasn?t been associated with much good luck in Europe historically. And with Ukraine mired in conflict, this year?s no different. But investors should resist the urge to react to geopolitical uncertainty and expect steady guidance from the Fed.
2014-03-10 00:00:00 With Fed in Charge, 5-Year Bull Run Poised to Continue by Kristina Hooper of Allianz Global Investors
The Federal Reserve?s loose monetary policy and gradual improvement in the economy are two big reasons the stock market can keep moving higher, says Kristina Hooper. Will it be reflected in this week?s consumer sentiment and spending data?
2014-03-03 00:00:00 Casting a Wide Asset Net in a Volatile Sea by Ed Perks of Franklin Templeton
It?s fair to say that investors will likely never be fully comfortable with market volatility. But actively managing the inevitable bumps that accompany equity investments, even in bull markets, can help make the ride a little less harrowing, according to Ed Perks, executive vice president and director of Portfolio Management, Franklin Equity Group. He explains how understanding the fundamental dynamics behind market selloffs is key to uncovering potential opportunities in the face of a rough market ride.
2014-02-28 00:00:00 Bounce Back by Liz Ann Sonders, Brad Sorensen & Michelle Gibley of Charles Schwab
US stocks have bounced and the markets still attractive and in the midst of a secular bull market. But there are likely to be bumps along the way; notably given that this is a midterm election year; which are known for first-half pullbacks. A diversified portfolio is important and both European and Chinese stocks appear to have upside, while Japan continues to frustrate with a two-steps forward, two-steps back sort of approach. And a final reminder not to replace fixed income assets with equities in search of higher income without recognizing the risk profile of a portfolio has changed.
2014-02-27 00:00:00 Corporate Credit Charting its Own Course by Eric Takaha of Franklin Templeton
At the start of the year, equity investors were fretting about possible emerging-market contagion, while bond investors were fretting about fallout from US Federal Reserve tapering. Meanwhile, the corporate credit market seemed to be charting its own course. Eric Takaha, director of the Corporate & High Yield Group and senior vice president, Franklin Templeton Fixed Income Group, takes a look at the corporate credit/high-yield market and explains why he currently sees supportive fundamentals.
2014-02-25 00:00:00 Alternative Energy Brief by Edward Guinness of Guinness Atkinson Asset Management
This month we provide our Outlook for the Alternative Energy sector in 2014.
2014-02-24 00:00:00 Corporate Credit Charting its Own Course by Eric Takaha of Franklin Templeton
At the start of the year, equity investors were fretting about possible emerging-market contagion, while bond investors were fretting about fallout from US Federal Reserve tapering. Meanwhile, the corporate credit market seemed to be charting its own course. Eric Takaha, director of the Corporate & High Yield Group and senior vice president, Franklin Templeton Fixed Income Group, takes a look at the corporate credit/high-yield market and explains why he currently sees supportive fundamentals.
2014-02-20 00:00:00 February Flash Update by Clyde Kendzierski of Financial Solutions Group
It's too early to mean much, but so far out 2014 forecast is falling nicely into place. The market highs on Dec 31st have held, bonds are outperforming stocks, gold is outperforming both stocks and bonds, while gold mining shares are soaring! The anticipated volatility in emerging markets and Japan as well as the wild card of the Chinese economy continue to unfold, while bad weather has postponed the evidence of strong 2014 US growth.
2014-02-20 00:00:00 The Fed: Yellen's Tapering Tightrope by Milton Ezrati of Lord Abbett
In reducing quantitative easing, the Federal Reserve chairwoman faces a big challenge: preventing asset bubbles at home without pressuring developing economies.
2014-02-18 00:00:00 Why Emerging Market Fears are Overblown by Robert Huebscher (Article)
Conditions in the emerging markets bear little resemblance to those in 1997 leading up to the Asian crisis, according to Simon Derrick, a leading market strategist with BNY Mellon. In this interview, he also explains why the euro is overvalued and picks the winners and losers in todays currency wars.
2014-02-18 00:00:00 Equity Markets: How Much Energy Does the Bull Have Left? by Kurt Feuerman of AllianceBernstein
After another big year for stocks in 2013, many investors are questioning how much longer the bull market can run before it collapses from exhaustion. This doubt has intensified with the early 2014 selloff. However, based on what we see, its not time to worry about the markets stamina yet.
2014-02-13 00:00:00 Equity Markets: How Much Energy Does the Bull Have Left? by Kurt Feuerman of Alliance Bernstein
After another big year for stocks in 2013, many investors are questioning how much longer the bull market can run before it collapses from exhaustion. This doubt has intensified with the early 2014 selloff. However, based on what we see, its not time to worry about the markets stamina yet.
2014-02-10 00:00:00 Growth and Policy Uncertainty Cause Choppy Markets by Bob Doll of Nuveen Asset Management
U.S. equities closed with modest gains last week, as the S&P 500 overcame Monday?s decline, the largest one-day percentage loss since June 2013. The weaker-than-expected ISM manufacturing and vehicle sales data drive the sell-off on Monday, exacerbating the focus on slowing momentum for the U.S. recovery. The impact of adverse weather complicates the picture. Also, although January non-farm payroll missed expectations, there were more upbeat indications for the household survey.
2014-02-08 00:00:00 International Equity Commentary - December 2013 by Team of Thomas White International
International equity prices saw marginal gains in December as investors weighed the improved global economic outlook against the reduction in monetary stimulus from the U.S. Federal Reserve. Economic trends have become more positive across most regions, helped by the improving business environment and consumer sentiment in the U.S. as well as in Europe. Japan continues to see stronger export gains as demand revives in its major markets and the cheaper yen remain supportive.
2014-02-05 00:00:00 Emerging Market Turmoil Creates January Decline by Bob Doll of Nuveen Asset Management
U.S. equities finished lower last week, as the S&P 500 ended January with the first monthly loss since August 2013 and the largest monthly decline since May 2012. A global retreat from risk has been sparked by unrest around the world, sell-offs in emerging markets led by a 20% decline in the Argentine peso, weaker than expected economic reports from China, U.S. economic growth concerns in light of frigid temperatures and anxiety over Fed tapering.
2014-02-05 00:00:00 2014 Market Outlook by Kevin Mahn of Hennion & Walsh
Some Bumps along the Road of Global Recovery
2014-02-05 00:00:00 The Importance of Taking a Long-Term Perspective by Jeffrey Knight of Columbia Management
For asset allocation decisions, we find great value in maintaining a long-term outlook for major asset classes. Twice a year, in fact, we conduct an extensive update of our five-year return forecasts for several asset classes. The purpose of this exercise is two-fold. First, taking a longer term perspective helps us to set strategic asset allocations and design portfolios for diverse investment goals.
2014-02-04 00:00:00 Chinas Problems are Americas Opportunity by Justin Kermond (Article)
Fear not Federal Reserve tapering, lackluster U.S. earnings, oncoming deflation or markets heading into bubble territory, says Francois Trahan. Our economic and market growth will be fueled by structural changes driven by rebalancing in China. Dont be surprised to see a repeat of 2013s U.S. equity market performance, according to Trahan, who offered a script for countering clients unfounded fears over what might go wrong.
2014-02-04 00:00:00 It Looks Messy Even From a Distance... by Jerry Wagner of Flexible Plan Investments
Im traveling outside the country but I am never far from the latest financial market update. I saw todays market move and with the sluggish start to the New Year in stocks, I thought Id drop you all a line with my thoughts.
2014-02-01 00:00:00 Central Banker Throwdown by John Mauldin of Millennium Wave Advisors
The Federal Reserve is signaling that it is going to end quantitative easing at some point in the future; therefore, investors are trying to find the exits before the end actually comes.
2014-01-30 00:00:00 FOMC Sticks With the Tapering Plan by Team of Northern Trust
The Federal Open Market Committee (FOMC) at the conclusion of its meeting today announced a further $10 billion reduction in its monthly rate of asset purchases. The increment was similar in size and composition to the first tapering step taken in December.
2014-01-28 00:00:00 Emerging Market Issues Weigh on U.S. Equities by Bob Doll of Nuveen Asset Management
U.S. equities finished lower last week as the S&P 500 declined 2.6% and suffered the largest weekly pullback since June of 2012. U.S. stocks are down approximately 3.0% both year to date and from all-time highs. In 2014, lack of direction in the market has been a focus, and the waning influence of macroeconomic news caused a notable shift late last week.
2014-01-28 00:00:00 Commodities In 2014: Supply Remains A Concern by Doug Ramsey of Leuthold Weeden Capital Management
If a reacceleration of EM demand for raw materials were imminent, one would think the MSCI BRIC Index would be the first to sniff it out. Yet that index remains among the poorest performing market composites in the world. Still, commodity demand will eventually right itself. Our worry is supply. Capital spending levels remain elevated, and are far above the levels seen just over a decade ago-on the eve of Chinas great commercial and residential construction boom. Commodity producers didnt anticipate that boom, which is precisely why it was so powerful.
2014-01-23 00:00:00 Economic Growth is Likely to Improve in 2014 by Derek Hamilton of Ivy Investment Management Company
We believe a global economic upturn is likely in 2014, although the overall growth rate will remain sluggish. We think developed countries will show the largest improvement, which in turn will help support growth rates in emerging markets.
2014-01-14 00:00:00 Letters to the Editor by Various (Article)
Several readers respond to Wade Pfaus article, How to Use Bond Ladders in Retirement Portfolios, which appeared last week. Readers also respond to two recent market commentaries.
2014-01-13 00:00:00 Stocks Rise Modestly in First Full Week of Trading by Bob Doll of Nuveen Asset Management
U.S. equities finished mostly higher for the first full week of the year, with the S&P 500 gaining approximately 0.6%. There were no meaningful directional drivers behind the price action, which is a dynamic that has been prevalent so far in 2014.
2014-01-09 00:00:00 The Year Ahead - 2014 by Mark Ungewitter of Charter Trust Company
In the spirit of year-end prognostication, heres my annual review of secular trends and historic behaviors that are likely to influence key markets in 2014.
2014-01-08 00:00:00 When the QE Tide Recedes, Focus on What is Revealed by Robert McConnaughey of Columbia Management
While there is fierce debate on the ultimate effectiveness of monetary stimulus surging from the central banks, one cannot dispute the boost that it has given to asset prices. While we may be seeing some "green shoots" of overall growth pick-up in the developed world, the post-crisis recovery in asset values has not been primarily driven by economic or earnings growth. Instead, we have been in a high correlation environment where the rising tide lifted most diversified investor boats as repressed "risk-free" rates pushed money out into riskier asset classes.
2013-12-26 00:00:00 A Strong Finish for 2013 by Bob Doll of Nuveen Asset Management
For our weekly subscribers, we wanted to take an opportunity to look back on the year. We began 2013 with an outlook for the prospect of improvement for the global economy and risk assets. We thought global policymakers unprecedented attempts to reflate global growth would show some signs of bearing fruit, especially in the United States and China. In our forecast, equity markets would continue to be choppy in light of the fiscal cliff issues, but an inevitable political compromise would reduce the economic drag.
2013-12-24 00:00:00 Fed Taper Brings Us Back to the Future by Kristina Hooper of Allianz Global Investors
A return to normal economic conditions is now more palpable following the Feds decision to start unwinding QE and early signs of a revival in consumer spending, growth and jobs, writes Kristina Hooper.
2013-12-21 00:00:00 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?
2013-12-18 00:00:00 Three Investments that Could Return to Favor in 2014 by Jeffrey Knight of Columbia Management
When investors lose confidence in an asset class, especially one that had been popular enough to attract outsized allocations, subsequent rebalancing generally leads to prolonged periods of underperformance. Technology stocks after 1999, for example, underperformed the S&P 500 in eight of the next 10 years and by a cumulative total of more than 40 percentage points. Today, many believe that interest rate sensitive bonds might have just begun a similar era of waning investor confidence, portfolio reallocation and underperformance.
2013-12-17 00:00:00 2013 A Pretty Good Year by Mike Temple of Pioneer Investments
This time last year we were bullish about equities and positive on the slow but steady strengthening of the economy. The market did not disappoint. The economy was almost heroic, you might say, with its performance enduring government sequestrations and higher taxes almost a 2% drag on GDP but comporting with our expectations of 2 - 2.5% growth. 2013 is ending with GDP and the markets coming fairly close to what we thought theyd achieve. Now the year is almost out, so lets take stock of 2013 but look ahead to 2014.
2013-12-17 00:00:00 5 Takeaways from the Mini-Budget Deal by Kristina Hooper of Allianz Global Investors
The bi-partisan budget agreement inked last week has real implications for investors, including its impact on consumers, the stock market and the Fed, writes Kristina Hooper.
2013-12-12 00:00:00 Looking Back 40 Years, What Can We Learn About This Current Corporate Debt Market? by Matt Lloyd of Advisors Asset Management
I recently wrote a blog post detailing the potential opportunity in municipals as it has historically rebounded after a negative total return. Accordingly, I have been asked if this pattern was representative in the investment grade corporate arena.
2013-12-03 00:00:00 Looking Out on the Horizon for Equities by Bob Doll of Nuveen Asset Management
U.S. equities finished higher for an eighth consecutive week as the S&P 500 increased 0.1%, representing the longest positive streak since 2004. Inertia may have carried markets forward in a relatively quiet trading week without major headlines. Retail news appeared fairly positive in anticipation of a strong start to the Thanksgiving shopping weekend. Economic data was mixed.
2013-11-25 00:00:00 Solving the Income Puzzle by Christopher Remington, Michael Cirami, Kathleen Gaffney, Scott Page of Eaton Vance
Income needs may be as high as they’ve ever been, while the yield potential from many traditional investment classes has dwindled to generational lows. Investors who remain in high-priced, low-yielding core bond strategies could experience loss of principal (and mounting retirement shortfalls) if interest rates revert toward their mean. We advocate creating an integrated, multi-pronged income plan that may offer yield potential that meets investor needs, while managing key risks found in the typical core fixed-income allocation.
2013-11-24 00:00:00 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 00:00:00 Howard Marks: Equities are Under-owned and Un-loved by Robert Huebscher (Article)
According to Oaktrees Howard Marks, U.S. equities are under-owned and un-loved, and I like to buy assets like that.
2013-11-19 00:00:00 A Glimpse of a Yellen-Led Fed by Kristina Hooper of Allianz Global Investors
Kristina Hooper highlights some key takeaways from incoming Federal Reserve chair Janet Yellens testimony before the Senate last week, including when the Fed is likely to taper its bond-buying program.
2013-11-12 00:00:00 Markets Vacillate Between Stronger Economy and Fed Accommodation by Bob Doll of Nuveen Asset Management
U.S. equities finished mostly higher last week as the S&P 500 increased 0.6%, ending higher for the fifth straight week. The return of central bank action was a primary concern. The European Central Bank (ECB) surprised investors with a 0.25% rate cut, while the debate over the Federal Reserves impending tapering decision continued in earnest.
2013-10-30 00:00:00 Getting Back into Value Equities by Kevin Simms of AllianceBernstein
It finally feels like a great time to be a value investor again. After several challenging years, market conditions have become much more conducive to finding undervalued, controversial stocks with long-term payoff potential. Even after this years equity-market rally, we think the value rebound is just beginning.
2013-10-29 00:00:00 Defining the EM Corporate Bond Opportunity by Sponsored Content from Loomis Sayles (Article)
Finance is a numbers business. Investors study prices, yields, rates of return. However, when it comes to sizing up emerging markets, we think they should also pay attention to semantics. In the past, terming a country “emerging” made it synonymous with low credit quality and higher risk. But today, many emerging markets boast strong credit profiles while parts of the developed world buckle under heavy debt loads.
2013-10-29 00:00:00 Is This the New Normal'? by Sam Wardwell of Pioneer Investments
Markets Settle into a New Normal All sorts of economic data were released last week, but volatility has dropped: rightly or wrongly, market forecasts about the pace of quantitative easing (QE) and earnings growth in the U.S. appear to have coalesced around an outlook for slow growth with ongoing QE.
2013-10-21 00:00:00 Fourth Quarter Investment Outlook by Bob Doll of Nuveen Asset Management
The macro theme of the fourth quarter and early 2014 is monetary reflation and global growth resynchronization. The Feds surprising decision to postpone tapering its QE program will likely encourage further risk-taking. In the meantime, we observe increasing signs of a synchronized improvement among the four important economies - the United States, Europe, Japan and China.
2013-10-15 00:00:00 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.
2013-10-14 00:00:00 Can Markets Remain Resilient in Light of Political Dysfunction? by Bob Doll of Nuveen Asset Management
Equities were mixed again last week, and the markets remain focused on the budget impasse in Washington, D.C., after the second week of the partial government shutdown. The S&P 500 closed the week in positive territory, increasing 0.8%.1 It is hard to ignore headlines and market volatility, but the real issues for markets are the debt ceiling debate and third quarter corporate earnings announcements.
2013-10-08 00:00:00 Listen to the 10th Man by Kristina Hooper of Allianz Global Investors
Theres no shortage of short-term risks in todays market or conventional wisdom on how they will play out. But prepping for the unexpected could limit the number of surprises and better insulate investors portfolios, writes Kristina Hooper.
2013-09-28 00:00:00 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.
2013-09-25 00:00:00 Surprise! No Tapering and More Budget Progress than Meets the Eye by Sam Wardwell of Pioneer Investments
On Monday, Larry Summers exited the pool of candidates for the next Federal Reserve (Fed) chairman. (Only the timing was really a surprise.) On Wednesday, the Fed didnt taper and de-emphasized several of the targets theyd set earlier. (Big surprise versus consensus - not central bank best practices). Municipal bond offerings by Puerto Rico, California, and Illinois were met with strong investor demand.
2013-09-24 00:00:00 ENERGY MLPs: A Suitable and Sustainable Asset Class by Sponsored Content from ClearBridge Investments (Article)
Key Takeaways: MLPs have provided income with little correlation to other asset classes and little sensitivity to interest rates, commodity prices or economic cycles. The market for MLP stocks has expanded greatly and offers liquidity which appeals to long-term institutional investors. The renaissance in U.S. energy production is driving sustainable growth in the infrastructure that MLPs own and operate
2013-09-23 00:00:00 Post Fed, Expect More Surprises by Kristina Hooper of Allianz Global Investors
Kristina Hooper says investors should brace for more big market swingsand some fiscal curveballsin the wake of the FOMCs decision not to taper in September. But the economy is throwing some good surprises our way too.
2013-09-17 00:00:00 Gundlach ? Where to Expect the Next Crisis by Robert Huebscher (Article)
Unless there is a crisis, dont expect a major decline in interest rates, according to Jeffrey Gundlach. And if such a crisis occurs, Gundlach warned, it will most likely take place in this emerging market.
2013-09-17 00:00:00 The Debate on DFAs Research by Various (Article)
We received many responses to Michael Edesess article, Why DFAs New Research is Flawed, which appeared last week. We provide the responses from individuals who disagreed with Edesess findings, followed by Edesess response and then by responses in agreement with his findings.
2013-09-17 00:00:00 Emerging Markets: Time to Buy? by Mark Ungewitter of Charter Trust Company
Emerging markets have performed dismally over the past three years. The bellwether MSCI index has moved essentially sideways over that period while losing a whopping 40% of its value relative to the S&P 500. After such a severe underperformance, the sector is now beginning to show signs of improvement.
2013-09-17 00:00:00 The Upside of Low Expectations by Kristina Hooper of Allianz Global Investors
The stock market has benefited from a pessimistic outlook recentlyand so could the consumer, writes Kristina Hooper.
2013-09-09 00:00:00 The Shape of Things to Come by Kristina Hooper of Allianz Global Investors
With a week to go before the September FOMC meeting, theres little that stands in the way of Fed tapering. Fridays jobs report didnt impress but it probably wasnt bad enough to stop central bankers from pulling some punch, writes Kristina Hooper.
2013-08-31 00:00:00 How Do I Hate Thee? by John Mauldin of Millennium Wave Advisors
I will list a number of reasons why I hate this market and then suggest a few reasons why that should get you excited. We will look at some charts, and I’ll briefly comment on them. No deep dives this week, just a survey of the general landscape.
2013-08-26 00:00:00 The Case for More Mortgage QE by Kristina Hooper of Allianz Global Investors
Disappointing new home sales dont mean that tapering is less likely to occur in September. Rather, it may only mean that when tapering begins, the Feds likely to start small and only trim Treasuries.
2013-08-10 00:00:00 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 00:00:00 Equities Grind Higher as the Economy Continues to Muddle Through by Bob Doll of Nuveen Asset Management
U.S. equities advanced last week, with the S&P 500 increasing 1.10%.1 For the month of July, the S&P gained 5.09%, and equities have increased 21.33% year to date. Second quarter earnings season is nearly complete, and there has not been a material change in estimated earnings for the balance of the year or 2014. Revenues were slightly ahead of expectations, and earnings per share were approximately 3% higher than expected, annualizing at about $110 per S&P 500 share.
2013-07-30 00:00:00 The Power of Diversification and Safe Withdrawal Rates by Geoff Considine (Article)
When Bill Bengen published his seminal research in 1994, a 4% safe withdrawal rate (SWR) was clearly attainable with a variety of asset allocations. But bond yields are lower now than they were then, and equity returns for the next 20 years are unlikely to exceed those of the prior two decades. Indeed, a new paper by three highly respected researchers showed that SWRs for stock-bond portfolios are well below 4%. But as I will demonstrate, a 4% SWR is still possible with a more diversified portfolio ? and without subjecting clients to additional risk.
2013-07-30 00:00:00 Result of Japan's Upper House Election by Team of Nomura Asset Management
The ruling Liberal Democratic Party (LDP) and New Komeito coalition have secured an upper house majority by winning 76 seats in the July 21st House of Councilors election to reach the total of 135 seats together with the seats that were not contested this time (out of a total 242 seats). This has ended the state of a divided National Diet, allowing more stable management by the Prime Minister Shinzo Abe cabinet and the ruling coalition parties.
2013-07-24 00:00:00 Earnings Acceleration Likely Needed for Next Upturn in Stocks by Bob Doll of Nuveen Asset Management
U.S. equities finished mostly higher last week. For a fourth straight week, the S&P 500 and Dow Jones Industrials were up (returning 0.73% and 0.57% respectively for the week), while the NASDAQ underperformed at -0.34%. It was a busy start for second quarter earnings. More than 70% of the 100 S&P 500 companies that have reported earnings have beaten consensus earnings per share expectations by approximately 3% in aggregate.
2013-07-19 00:00:00 Opportunity in Europe by Team of Neuberger Berman
A striking feature of this years global stock market rally is that international markets have significantly trailed U.S. stocks. Nevertheless, Neuberger Bermans Asset Allocation Committee (AAC) recently made the contrarian call of upgrading its view for international developed markets, particularly Europe. In this Strategic Spotlight, we provide an update on the European economy and lay out some reasons for optimism despite the dour growth outlook.
2013-07-17 00:00:00 China's Curbs on Bank Lending: Implications for the World Economy? by Giordano Lombardo of Pioneer Investments
Banks are by far the top-weighted sector group in China, so theres little chance for the broad market to buck the trend. Indeed the problem is sector-specific at first glance. Policy makers want to curb excess bank lending in an effort to make the industry better managed and more selective.
2013-07-16 00:00:00 Nassim Nicholas Taleb: To Prevail in an Uncertain World, Get Convex by Laurence B. Siegel (Article)
Investment professionals know the value of a convex bond ? it gains more from falling rates than it loses from rising ones. According to Nassim Nicholas Taleb, people and institutions can and should position themselves to be convex. Indeed, they should be antifragile ? ready to gain from disorder or uncertainty.
2013-07-15 00:00:00 Mid-Year Outlook: Waiting to Move Beyond a Muddle-Through Economy by Bob Doll of Nuveen Asset Management
By focusing on current economic conditions while giving due importance to the uncertainty created by Fed actions we offer thoughts for consideration in evaluating risk-on investments.
2013-07-09 00:00:00 A Mid-Year Letter to Clients: A Positive Outlook on America by Dan Richards (Article)
Each quarter Ive posted templates to serve as a starting point for advisors looking to send clients an overview of the three months that just ended and the outlook for the period ahead. This quarters letter focuses on why the U.S. is expected to be the leader among global economies.
2013-07-09 00:00:00 ENERGY MLPs: A Suitable and Sustainable Asset Class by Sponsored Content from ClearBridge Investments (Article)
Greater capitalization. More liquidity. The energy MLP market has grown steadily, with good reason: our constant demand for energy. While oil prices go up and down, volume has stayed consistent. Production is increasing. And the infrastructure is needed to support it. Add some risk, and you’ve got an investment which could fit in a diversified portfolio.
2013-07-02 00:00:00 Gundlach’s One-Word Explanation for June’s Decline by Robert Huebscher (Article)
According to Doubleline’s Jeffrey Gundlach, a single word explains the declines global capital markets experienced in June.
2013-06-27 00:00:00 Turmoil Shouldn't Derail Turkey by Carlos von Hardenberg of Franklin Templeton Investments
In 2012, Turkeys stock market rose more than 50%, posting one of the strongest performances of any global equity market last year. However, recent news of protests sweeping the nation has started scaring off some investors, at least in the short term. We consider turmoil to often be a natural part of change and development, and these short-term political disturbances likely wont be the last. Ive invited my colleague Carlos von Hardenberg, Managing Director, Turkey, based in Istanbul, to share some local insight.
2013-06-25 00:00:00 Rates, Dividends and The Laws of Gravity by Don Taylor of Franklin Templeton Investments
The laws of gravity may dictate that what goes up must come down, but interest rates seem to have their own converse course of action what goes down eventually will go up. Although it seems like interest rates can stay stuck in low gear for years, (decades even, in the case of Japan) eventually they will creep higher, and talk is heating up about the timing and magnitude of such creep in the US. As the portfolio manager of Franklin Rising Dividends Fund, Don Taylor was quick to comment that higher interest rates dont mean all dividend-paying stocks are doomed.
2013-06-24 00:00:00 The Case for Rotating into (Select) Cyclical Sectors by Russ Koesterich of iShares Blog
Although defensive sectors are back to outperforming cyclical sectors amid Junes market volatility, Russ still believes theres a strong case for preferring cyclicals or at least select cyclicals
2013-06-21 00:00:00 Outlook for the Global Bond Market by Nic Pifer of Columbia Management
The global economy continues to expand, but seems stuck on a moderate, below-trend trajectory. Lately, the story seems to be more about a growth rotation across regions than a clear-cut acceleration or deceleration at the global level. Looking to 2014, however, we still expect the global economy to accelerate to a more trend-like pace.
2013-06-18 00:00:00 GMO’s Montier on Why to Hold Cash by Robert Huebscher (Article)
Central bank policies have distorted markets to such a degree that investors are devoid of any buy-and-hold asset classes, according to James Montier. But according to Richard Bernstein, the flood of liquidity unleashed through quantitative easing (QE) now offers investors compelling opportunities.
2013-06-18 00:00:00 Help Clients Fill the Income Void by Sponsored Content from Legg Mason Global Income Survey (Article)
Affluent investors all over the world just arent getting what they want from their income investments, according to Legg Masons recently released Global Income Survey. Yet there is good news: most say they want to become more knowledgeable about income investing, and theyre eager for financial professionals to point out fresh opportunities.
2013-06-11 00:00:00 A Better Alternative to Cap-Weighted Bond Indices by Geoff Considine (Article)
Capitalization weighting is the prevailing choice for equity index investors, who can choose from low-cost index funds constructed with theoretically proven methodologies. But capitalization weighting in fixed-income markets enjoys no such theoretical foundation, leaving investors without a clear choice for a diversified core fixed-income holding. A portfolio of bond exchange-traded funds that optimizes the tradeoff between yield and risk gives investors a commendable way to own a broadly diversified core allocation.
2013-06-11 00:00:00 Bursting the Bond Bubble Babble by Andy Martin (Article)
Interest rates will eventually go up. The 50-basis-point spike in May on the 10-year Treasury bond may have been the beginning. But despite industry and media assertions, history shows that there is nothing to fear from rising rates.
2013-06-04 00:00:00 Equities Hit Pause by Bob Doll of Nuveen Asset Management
Stocks and other risk assets struggled last week, with the S&P 500 declining 1.11%.1 Equities finished lower on Friday, the final trading session of May. The decline trimmed Mays gains and sealed the second consecutive weekly decline for U.S. equities. The S&P increased 2.34% for the month and has gained 4.31% this quarter and 15.37% for the year.1
2013-06-01 00:00:00 After the Gold Rush by Nouriel Roubini of Project Syndicate
The run-up in gold prices in recent years from $800 per ounce in early 2009 to above $1,900 in the fall of 2011 had all the features of a bubble. And now, like all asset-price surges that are divorced from the fundamentals of supply and demand, the gold bubble is deflating.
2013-05-29 00:00:00 Outlook on the Japanese Equity Market by Team of Nomura Asset Management
The Nikkei Stock Average closed 128 points higher, or 0.9%, to close the week at 14,612 following the dramatic 7.3% sell-off on Thursday, May 23, 2013. The Tokyo Stock Price Index (TOPIX) also added 6 points, or 0.5%, to 1,194, following a 6.9% sell-off on Thursday, May 23rd.
2013-05-28 00:00:00 Taking Stock by Bob Doll of Nuveen Asset Management
U.S. and global equities were under pressure last week, with all major U.S. indices lower for only the fourth time this year. With discussion of the Fed tapering its stimulus, market uncertainty gained momentum. The S&P 500 was down 1.0% for the week.1 We consider the market pullback technical in nature since the mention of a Fed quantitative easing exit likely created a natural point to take profits after the recent rally.
2013-05-21 00:00:00 Putting Cash to Work: 3 Ways to Enter the Market Today by Russ Koesterich of iShares Blog
With global equities up more than 25% since their bottom last June, many investors are wondering: Is it too late to move cash from the sidelines to stocks? No, says Russ, and he offers three ideas for where find value today.
2013-05-14 00:00:00 Nouriel Roubini: Four Reasons Investors Should be Worried by Robert Huebscher (Article)
Despite a modest recovery from the nadir of the financial crisis, the global economy still faces tail risks, according to Nouriel Roubini. Roubinis forecast is not as gloomy as the one that earned the moniker Doctor Doom, when he correctly predicted the housing market collapse and the ensuing global recession. But, in a talk May 1, he identified todays biggest danger points in Europe, the U.S., China and geopolitics which he said threaten to destabilize the global economy.
2013-05-14 00:00:00 Mohamed El-Erian: The Three-Speed Global Economy by Robert Huebscher (Article)
The global economy is operating at three distinct speeds, according to Mohamed El-Erian, and investors need to understand the implications of the divergent paths that key countries are following. Japan and most European countries are going backward, he said, and could continue in that direction for decades. The U.S. is “healing,” but not quickly enough to get to “escape velocity.” Certain emerging markets, meanwhile, are adapting technology and innovation and are growing rapidly.
2013-04-30 00:00:00 Stockman to America: Sinners, Repent! by Laurence B. Siegel (Article)
In a massive volume that melds economic history and social criticism, the former Reagan administration budget director David Stockman has documented countless ways in which America went astray over the last century. Most notably, he decried the corruption of free-market capitalism by those seeking effortless profits at the public?s expense. This is the source of his book?s title, The Great Deformation.
2013-04-29 00:00:00 The Trapdoors at the Fed's Exit by Nouriel Roubini of Project Syndicate
It may be too soon to say that many risky assets have reached bubble levels, and that leverage and risk-taking in financial markets is becoming excessive. But the reality is that credit and asset/equity bubbles are likely to form in the next two years, owing to loose US monetary policy.
2013-04-22 00:00:00 Commodity Declines and Weak Data Startle Investors by Bob Doll of Nuveen Asset Management
U.S. equities declined last week as the S&P 500 fell by more than 2.0%, which came on the heels of a new all-time high the prior week. Led by gold, commodities experienced volatility and declined over the past two weeks. Other detractors included disappointing first quarter Chinese economic numbers and somewhat softer U.S. releases.
2013-04-20 00:00:00 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.
2013-04-11 00:00:00 Bank of Japan Surprises Market and Yen Reacts by Team of Nomura Asset Management
We recently indicated on March 14, 2013 that we believed the Yen would remain range bound near the level of PPP (purchasing power parity), which we estimated to be between 90 to 95 Yen/USD. We wrote at the time that though currency movements will be affected by various factors, the monetary policies of both Japan and the U.S. are the most important.
2013-04-10 00:00:00 Economic Slowdown Halts Equity Rally by Bob Doll of Nuveen Asset Management
The latest softness in economic indicators probably means that more consolidation in the equity markets is required before we can advance beyond the recent all-time highs. During March, nearly all of the activity for the S&P 500 was within 1% of 1550. Equities may move lower due to deteriorating technical conditions and the possibility of weak first quarter earnings reports.
2013-04-10 00:00:00 Surprising Surge!! by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup
Momentum from 2012s surprisingly strong performance continued into the first quarter of 2013 with stocks rising sharply. Our portfolios did well but lagged behind our benchmarks in the quarter. Taking a little longer view, over the trailing 12 and 36 months we mostly matched the double-digit gains of our benchmarks, which we are very pleased with since we usually underperform during strong market advances. So far this year small- & mid-capitalization, value, and domestic stocks were the market leaders, while international, growth, commodity stocks and Apple were laggards.
2013-04-08 00:00:00 Cypriot Chaos Assists EU Centralization by John Browne of Euro Pacific Capital
Remarks by members of the European Unions elite suggesting that banking deposit seizures may become standard practice appear to have heightened the risk of a European bank run and perhaps even a catastrophic collapse of the euro. Any threat to the euro is a threat to the European publics conception of the Unions manifest destiny. As such, I believe members of the EU elite may be purposefully leveraging the crisis to push for a centralized European banking system to cement the political framework of an EU superstate.
2013-04-01 00:00:00 The Discipline of Buy and Sell Decisions by Mark Mobius of Franklin Templeton Investments
The thought of giving up a once-treasured possession can be an emotional exercise for anyone, even if the object of affection has outlived its use. As investors, we can find it difficult to sell a once-favored holding even more difficult than the decision to purchase it. But sometimes, you just have to let go.
2013-03-28 00:00:00 2 Factors Keeping a Lid on Interest Rates by Russ Koesterich of iShares Blog
Investors have been expecting interest rates to rise, but with the yield on the 10-year Treasury bond back below 2%, Russ explains two structural factors that are slowing the rate rise.
2013-03-26 00:00:00 A Cry for Help from Income Investors by Legg Mason Global Income Survey (Article)
Confronted with the stark realities of income investing now, affluent investors all over the world are rethinking their approach, notes Legg Masons just-released Global Income Survey. Yet the Survey also found income investors hungry for more knowledge and ideas -- creating opportunities for savvy financial advisors.
2013-03-22 00:00:00 ING Fixed Income Perspectives March 2013 by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Developed sovereigns are still broadly unattractive, but global central banks appear poised to ease. We prefer EM currencies that will continue to benefit from positive global growth and tolerate further upward pressure on the U.S.
2013-03-22 00:00:00 Deep Value Diving in the Eurozone by Katrina Dudley of Franklin Templeton Investments
Greeces tale of financial woe may well go down as a modern Greek tragedy, with people in power falling prey to a tragic flaw which brings about their catastrophic reversal of fortune. Its all quite dramatic and dire, but if the real life Greek financial system stays true to the classical formula, the conclusion means recognition of that tragic flaw and potential course correction. For those hardy and/or contrarian souls who suspect opportunity may be sprouting from Greeces great mess, this would be good news.
2013-03-19 00:00:00 Paul Matlack from Delaware Investments on the Direction of the Bond Market by Robert Huebscher (Article)
Paul Matlack is senior vice president, senior portfolio manager and fixed income strategist for Delaware Investments. His firm oversees $145 billion in fixed-income strategies, and in this interview Matlack discusses his outlook for the economy and the bond market, and how advisors should be positioning client portfolios.
2013-03-12 00:00:00 Bill Ackman on What Makes a Great Investment by John Heins (Article)
In addition to commenting on his high-profile current investments, Pershing Square Capital's Bill Ackman in a recent interview with Value Investor Insight describes the general company traits he looks for in both active and passive investments, why a high public profile is an important element of his strategy, whether his thesis on J.C. Penney has evolved, what lessons he's learned from a few prominent mistakes, and why his short conviction on Herbalife is as high as ever.
2013-03-11 00:00:00 Italy: Welcome to the Bungle by Milton Ezrati of Lord Abbett
Results of the recent election increase the likelihood of a eurozone breakupand disruptions to financial markets.
2013-02-20 00:00:00 Two New Country Views for a Two-Speed Global Economy by Russ Koesterich of iShares Blog
The global economy is stuck in a two-speed regime: Developed markets like Europe, Japan and the United States are stalling, while China is re-accelerating. Russ explains what this divergent growth landscape means for his country outlooks.
2013-02-19 00:00:00 Kyle Bass on Inflation and How to Protect Against It by Mark Quam (Article)
Kyle Bass, the founder of Hayman Capital, foresaw the collapse of the sub-prime mortgage bond market in 2008 and the foreign sovereign debt crisis in Greece. Bass' latest warning is about looming Inflation ? and he advises how to protect against it.
2013-02-11 00:00:00 When to Worry About Inflation by Russ Koesterich of iShares Blog
Though the Fed continues to flood the US economy with money, Russ explains why inflation isn't likely to be a problem until 2014 and what investors can do in the meantime to prepare.
2013-02-05 00:00:00 The 2030 Outlook by Bill O'Grady, Kaisa Stucke of Confluence Investment Management
Over the next several weeks we will look into the more distant future, to the year 2030. We will explore the long-term strategic alternative world development scenarios as laid out by the National Intelligence Council (NIC) and present our views regarding the developments. The NIC forecasts the likely paths that are either currently underway or are forecast to occur in the future. The NIC projects four possible global political and economic states based on these expected trends.
2013-02-05 00:00:00 2012 Equity Market Market Year in Review by Natalie Trunow of Calvert Investment Management
Equities started the year strong as global inflation remained tame, and aggressive, accommodative monetary policy by central banks around the globe helped equity markets rally hard off their lows posted in the fall of 2011. Continuously improving U.S. economic data, strong corporate earnings, and policy steps toward mitigation of the sovereign debt crisis in Europe also provided support for the equity markets worldwide.
2013-01-23 00:00:00 Inflated Expectations? by Kristina Hooper of Allianz Global Investors
Investors should prepare themselves for higher long-term inflation because the market may be ignoring it, a mistake that could come back to haunt. On the heels of encouraging economic data, central bankers are projecting only modest price increases for goods and services over the next 10 years. But history tells us that an inflation spike is inevitable when governments print money so aggressively. As such, investors with long-term time horizons should have substantial exposure to inflation-hedging asset classes. Now, more than ever, real returns matter.
2013-01-22 00:00:00 The Economic Fundamentals of 2013 by Nouriel Roubini of Project Syndicate
The global economy this year will exhibit some similarities with conditions prevailing in 2012 no surprise there. But there will be some important differences, as fiscal austerity spreads to more advanced economies, the risk of a hard landing in China rises, and the threat of war in the Middle East grows.
2013-01-15 00:00:00 Template for a Year-End Client Letter 2012 in Review: Learning from the Past, Looking to the Future by Dan Richards (Article)
Client concerns about whether you're on top of things can be reduced by sending regular overviews of what's happened in the immediate past and the outlook for the period ahead. That's why each year since 2008, I have posted templates to serve as a starting point for advisors looking to send clients an overview of the year that just ended and the outlook for the period ahead.
2013-01-14 00:00:00 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles
The ?nal quarter of 2012 was the icing on the cake of an exceptional year for the credit sectors. Fourth quarter credit gains stemmed in part from uncommonly aggressive monetary policy responses in the third quarter. As economic growth continued to undershoot expectations, major central banks made clear that they were dissatis?ed with the status quo of tepid economic growth and high unemployment. The Federal Reserve went so far as to tie its monetary policy to the level of the unemployment rate.
2013-01-11 00:00:00 2 Reasons to Stick With Emerging Markets by Russ Koesterich of iShares Blog
Think emerging markets equities have run their course? Not so fast despite recent strong performance, Russ explains why there's room for further EM gains in 2013.
2013-01-08 00:00:00 The Forecast for Risk in 2013 by Geoff Considine (Article)
With the new year upon us, pundits are issuing their forecasts of market returns for 2013 and beyond. But returns don't occur in a vacuum ? meeting clients' goals requires an asset allocation that appropriately balances return and risk. So what follows are my predictions for risk across major asset classes, based on a theoretically sound approach that has proven to be reliable in the past.
2013-01-08 00:00:00 2012: Resumption of the Stock Market Recovery by Ronald Surz (Article)
Let's take a close look at the details of what occurred in 2012 so we can assess the opportunities and prepare for the surprises that 2013 will bring. I'll give you my opinions, and you should form your own.
2013-01-02 00:00:00 Brian McMahon on Thornburg?s Investment Income Builder Fund by Robert Huebscher (Article)
Brian McMahon is the chief executive officer and chief investment officer for Thornburg Investment Management, where he the co-portfolio manager for the $11.4 billion Thornburg Investment Income Builder Fund (TIBAX). The fund's goal is income production, and it has outperformed its benchmark, the Morningstar Moderate Target Risk, over the last ten years (10.87% versus 2.88%). In this interview, he offers his views on the economy and the markets, and how he has positioned his fund.
2012-12-26 00:00:00 Gundlach's High-Conviction Investment Idea by Robert Huebscher (Article)
Count Jeffrey Gundlach among those who expect Japan's currency to collapse because it can't service its debt. Japan's challenges may parallel those that the US faces, and Gundlach feels strongly that they have created a compelling investment opportunity.
2012-12-18 00:00:00 Pulling Back the Lens in Emerging Markets by Western Asset Management (Article)
Emerging markets remain resilient, according to Western Asset Portfolio Manager Rob Abad. But in the face of so much global uncertainty, investors would be wise to consider the latest trends and dynamics impacting this maturing asset class.
2012-12-11 00:00:00 Fine Wine - Why it's for More than Just Drinking by Mark E. Ricardo, JD, LLM, AAMS (Article)
For many investors, an ideal asset class would combine superior long-term absolute and risk-adjusted returns with a hedge against inflation and stock market volatility. There's a way to get all of that, in an asset class you might never have thought of until now: fine wine. Investment-grade wine deserves careful consideration, particularly now that - unlike other collectibles, such as art and rare books - it can be traded on a regulated exchange.
2012-11-13 00:00:00 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.
2012-11-13 00:00:00 Emerging Markets: Maintaining Perspective by Robert O. Abad (Article)
In this Q&A, Western Asset Portfolio Manager Robert Abad discusses the latest dynamics and trends within emerging markets (EM). Although EM continue to demonstrate resiliency, Mr. Abad believes that given the amount of global uncertainty today, it is important that investors evaluate opportunities alongside a manager equipped to guide them through the risks and rewards of this evolving asset class.
2012-10-30 00:00:00 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.
2012-10-09 00:00:00 The Yin and Yang of 2012 Stock Markets Through September by Ron Surz (Article)
Despite investor concerns about the economy, stock markets delivered substantial returns in the year-to-date, with the S&P 500 returning more than 16% and Europe, Australasia, Far East (the EAFE index) delivering more than 10%. This growth has been in the face of investor withdrawals from equity mutual funds. So if mutual fund investors are selling, who is buying?
2012-10-02 00:00:00 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.
2012-08-21 00:00:00 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.
2012-07-17 00:00:00 Gundlach ? Avoid Riskier Assets by Robert Huebscher (Article)
Since early this year, Jeffrey Gundlach has warned investors to avoid exposure to riskier assets ? among them, equities, non-dollar-denominated securities and sovereign debt. Still reluctant to move to a more aggressive position, Gundlach said on Thursday that 'substantial opportunities await,' but they may be as much as a year away.
2012-07-10 00:00:00 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 00:00:00 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.
2012-06-26 00:00:00 Jeremy Grantham: US Stocks are Expensive and Bonds are Disgusting by Robert Huebscher (Article)
Jeremy Grantham, who has consistently identified overpricing in the US equity markets - he flagged both the Dot Com bubble and the irrational pricing that preceded the financial crisis, for instance - said last week that US stocks are 'a little expensive' and bonds are 'disgusting.' But his sternest warning to investors concerned the longer-term threat posed by global resource constraints.
2012-06-26 00:00:00 A Top Analyst: North America Heading to Energy Independence by Robert Huebscher (Article)
Ed Morse, a managing director of Citigroup Global Markets, said last week that by the end of this decade the US and Canada will have a surplus of oil, leaving it with 'no room for imports.' But the longer-term picture is far less certain, as extraction moves from conventional wells to newer sources, such as deepwater fields and shale-based oil.
2012-06-12 00:00:00 The Problems with Trying to Benchmark Unconstrained Portfolios by Ken Solow (Article)
Benchmarking unconstrained, 'go-anywhere' managers is difficult. Common methods to determine an appropriate benchmark - such as an ex-post regression of how the fund was invested - can obscure the actions of the manager. Is the only solution to simply select an arbitrary benchmark and proceed accordingly?
2012-06-05 00:00:00 Finding the Best Dividend Fund by Geoff Considine (Article)
Assets are flowing into dividend-stock funds. But many experts are warning that those investors are setting themselves up for significant losses. Using an objective methodology that assesses tradeoff between yield and risk, we can determine those funds that investors should prefer - and a few they should avoid.
2012-05-29 00:00:00 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.
2012-05-08 00:00:00 Richard Bernstein: US Assets will Outperform over the Next Decade by Robert Huebscher (Article)
Prior to founding the firm that now bears his name, Richard Bernstein was the chief investment strategist at Merrill Lynch & Co. In this interview, he discusses why he expects US assets - both equities and fixed income - to be the outperformers among global markets over the next decade.
2012-05-08 00:00:00 Q2 Outlook: "Sell in May" May Not Work This Year by OppenheimerFunds (Article)
Chief Economist Jerry Webman explains why he believes the U.S. economic recovery is real and CIO Art Steinmetz talks about how stocks are as cheap compared to bonds as they have been in decades.
2012-05-01 00:00:00 Q2 Outlook: by OppenheimerFunds (Article)
Chief Economist Jerry Webman explains why he believes the U.S. economic recovery is real and CIO Art Steinmetz talks about how stocks are as cheap compared to bonds as they have been in decades.
2012-04-24 00:00:00 Why a 60/40 Portfolio isn?t Diversified by Alex Shahidi (Article)
Maintaining a balanced portfolio is critical, especially when predictions of growth and inflation vary as widely as they do today. Investors are always better off spreading risk than aggressively betting on one economic outcome, and that's especially true when the range of possible economic outcomes is so wide.
2012-04-10 00:00:00 Allocating to Real Assets: Why Diversification Matters by Cohen & Steers (Article)
One way to extend the long-term purchasing power of a traditional stock and bond portfolio is through an allocation to real assets. But individually, categories like commodities, natural resource equities and REITs can be volatile. Cohen & Steers meets the challenge with a focus on broad asset-class diversification.
2012-04-03 00:00:00 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.
2012-03-20 00:00:00 Bob Rodriguez on the Dangers in Today's Markets by Robert Huebscher (Article)
Bob Rodriguez is the managing partner and chief executive officer of Los Angeles-based First Pacific Advisors. In this interview, he discusses how the challenges faced by the US economy will impact the capital markets.
2012-03-13 00:00:00 Europe's ?Back-door QE?: Good News for Global Bond Investors by OppenheimerFunds, Inc. (Article)
By restoring confidence in the global financial system, the European Central Bank's Long Term Refinancing Operation has allowed global bond investors to participate in attractive opportunities around the world.
2012-02-21 00:00:00 Gundlach: The Two Questions that Matter Most by Robert Huebscher (Article)
Two questions stand out amid the complexity of the current economic and market environment, according to Jeffrey Gundlach, both of which relate to critical elements of fiscal and monetary policy and should guide portfolio construction for investors.
2012-02-14 00:00:00 ?The Greatest Anomaly in Finance' by Geoff Considine (Article)
If I told you that there is an easy-to-exploit market anomaly that has enabled investors to consistently and substantially outperform the market with less risk for more than four decades, your first instinct might be to roll your eyes. After all, the unending quest to improve returns while lowering risk has yielded countless methods with initial promise that subsequently collapse under further scrutiny.
2012-02-07 00:00:00 Neel Kashkari on PIMCO's Equity Strategy by John Heins (Article)
Bond titan PIMCO has been methodically building its equity-investing expertise. Here the architect of that effort, Neel Kashkari, and his first major hires describe their strategy and how they're uncovering value in today's market.
2012-01-31 00:00:00 Bob Doll Believes the Recent Equities Rally Could Continue by BlackRock (Article)
Conditions have improved compared to last quarter, with the US economy showing signs of acceleration and European policymakers moving further along the path of progress. With the bearish tone receding, investors should consider moving into "risk" assets and out of "safe" assets, especially on pullbacks.
2012-01-31 00:00:00 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.
2012-01-10 00:00:00 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 00:00:00 Gundlach on the Key Risk for Bond Investors by Robert Huebscher (Article)
Watch out if you own a bond fund that underperformed its benchmark by 2% or more last year, as most did. Rather than put their careers at risk by suffering a second year of poor performance, those fund managers will turn to indexation, according to DoubleLine?s Jeffrey Gundlach. And since the Barclay?s Aggregate Index holds nearly 35% of its assets in Treasury bonds with near-zero yields, its investors will endure poor returns.
2012-01-10 00:00:00 How an Advisor Doubled New Clients by Dan Richards (Article)
It's not always the bold strategic initiatives that pay dividends; rather, executing the little things makes a big difference. In the fall of 2010 I ran a workshop for advisors in which I discussed a regular focus on a short list of high priority prospects. An attendee described how he'd used this idea last year as the jumping off point to add 15 minutes to his Monday morning team meeting - and doubled the number of new clients.
2012-01-10 00:00:00 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.
2011-11-15 00:00:00 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.
2011-11-08 00:00:00 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.'
2011-10-25 00:00:00 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 00:00:00 Gundlach: Markets Aren?t Cheap Enough Yet by Robert Huebscher (Article)
Prices for risky assets are straddling the extremes of two potential outcomes. A 'hurricane' may hit, in the form of a blow-up in Europe or a move to put the US federal government on an austerity program, driving prices lower. Or world economies will plod along, in which case optimistic pricing makes sense. But prices should be 'truly cheap' against those parallel problems, according to Jeffrey Gundlach, and that is not yet the case.
2011-10-18 00:00:00 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?
2011-10-11 00:00:00 A Q3 Client Letter Drawing on Buffett?s Optimism 'The U.S. is coming back now' - and why three inves by Dan Richards (Article)
Since 2008, each quarter I have posted a template for a letter to clients; these are consistently among my most popular articles. This quarter's letter provides clients with perspective on the recent market turmoil.
2011-10-11 00:00:00 The Global ?Old Normal? by Michael Nairne (Article)
Amidst a torrent of dismal economic news and plunging stock prices, investment horizons have become increasingly short-sighted. The new normal of faltering growth and painful deleveraging appears to be only too true. However, investors capable of taking a long-term, global view will find forces at work that will likely drive resurgent world growth akin to that which occurred in the decades right after World War II.
2011-10-11 00:00:00 Market See-Saw Brings Us Back to April 2010 Double-Digit Third Quarter Losses Erase Previous Gains by Ron Surz (Article)
Stock markets around the world plummeted in the third quarter, with the US market losing 16% and foreign markets faring somewhat worse with 17% losses. This quarter's loss reverses the gains of the first quarter and brings year-to-date returns below water, with domestic markets losing 11% and foreign markets losing 13%.
2011-10-04 00:00:00 Jeffrey Gundlach: Preparing for the Coming Crisis by Katie Southwick (Article)
Speaking at a luncheon in New York last week, Jeffrey Gundlach, the founder and chief investment officer of DoubleLine Capital, gave investors advice on how to survive pending crises at home and abroad. After outlining the current state of U.S. debt and tax policy, Gundlach advised against European investments, favoring the U.S. dollar and owning U.S. government bonds as a hedge against credit.
2011-09-13 00:00:00 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.
2011-09-06 00:00:00 Five Strategies for a Sideways Market by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)
If this slow growth environment coupled with asset price volatility continues for (to steal a quote from Fed Chairman Bernanke) 'an extended period,' what additional portfolio strategies might aid the overall risk/return profile of investor portfolios? More specifically, how do you manage investments in a sideways market?
2011-08-16 00:00:00 Tapping into 'The Power of Three' by Dan Richards (Article)
One area on which there's a growing body of evidence is the optimum number of examples to use and alternatives to provide when talking to an existing or prospective client. You want to provide enough examples to communicate that you've done your homework without having people feel overwhelmed.
2011-08-11 00:00:00 Saying No to Keynes and Fiscal Folly by Tony Crescenzi, Ben Emons and Lupin Rahman of PIMCO
?Taxpayers have been hoodwinked into believing the cost from profligate government spending is low relative to the benefits. The Keynesian revolution ignited a decades-long abuse of the core principle of Keynesian economics: for government to increase spending when private sector aggregate demand weakens and stymies job growth. The central banker is left to shoulder the burden, seeking all the while to pressure the fiscal authority to amend the abuse of Keynesian economics and decades of fiscal folly.
2011-08-11 00:00:00 Saying No to Keynes and Fiscal Folly by Tony Crescenzi, Ben Emons and Lupin Rahman of PIMCO
?Taxpayers have been hoodwinked into believing the cost from profligate government spending is low relative to the benefits. The Keynesian revolution ignited a decades-long abuse of the core principle of Keynesian economics: for government to increase spending when private sector aggregate demand weakens and stymies job growth. The central banker is left to shoulder the burden, seeking all the while to pressure the fiscal authority to amend the abuse of Keynesian economics and decades of fiscal folly.
2011-08-10 00:00:00 Global Investment Outlook: Aberdeen's monthly outlook for economies and markets. by Team of Aberdeen Asset Management
Eurozone crisis threatens financial stability Global industrial production momentum may be turning back up Fiscal policy and sovereign indebtedness is the major medium-term issue Monetary policy remains accommodative with emerging countries becoming less restrictive
2011-08-10 00:00:00 Run, Ride or Buy? What Should Investors Do? Dont Sell on Mondays! by Frank Holmes of U.S. Global Investors
With trillions of dollars in debt acting as a ball-and-chain for much of Europe, the U.S. and the rest of the developed world, must detoxify their balance sheets before hitting the ground running. On the other hand, emerging market economies carry low levels of debt and operate like a cash business, making them the final frontier for strong economic growth. A key reason is emerging market governments have the long-term policies in place to facilitate growth of their economies.
2011-08-10 00:00:00 The Economic Recovery Has No Clothes by Kevin D. Mahn of Hennion & Walsh
What likely transpired yesterday was that investors finally siad, The economic recovery has no clothes, despite repeated claims by the Federal Government and certain economists to the contrary over the past 6-12 months. While historical research has shown that typical stock market recoveries generally precede economic recoveries by 6-9 months; perhaps it was too soon. While many encouraging signs pointing to a sustainable economic recovery have emerged over this timeframe in terms of corporate earnings GDP growth and M&A activity, many headwinds for the U.S. economy still exist.
2011-08-10 00:00:00 Update on Global Economic Uncertainty by Team of Nomura Asset Management
Investors can afford to be less nervous in a market that has already declined significantly. Rather, we would recommend that investors should recognize the ability of these companies to generate earnings as well as their ability to sustain their dividends payments. Governments of all major developed and emerging countries have to deal with deteriorating economic forecasts, so until investor psychology calms down, patience may be needed. We will continue to monitor the changing investment environment and identify stocks that offer worthwhile investment opportunities.
2011-08-09 00:00:00 What the Downgrade Means for Investors by Russ Koesterich of iShares Blog
The downgrade simply reaffirms what everyone already knew. The US fiscal situation has deteriorated rapidly since 2008. More troubling, it also reiterates that the current structure of the large US entitlement programs and the narrow nature of the US tax base mean that after a brief respite, deficits will likely get much worse in the latter part of the decade. While last weeks bi-partisan deal to raise the debt ceiling alleviated the near-term pressure, the deal explicitly did not address entitlement programs and taxes, the longer-term more troubling challenges for the US fiscal situation.
2011-08-09 00:00:00 The U.S. Debt and Emerging Market Opportunities by Mark Mobius of Franklin Templeton
The initial market reaction will likely be a high degree of uncertainty and volatility, since investors will likely not know where to turn for assets with lower short-term volatility. During the subprime crisis, investors largely sought such assets in U.S. Dollars and Treasuries. While during the subprime crisis the USD index was high, now it is low reflecting a changed perception of markets that may be considered less volatile in the short-term. In particular, we believe currencies and stocks of emerging countries may look relatively attractive.
2011-08-09 00:00:00 Pacific Basin Market Overview July 2011 by Team of Nomura Asset Management
Equity markets in the Pacific Basin edged higher in July despite the ongoing sovereign debt issues troubling both Europe and the U.S. and the pressure from a slowdown in Chinas economy. Smaller ASEAN (Association of Southeast Asian Nations) economies continued to provide support this month, so the MSCI AC Asia Pacific Free Index including Japan and the MSCI AC Asia Pacific ex Japan Free Index closed 1.33% and 0.03% higher, respectively.
2011-08-08 00:00:00 Everyone Forgot the Basic Laws of Economic by Richard Bernstein of Richard Bernstein Advisors
The consensus over the past month of so was that Washington would come to a last minute debt limit resolution and the equity markets would rally once the cloud of uncertainty regarding the US's finances was removed. Washington did come to its last minute resolution, but the markets have sold off. What happened?
2011-08-06 00:00:00 The Case for Going Global Is Stronger Than Ever by John Mauldin of Millennium Wave Advisors
If we have learned anything from the current financial mess, its that building wealth is dependent on rational analysis, careful decision making, and risk management. Thats why sticking close to home at a time when our markets are more uncertain than ever is a recipe for disaster and absolutely the wrong thing to do. Not only will you miss out on the worlds fastest-growing markets, but the odds are exceptionally high that you will miss as much as 50% or more in potential returns over the next decade.
2011-08-05 00:00:00 A Contagion of Bad Ideas by Joseph E. Stiglitz of Project Syndicate
There has been much concern about financial contagion between Europe and America. After all, Americas financial mismanagement played an important role in triggering Europes problems, and financial turmoil in Europe would not be good for the US-especially given the fragility of the US banking system and the continuing role it plays in non-transparent CDSs. But the real problem stems from another form of contagion: bad ideas move easily across borders, and misguided economic notions on both sides of the Atlantic. The same will be true of the stagnation that those policies bring.
2011-08-05 00:00:00 Urbanization: Driving Commodity Demand by Mark Mobius of Franklin Templeton
Increasing economic activity in emerging markets has continued to push up the demand and prices for key resources such as metals and oil. Infrastructure spending is a key factor driving this rising demand, as more of the working population in emerging markets move from rural areas to the cities, increasing consumption and putting upward pressure on both hard and soft commodities. Long-term commodity prices are likely to be driven by rising global demand as well as increasing costs to obtain these commodities.
2011-08-03 00:00:00 Training Wreck Waiting to Happen by Bill Smead of Smead Capital Management
Someday soon, as the charade of uninterrupted GDP growth catches up with the Totalitarian Communist Government, we believe the entire Chinese banking system will have to be recapitalized to the tune of over $1.5 trillion. At that point, there wont be enough money to lend for new projects to even maintain existing GDP. In our opinion, there will be an economic contraction in China lasting three to four years. Whether China is to become a truly great economy will be determined by what they do in the aftermath of the coming economic train wreck.
2011-08-02 00:00:00 Commodity Caution by Richard Bernstein of Richard Bernstein Advisors
The overwhelmingly bullish consensus regarding the emerging markets should be worrisome to even the most stalwart enthusiasts of emerging markets. It's hard to believe that the consensus a decade or so ago was that the emerging markets were terribly risky and should be avoided. Today, emerging markets, and ancillary asset classes like commodities, have become the cornerstone of most investment strategies.
2011-08-02 00:00:00 Russ K.s Market Calls | Developed & Emerging Markets by Russ Koesterich of iShares Blog
I started the year with a bias for developed market equities over emerging market equities. Year-to-date, developed equity markets have outperformed emerging markets by roughly 4%. I had two main reasons for favoring developed market equities. Emerging market equities looked expensive relative to their developed market counterparts and I felt that emerging market inflation would be a more persistent problem than the market was discounting. Now, however, these major rationales for broadly favoring developed markets no longer hold.
2011-08-02 00:00:00 Kings of the Wild Frontier by Bill Gross of PIMCO
The U.S. has averted a debt crisis, but there remains a stain on our reputation. Nothing in the Congressional compromise reached over the weekend makes a significant dent in our $1.5 trillion deficit. In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near unfathomable $66 trillion of future liabilities at net present cost. Aside from outright default, there are numerous ways a government can reduce its future liabilities. They include balancing the budget, unexpected inflation, currency depreciation and financial repression.
2011-07-30 00:00:00 Shifting Focus by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Some economic indicators are starting to perk up while corporate earnings have been strong as we wind down reporting season. Stocks will move higher in the coming months once confidence is restored. Whatever the near-term outcome of the debt debate, the US still has deficit issues to deal with and hard choices must be made to ensure economic stability for years to come. Europe finally arrived at their debt deal, but it likely falls short of what will eventually be needed. Meanwhile, China is key to emerging market performance and continues to deal with inflationary concerns.
2011-07-28 00:00:00 Investor Question: Greek Bonds in ETFs by Matt Tucker of iShares Blog
As the Greece situation continues to develop, Ive been hearing a lot of client questions about the exposure to Greek debt in some of our iShares fixed income ETFs. With good reason, too investors are wondering whether downgraded Greek bonds will be removed from the funds in which they currently reside. Its a fair question, and it really highlights some of the points I made in my last post on index construction. Of course, last time I focused on US indexes (which are fairly straightforward). The Greece example gives me a good excuse to cover index rules for non-US bond indexes.
2011-07-28 00:00:00 Eurozone Leaders are Fighting Contagion, But is it Too Little, Too Late? by Andrew Balls of PIMCO
European politicians and bureaucrats may want to focus on their summer holiday plans rather than the eurozone sovereign crisis, but with Italy and Spain facing ongoing contagion they may have to forget their holidays and get to work. When the eurozone leaders finally got around to their summit on July 21, they no doubt hoped that the announcement of a new bailout plan for Greece and plans to expand the role of the European Financial Stability Facility (EFSF) would buy them some time. Unfortunately, that has not happened.
2011-07-27 00:00:00 From Asset Allocation Nirvana to Asset Allocation Nightmare by Bill Smead of Smead Capital Management
We believe the next 10 years will be about money moving back into non-cyclical US large cap stocks and domestic companies which enjoy lower commodity prices and the repatriation of money from highly risky asset classes with poor odds. Being widely asset allocated today prepares folks for an under-performance nightmare In our opinion, bonds are expensive, commodities are outlandish, small caps trade at a huge premium and as Chinas economic contraction occurs, the crowd will flee emerging markets.
2011-07-26 00:00:00 Comfort is Rarely Rewarded; Maverick Risk and False Benchmarks by J.J. Abodeely, CFA, CAIA (Article)
Conventional investment strategies, while affording the investor at least a temporary degree of comfort, are destined to produce mediocre results. Only by distancing themselves from the ordinary approach ? as Jeremy Grantham and Seth Klarman have ? can asset managers achieve superior performance and truly fulfill their fiduciary duties by acting as proper stewards of their clients? capital.
2011-07-26 00:00:00 On Your Mind: The Debt Ceiling, US Credit Rating and Potential Default by Team of Charles Schwab
We are disappointed in the continued inability of Washington to resolve the current short- and long-term debt issues. However, we do not believe now is the time to make major portfolio adjustments given US companies' continued strong earnings reports, few signs of a double-dip recession, and few signs that the bond market currently questions the fundamental ability of the US to pay its bills. Be prepared for more volatility as the political negotiations continue. Watch the VIX index for upward spikes indicating that investors are losing patience.
2011-07-25 00:00:00 Quarterly Letter by Team of Grey Owl Capital Management
We remain concerned about the global economy and suspect of broad asset class valuations.However, in a world of tens of thousands of securities there are always opportunities.Absent a significant market correction, we are likely to continue to hold cash or dry powder.We also continue to look to hold assets that can perform well in an inflationary environment, as dollar debasement seems to be the political path of least resistance out of our current problems.The politicians appear happy to solve the problems maana. We on the other hand are happy to make hay when the sun shines.
2011-07-22 00:00:00 2011 Halftime Report: Oil and Copper by Frank Holmes of U.S. Global Investors
Last week we recapped commodities performance for the first six months of the year and offered our outlook on gold. This week, were discussing our outlook for two other commodities that are poised to have an exciting back half of the year.
2011-07-22 00:00:00 2011 Halftime Report: Oil Outlook Remains Strong by Frank Holmes of U.S. Global Investors
Todays oil market is much different than what we experienced back in the 1970s. Back then, countries such as China, India and Russia had no global footprint; they were isolationists. Today these countries are building their economies and squeezing the existing supply of the worlds resources, including oil. These factors indicate that growth in global oil demand will likely outpace increases in production capacity and create a tighter market than what the IEA expected back in 2010.
2011-07-21 00:00:00 Sector Insights - Focus: Materials & Processing by James R. Margard, Peter M. Musser and Carlee J. Price of Rainier Funds
There has been a trend in the last decade for companies to increase in size through M&As, with a focus on removing competition, growing larger, and cutting costs to achieve economies of scale. In businesses that are commodity-oriented, scale is vital to success. This consolidation is occurring in part because it is becoming increasingly difficult to add economic value in this sector of the market. An agricultural revolution is underway, which is advantageous to many companies in the agricultural chain. Demand in the emerging world in particular is providing opportunities to grow revenues.
2011-07-20 00:00:00 Secular Outlook: Implications for Investors by Bill Benz of PIMCO
As the economy undergoes important realignments, investors will need to rethink their traditional approaches to managing their portfolios. As the lines between interest rate and credit risk become blurred, finding sources of safe spread becomes even more critical. More, not less, discretion is warranted when navigating volatile global markets, avoid sectors affected by financial repression and hedge against inflation and/or adverse tail events. We believe investors need to look at risk factors rather than traditional asset classes when making asset allocation decisions.
2011-07-19 00:00:00 Earning 'Extra Credit' Through Short-Term Strategies PIMCO by Jerome M. Schneider of PIMCO
Given renewed concerns over liquidity and credit, investors can potentially do better by considering actively managed short-term strategies that invest beyond traditional U.S. money-market guidelines. The current credit situation in Europe is different from that in both 2008 and 2010 because initial liquidity conditions in the short-term markets are better. In our view, investors should evaluate potential investments within the wider scope of relative value opportunities and not simply for the incremental yield they may offer above risk-free returns.
2011-07-19 00:00:00 Global Overview: July 2011 by Team of Thomas White International
The most recent economic indicators suggest a moderation in global economic activity growth, and forecasts for the current year have been lowered. Manufacturing activity decelerated for the second successive month in June across most major economies, except the U.S. Even Japan, which was expected to bounce back, reported slower growth. Among the emerging economies, economies suggest a decline in the pace of expansion. Consumer sentiment has weakened across the developed world over concerns about income growth as the labor market slipped again in select countries, most notably in the U.S.
2011-07-19 00:00:00 Urbanization: Building a New World by Mark Mobius of Franklin Templeton
Over the next few decades, I believe we are likely to see an increase in several types of infrastructure investments due to rapid urbanization, which drives the increasing global demand for resources, mainly from emerging markets. Rapid urbanization in emerging markets, driven by rural populations migrating to cities in search of work and better opportunities, has put pressure on resources and prompted governments to pump money into a range of urban infrastructure-related sectors such as housing, transportation, sanitation, water, electricity and telecommunications.
2011-07-19 00:00:00 The Debt Ceiling Debate & China by Russ Koesterich of iShares Blog
This week, our first call focuses on the ongoing drama over the US debt ceiling and its implications for the US Treasury Market. While the clock continues to tick towards an August 2nd deadline for raising the debt ceiling, Congress and the White House are still nowhere near a compromise. Next, heres a quick update regarding our view of China. While we remain, for now, neutral on China, and hold a negative view of emerging markets in general, our stance on China is starting to shift to a more constructive, or positive, view.
2011-07-18 00:00:00 Are Emerging Markets Ready to Lead the Global Economy? by Lupin Rahman of PIMCO
We forecast emerging economies will expand at a faster pace than advanced economies over the secular horizon. The challenge for emerging market central bankers is to remain ahead of inflation expectations and retain credibility on inflation targeting. We feel they are well positioned for this. We believe global investors remain significantly underweight emerging market assets. We expect this underallocation to decrease, providing multiyear support for the asset class.
2011-07-18 00:00:00 Equity Investment Outlook by Team of Osterweis Capital Management
As evidence of a global economic slowdown accumulated, the stock market suffered a correction during the second quarter. This is hardly surprising given the market?s strong recovery from the depths of the 2008-2009 financial meltdown. After surging just over 100% from its low in March of 2009 and nearly 30% since August of just last year through the end of the first quarter 2011, the S&P 500 Index needed a breather. The 7% correction that occurred from the April high through the June low looks relatively modest to us in light of how far and how fast the market has rallied.
2011-07-16 00:00:00 Commodities 2011 Halftime Report by Frank Holmes of U.S. Global Investors
Commodities don?t all perform in the same way. In any given year, a particular commodity will go gangbusters and outperform the group. However, that commodity will typically come back to Earth and underperform the following year or the year after that. This is why active management is important when investing in commodities. Active managers can benefit from rotating from winners to laggards or by investing in the companies which produce, farm or mine commodities most effectively.
2011-07-15 00:00:00 What a Multi-Speed World May Mean for Equities by Anne Gudefin and Masha Gordon of PIMCO
Equity investors may look in unfamiliar places as they navigate potential shifts in the global economy. An apparent rebound in risk tolerance since the financial crisis has supported higher equity valuations. Emerging market economies appear to be undergoing a mid-cycle rebalancing. We view this as a welcomed cyclical adjustment rather than the end of their growth cycle; long-term fundamentals remain intact. We believe advanced economies should continue to see headwinds to growth, and that potentially means investors may be generally willing to pay lower multiples to earnings.
2011-07-15 00:00:00 On Brazilian Investment by Andrew Foster of Seafarer Capital
In my last commentary, I presented some basic evidence that suggested that Brazil?s long-term record of capital investment is not particularly impressive. Specifically, Brazil?s rate of ?fixed capital formation? was cumulatively 16.9% of GDP over the past two decades. This is the lowest rate among the vaunted ?BRIICS? emerging markets; it also falls below that of the U.S. at 18.2%. In my view, this figure is both surprising and disappointing. It?s surprising because a developing country such as Brazil should have great scope for productive investment.
2011-07-15 00:00:00 Earnings Heat Up by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Earnings season is heating up and will provide a status update on the "soft patch" and where companies' confidence level lies. Stocks have been more volatile but are they telling us something about potential future direction? Debt ceiling talks continue in Washington, with a deal still likely to come in the final days before the supposed August 2 deadline. The make-up of spending cuts, tax changes, and any entitlement reform may be key to longer-term market reaction. Contagion fears are growing in Europe and solutions are difficult to come by.
2011-07-14 00:00:00 Pacific Basin Market Overview ? June 2011 by Team of Nomura Asset Management
Faced with the imminent withdrawal of the Fed?s QE2 policy, the ongoing sovereign debt woes in the Euro-zone, and concerns over a slowdown in China, the Asian equity markets were at best only able to range trade during the second quarter. The broad indices remained relatively flat, with the MSCI AC Asia Pacific Free Index declining by 0.50% while the MSCI AC Asia Pacific declined 0.87%. As the immediate concerns over the sovereign debt crisis in Europe subsided, a steady recovery in domestic production also helped to lift the Japanese market and trigger a late rebound in equity prices.
2011-07-14 00:00:00 The Brightening Air by Christian Thwaites of Sentinel Investments
A casual empiricist would conclude that the US economy is troubled: weak GNP, employment, housing and slowdowns in the important ISM and Fed surveys. But a longer perspective shows this is entirely in keeping with a recovery from a deep-seated financial and borrowing crisis. There are many signs that the US is picking itself up: manufacturing productivity, private sector job creation, corporate profitability and household deleveraging. Monetary policy has saved the economy from the insidious threat of deflation. Fiscal policy is meandering. Some of the answers are right in front of us.
2011-07-14 00:00:00 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
In many ways, 2011 feels like a repeat of 2010, as the economy has hit a bit of a soft patch, the Federal Reserve?s quantitative easing program has come to an end, and the eurozone is faced with serious sovereign financial concerns. Stocks have pulled back, but the decline has been much more moderate than in 2010, in part because the corporate earnings cycle remains firmly positive. Companies have continued to exceed analyst estimates more often than not, and we expect the upcoming quarter to produce another round of good earnings reports.
2011-07-13 00:00:00 The Inflation Revival: Is it Time to Recalibrate Your Portfolio? by Richard Levine, Matthew Rubin and Tom Marthaler of Neuberger Berman
After a decades-long hiatus, inflation appears to be making a comeback. Clearly few anticipate a return to the days of the late 1970s and early 1980s when double-digit annual inflation gains were the norm. Still, the cumulative impact of inflation can be costly even during periods of modest price increases. According to Bloomberg $100 saved by the end of 1988 was ?worth? only $56 by the end of 2009. Investors may wish to take into account such changes as they estimate the potential returns of their portfolios, and consider incorporating inflation hedges into their investment strategy.
2011-07-12 00:00:00 An End-of-Quarter Letter to Clients by Dan Richards (Article)
Given recent unrest in Europe and uncertainty about economic growth, many clients are looking to their advisors for direction. This template for an end-of-quarter letter is a starting point for your own letter to clients, one that can be a catalyst for a conversation about how to position portfolios.
2011-07-12 00:00:00 The Real Story behind Bond Yields by Michael Nairne (Article)
One of the most important questions that individuals should ask before making any investment is 'Am I being paid enough for the risk of this investment?' I analyze the returns available today from government bonds and answer this important question for this asset class.
2011-07-12 00:00:00 Second Quarter Preserves First Quarter Market Gains: We're Still Above Water and Treading by Ron Surz (Article)
In his award-winning commentary, Ron Surz looks at how the US market performed and then how foreign markets fared. He concludes on a lighter note with a couple of videos that address key topics in the investment arena.
2011-07-12 00:00:00 Developed Asia Pacific: Economic Review June 2011 by Team of Thomas White International
Developed Asia Pacific economies continued to face headwinds in June as the outlook for demand from both developed markets such as the U.S. and Europe, and emerging markets cooled. In the U.S., a lukewarm labor market caused concerns about the pace of economic recovery. In the emerging markets, persistent inflation fears were prompting higher interest rates. Both these factors are putting pressure on exports from Developed Asia Pacific economies. Japan, which specializes in exporting machinery and consumer durables, is feeling the heat of a slowdown in demand from consumer countries.
2011-07-12 00:00:00 Emerging Asia Pacific: Economic Review June 2011 by Team of Thomas White International
Emerging Asia Pacific economies continued to be troubled by persistent inflation in June. Almost every country in the region had to either hike benchmark interest rates or bank reserve requirement ratios to rein in lending and credit growth. The monetary tightening effects are largely expected to make capital more expensive and this in turn is expected to crimp growth across many emerging markets. Inflation, which thus far has been more pronounced among food and fuel items, now seems to be spilling over to structural inputs like labor as well.
2011-07-12 00:00:00 Balancing Debt, Value and Earnings by James G. Tillar and Steve Wenstrup of Tillar-Wenstrup Advisors
The quarter was weak. If this is due to factors like the earthquake and high energy prices, the soft patch should end in the second half of 2011. However, even if this plays out, longer term headwinds remain. What has become clear is that we are in a period of suboptimal economic activity, despite aggressive fiscal and monetary policy. Almost all rich countries are still stuck with a toxic mix of modest growth, depressed housing markets, negative real interest rates, even more asset concentration at our financial institutions, and uncomfortably high unemployment and government deficits.
2011-07-08 00:00:00 Don't Miss Your Chance to Catch a Bull Market by Frank Holmes of U.S. Global Investors
Many people missed the market?s enormous appreciation during the latest equity bull market because they were late to the game or chose to sit on the sidelines. The sideline is a crowded place these days as investors have been reluctant to fully embrace equities. Household savings for the past 12 months totaled $711 billion, the highest level ever recorded in dollar terms. You can see from the chart that?s roughly double the amount of savings recorded following the Tech Bubble. In fact, household debt-to-savings ratios are currently at levels so low, they?ve not been seen since the mid-1990s.
2011-07-05 00:00:00 The End of Currency Wars? by Richard Clarida of PIMCO
International capital is flowing to countries with good growth prospects and to countries with central banks confident enough to raise interest rates. Certain nations are placing controls on capital or intervening in currency markets with an eye to maintaining economic competitiveness. We see central banks in the U.S. and the U.K. winding down monetary stimulus that has exacerbated the situation. Also, we see potential for emerging market currencies to appreciate, and that may give developed nations a boost.
2011-07-05 00:00:00 Scarce Resources by Dennis Nacken of Allianz Global Investors
For decades, investors largely ignored the commodities segment. They can no longer afford to. Commodity production can scarcely keep up with the dynamic development in global demand. The supply bottleneck could remain a sustainable driver of higher commodity prices for the foreseeable future. This applies to energy, to commodities in general and agricultural products in particular: these resources are becoming scarcer?and this is a megatrend.
2011-07-01 00:00:00 Emerging Markets Building Highways to Wealth by Frank Holmes of U.S. Global Investors
Last summer, IBM surveyed more than 8,000 motorists in 20 cities across 6 continents to determine the emotional and economic toll of commuting. They measured the amount of time it took to commute and time stuck in traffic along with whether there was an agreement of the following: the price of gas is already too high, traffic has gotten worse, and driving causes stress and anger. According to IBM, 13 cities other than LA cause more commuter angst. The top three hail from three different countries: Beijing and Mexico City tie as the world?s worst, with Johannesburg coming in third.
2011-07-01 00:00:00 On The Importance of Sustained Capital Investment Part 2 by Andrew Foster of Seafarer Capital
This commentary revisits the topic. It presents basic evidence to support the idea that sustained capital investment is critical in the context of developing markets. The data presented below is gathered from several countries, so as to allow for comparison across emerging markets. Admittedly, the workings of macro economies are highly complex, and drawing detailed conclusions about them is tricky. Nonetheless, national statistics do reveal the general outline of an economy and its underpinnings. That?s how I intend to use the data here ? to make broad inferences only.
2011-07-01 00:00:00 Schwab Market Perspective: Dealing with Debt by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Global governments are dealing with rolling debt crises equaling shaky investor confidence. We are concerned that many of the solutions weigh on growth prospects, but are hopeful about short-term resolutions that restore business confidence and lead to more investment and hiring. The Fed continues to hold steady, keeping short rates near zero and likely reinvesting maturing Treasury securities after QE2 ends. Greece passed the austerity package required to get short-term funding but much more is needed. And while the focus has been on Europe, it may be time to focus on the Asian region.
2011-06-30 00:00:00 The Biggest Bear Market Rally of All? by Bill Smead of Smead Capital Management
Most stock market participants screamed ?bear market rally? in the summer of 2009 as the US market exploded to the upside from the March 2009 low. They were referring to the phenomena whereby a major rally follows a bear market, retraces some of the prior decline and attempts to suck most investors back into the market. These ?sucker? rallies are debilitating because they heap agony those who end up getting caught twice in the same secular decline. We believe the rally in oil to $115 is possibly the biggest ?bear market? rally ever and we advise folks to protect their capital.
2011-06-27 00:00:00 Higher Commodity Prices and the End of Economic Growth Without Inflation by Mihir P. Worah of PIMCO
Global inflationary patterns may shift amid higher commodity prices. We expect commodity prices to be generally rising going forward, though with volatility and differentiation among commodities. Emerging markets going through a particularly commodity and energy intensive phase of growth may affect what developed-world consumers pay for commodities. Currencies are another factor. If developed-world policymakers attempt to make their economies more competitive via a cheaper currency, that could lead to higher inflation for those that are net importers.
2011-06-25 00:00:00 The Malleable Market for Global Aluminum by Frank Holmes of U.S. Global Investors
Last week?s Investor Alert highlighted a Macquarie Research chart showing a recent notable upswing in aluminum production around the world. Following a huge dip in output in China and worldwide throughout 2009, China once again surpassed the rest of the world in producing the most aluminum. China?s massive production makes sense considering the country consumes the most aluminum. According to Jeremy Grantham of GMO, China uses 40 percent of the world?s aluminum as it rapidly develops its railway transportation, increasingly purchases automobiles and demands more energy.
2011-06-23 00:00:00 A New Era of Global Financial Repression by Scott A. Mather of PIMCO
Investors need to be especially alert to increasing financial repression. Any sovereign policy that interferes with free market activity and the pricing of debt or currency can be thought of as financial repression. Repressionary policy rates percolate through the global financial markets and affect asset prices across the risk spectrum. Many emerging market countries use repressionary tactics to capture a larger share of global growth.
2011-06-23 00:00:00 The Disconnect Continues by Richard Bernstein of Richard Bernstein Advisors
BRIC yield curves are on the brink of inversion, while the US has the steepest yield curve in the world. Such signals, while certainly not infallible, have historically been reliable predictors of future equity returns, but investors? portfolios nonetheless remain generally overweight emerging markets and underweight the US. We see opportunity in this disconnect.
2011-06-22 00:00:00 Japan Outlook ? June 2011 by Team of Nomura Asset Management
Nomura?s forecast for Japan?s CY2012 real GDP growth is 3.2%, up from an expected rate for CY2011 real GDP growth of just 0.1%. Although there has been a temporary deterioration in Japanese economic indicators due to supply side constraints, such as capital stock damage, supply chain disruption, and electricity generating capacity shortfalls, we have already started to witness signs that these constraints are easing. The supply chain will return to normal this autumn, as production bases in the disaster-affected areas are restored or the users quickly switch to substitute components.
2011-06-22 00:00:00 Can U.K. CPI Really Get Back to Its 2% Target? by Mike Amey of PIMCO
?U.K. CPI (Consumer Price Index) will likely continue to be buffeted by food and energy inflation. To generate the conditions necessary to bring inflation down more aggressively would put even greater pressure on U.K. households. The Bank of England is right to be cautious on raising the Bank rate given the current state of the economy.
2011-06-22 00:00:00 High net worth families still ?scared to death? of stocks by David Edwards of Heron Financial Group
US earnings reports start the second week of July. Research in Motion?s negative pre-announcement this week is the only earnings miss worth mentioning. Earnings among financial service stocks are under pressure. Without junky mortgage backed securities to sell, not much profit on Wall Street these days. Excluding financials, earnings are expected to grow 11% in Q2, though year over year revenues are expected to be flat. Most economists expect GDP growth to accelerate in the second half of the year as the Japanese supply chain issues are sorted out and commodity prices moderate.
2011-06-21 00:00:00 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 00:00:00 The Toughest Question from Clients And How to Answer It by Dan Richards (Article)
Many existing and prospective clients wonder whether they're getting their money's worth on the fees they pay. They may not say it out loud - but it's often there, casting a cloud of doubt about the advisor they work with.
2011-06-21 00:00:00 Turkey: A Rising Power Bridging Europe and Asia by Mark Mobius of Franklin Templeton
Turkey is the land where the European and Asian continents meet. I asked Carlos von Hardenberg, who is based in Istanbul and oversees our frontier market strategies, to share his views from the center of Eurasia: Since the implementation of the customs union agreement with the European Union (EU) in 1996, Turkey?s trade with EU countries has grown substantially in certain areas. In particular, the Turkish automobile sector has been growing at a fast pace and has become highly competitive. Between 1999 and 2008, auto production in Turkey grew by 285% to 1.15 million vehicles per year.
2011-06-21 00:00:00 Quick Update by James G. Tillar and Steve Wenstrup of Tillar-Wenstrup Advisors
Currently the stock market is rightly focused on the many risks emanating from the macro environment. The European debt crisis, inflation and social unrest in emerging markets, especially China, and our economy has slowed while unemployment remains elevated.Most of these conditions were peculating well before the stock market started its decline in early May. We took advantage of that period to reduce risk in our portfolios by selling some stocks, especially the more cyclically oriented companies. As aresult our portfolios are holding up better than their benchmarks in the current correction.
2011-06-20 00:00:00 Game Change for Bond Investors? by Scott A. Mather of PIMCO
Over the next three to five years, we argue that market behavior may be vastly different than what typical cyclical models would predict. Sovereign debt, which is at the core of our global financial system, is undergoing a seismic shift. Governments practicing financial repression may be transferring wealth from creditors (citizens) to debtors (governments) to the detriment of creditors, fixed income investors and savers.
2011-06-17 00:00:00 An Investor?s Road Map by Tim Shirata of Guild Investment Management
It looks as if banking regulators are finally showing some backbone. Here in the U.S. and in Europe, they are demanding less leverage. This will likely spread as there is no question that many large global banks are in trouble. The problem is that they are not addressing leverage from derivatives. It is too little and too late, especially after the moral harm created by the bank bailouts. To us, the big question remains this: what about controlling and clearing derivatives through a central exchange so the world of derivative holders and writers can clearly know the risks involved?
2011-06-17 00:00:00 Will Gold Equity Investors Strike Gold? by Frank Holmes of U.S. Global Investors
While the party continues for gold bullion prices, stocks of gold companies have been a no-show. The NYSE Arca Gold Bugs Index (HUI) has fallen more than 13 percent year-to-date and the Philadelphia Gold & Silver Index (XAU) has toppled more than 16 percent. Companies such as High River Gold Mines, Jaguar Mining and NovaGold Resources are off 45 percent from 2007-2008 highs. This has been exacerbated in recent weeks making it a hot topic of discussion among investors. This chart shows gold equities of all market capitalization sizes were holding up quite well until late April.
2011-06-16 00:00:00 U.S. Investors Overexposed to U.S. Dollar Risk? by Axel Merk of Merk Funds
The U.S. dollar has experienced significant weakness over recent years. And there is a risk the U.S. dollar will experience ongoing deterioration for an extended period of time. U.S. investors may want to take this possibility into consideration when assessing the U.S. dollar risk inherent in their investment portfolios. Our analysis into the aggregate financial asset holdings of the U.S. personal sector finds that the vast majority of investor?s financial assets are denominated in U.S. dollars and as a result, significant U.S. dollar risk exposure is evident.
2011-06-15 00:00:00 GOLDRelic or Real Money? by J Michael Martin of Financial Advantage
In the past 10 years, the price of one ounce of pure gold has risen from less than $300 to $1,500, far outpacing the return on stocks and bonds. And yet, in most gatherings of professional investors it is not respected. Why is that? What drives the price of gold, anyway? And is gold really an appropriate investment in the 21st century? We set out to better understand this unique metal. Well explore the reasons that some consider gold an important asset class with unique and valuable investment characteristics, while many professionals regard it as a sort of investment sideshow.
2011-06-14 00:00:00 A Cautionary Tale from the World's Most Influential Economist by Dan Richards (Article)
Raghuram Rajan was recently cited by The Economist as having the most important ideas for the post-crisis world. In this interview, he identifies key policy issues the Obama administration must confront. This is a transcript of the interview.
2011-06-14 00:00:00 Global Overview: June 2011 by Team of Thomas White International
Slower manufacturing growth triggers fears of another global economic downturn. Even as the global economy appeared to have entered a phase of stable growth, the unexpected slowdown in global manufacturing activity during the month of May has led to fears of another economic downturn. Activity indicators declined the most in developed economies where growth was expected to gain pace this year. However, unless the trend persists, it is more likely that the moderation in manufacturing activity growth is only a readjustment after several months of rapid expansion.
2011-06-14 00:00:00 Pacific Basin Market Overview by Team of Nomura Asset Management
Europe?s sovereign debt woes and inflation fears have plagued the Asian equity markets recently, sending indices lower during May. The eventual withdrawal of QE2 also became a real concern for the markets. Japan?s post disaster market downturn continued in May, but mainly due to negative international factors this time. Meanwhile, domestic concerns about the ongoing negative impact of supply-chain disruption on manufacturers? earnings and the political disarray caused by a divided parliament and a weakened prime minister have continued to weigh on the market.
2011-06-13 00:00:00 Developed Asia Pacific: Economic Review May 2011 by Team of Thomas White International
Developed Asia Pacific economies largely managed to boost output by leaning on exports in May. For some of the economies affected by natural disasters earlier this year, exports proved to be a blessing. Australia, which was affected by floods in February this year, not only managed to increase raw material exports but also gained by the investments associated with its export-oriented mining sector. Earthquake-hit New Zealand and Japan, however, faced difficulties in increasing output. New Zealand, which depends on food exports and tourism, suffered because of a strong domestic currency.
2011-06-13 00:00:00 Emerging Asia Pacific: Economic Review May 2011 by Team of Thomas White International
Aggressive interest rate hikes by emerging markets in the past twelve to eighteen months have started showing some results. Although food inflation in many emerging markets remains at elevated levels, the pace of inflation seemed to slow in some countries. Further, inflation expectations are expected to cool, primarily due to anticipation of record harvest of food grains in many countries. The threat from oil prices, which grew at a menacing pace during the first quarter of the year, also subsided a bit in May. Nonetheless, many central banks across Asia were cautious over monetary policy.
2011-06-10 00:00:00 Why Bill Gross Doesn?t Like Stocks (or Treasury Bonds) by Sam Parl (Article)
Stocks have come to the end of a ?wonderful journey,? according to PIMCO's Bill Gross, and are now on their own, like ?a baby bird just released from the nest.? The journey Gross spoke of is the multi-decade decline in real interest rates, which have fueled bull markets across ?risk assets,? especially in equities and bonds.
2011-06-10 00:00:00 Pause or Panic? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data has deteriorated to the point that talk of a double dip recession has returned. The risk of another recession is low as most indicators remain well in expansion territory. Several factors are contributing to a soft patch, but a rebound is likely in the latter part of 2011. Along with talk of recession risk, chatter about the need for QE3 by the Fed has increased. The bar is quite high for QE3, but it is very likely the Fed will not let its balance sheet shrink in the near-term. Global growth is decelerating as well, with China tightening and Japan dealing with reconstruction.
2011-06-08 00:00:00 The Economy: When Will Happy Days Be Here Again? by Team of Knowledge @ Wharton
The latest economic reports show the U.S. recovery has faltered. But someday, surely, there will be a real recovery. What forces will drive that upturn? And will the healthy economy of the future look different from those of the past -- establishing a "new normal?" Two intertwined factors are critical to any rebound, according to many experts: Home prices must stop declining and begin to rise, and consumers must spend more freely.
2011-06-07 00:00:00 Monday Market Calls | US Retailers and Emerging Market Bonds by Russ Koesterich of BlackRock Investment Management
Call #1: Maintain Underweight US Retailers. Last week, the main monthly gauge for manufacturing activity and May?s non-farm payroll report both came in weaker-than-expected and both confirmed that the economy is experiencing a dramatic slowdown. Call #2: Neutral Emerging Market Bonds. The other implication of a slower global economy is that bonds should do better relative to stocks. Given what appears to be a case of extreme over valuation, we would still advocate a negative view on US Treasuries, but we are now changing our view of emerging market bonds from negative to a neutral stance.
2011-06-07 00:00:00 Low Volatility Equity Solutions ? Is Now The Time? by K.Sean Clark of Clark Capital Management Group
Correlations converging amid the market declines of 2008 called attention to the limits of relying on diversification between assets for portfolio protection. The desire for non-correlated returns among assets had led to a significant reduction in U.S. equity exposures and accelerated flows into non-U.S. equities and alternative strategies. But the correlations of these uncorrelated assets spiked under the extreme market stress of 2007 and 2008. This shows that for downside protection, buying assets with many different risk profiles is not a substitute for buying volatility to manage risk.
2011-06-07 00:00:00 The Tough Transition by Cole Smead of Smead Capital Management
Stock market participants seem to be having a great deal of difficulty handling temporary economic weakness. This weakness is highly likely to be a combination of higher gasoline prices and the disruptions that supply chains suffered at the hands of the Japanese Tsunami. We are not surprised by this temporary weakness and if it hadn?t been caused by this combination it would have come to pass anyway.
2011-06-07 00:00:00 Modern Portfolio Theory IS Harming Your Portfolio by JJ Abodeely of Sitka Pacific Capital Management
In a recent paper, Scott Vincent argues that the flawed foundation of MPT has allowed its advocates to control the language of the debate and set the stage for the obvious conclusion that passive index-based investing is inherently superior. And don?t think for a second that this debate is simply theoretical, academic, or unimportant? the basic tenets of MPT shape the decisions of nearly all investors in profound and often disturbing ways. YOUR money is almost certainly being managed with these ideas at the core. The traditional approach to asset allocation is built on false axioms.
2011-06-03 00:00:00 The Eurozone Needs a Plan B, as 'Quarantining' the Weak Is Too Costly by Andrew Balls of PIMCO
The eurozone?s peripheral debt crisis is morphing into a tussle between politics and economics and the strains are beginning to show. Greece and Ireland are on programs that are neither restoring stable debt dynamics, nor in keeping current investors engaged or attracting new ones. Portugal is now following the same approach. The better and more realistic approach for the eurozone as a whole might be to acknowledge the Greek plan is not working and move to Plan B ? address the need for a restructuring of Greece?s public debt and perhaps that of other countries too.
2011-06-03 00:00:00 ETF Mythbusting ? Synthetic ETF Considerations by Noel Archard of BlackRock Investment Management
With headlines like ?ETFs: The Next Financial Time Bomb?? I myself would be alarmed about the safety of investing in ETFs, if I didn?t understand that there?s more to the story. The FSB?s April report, entitled ?Potential financial stability issues arising from recent trends in Exchange Traded Funds? focused on two risks. First, the risks associated with the structure of ?synthetic ETFs?; and second, the use of a practice called securities lending in ETFs. For the sake of pithiness, I?m going to tackle the former issue here and the latter in another post, which you?ll see published shortly.
2011-06-03 00:00:00 Natural Resources Q&A with the Global Resources Fund Team by Frank Holmes of U.S. Global Investors
This week Frank Holmes and the co-managers of the U.S. Global Investors Global Resources Fund (PSPFX), Evan Smith and Brian Hicks, participated in a special webcast for the Peak Advisor Alliance. Here are some candid portions of the Q&A: Q. How are interest rates currently affecting commodity prices? A. The magic number for real interest rates is 2 percent. That?s when you can earn more than 2 percent on a U.S. Treasury bill after discounting for inflation. Our research has shown that commodities tend to perform well when rates fall below 2 percent.
2011-06-01 00:00:00 Overweight Healthcare and Exiting Australia by Russ Koesterich of BlackRock Investment Management
This week, our attention turns to the recent slowdown in the global economy and what it means for investors. Over the past month, both equity and commodity markets have staged a modest retreat. One potential cause of the slowdown is the lagged impact of higher commodity prices, which have historically acted as a drag on growth. Late last year, we advocated an overweight to Australian equities, which we then reiterated in early April. Since the initial call, iShares MSCI Australia Index Fund (EWA) has gained around 6.5%. We are now changing our view to neutral for a number of reasons.
2011-06-01 00:00:00 The Danger of Emerging Market Inflation by Mohamed A. El-Erian of PIMCO
If left unchecked, high and accelerating inflation in emerging markets will have growing adverse economic, social and political effects. In addition to undermining overall growth and resource allocation, emerging market inflation imposes a very heavy burden on the poor and erodes political unity. Emerging economies will tap multiple policy brakes as they seek to counter mounting inflationary pressures. And they will continue to grow, but not enough to pull up decisively the sluggish advanced countries.
2011-06-01 00:00:00 An Investment in Infrastructure by Team of Columbia Management
Neglecting infrastructure can have tragic consequences. Think about the I-35 bridge collapse in Minneapolis, levees breaking in Missouri or the San Bruno gas pipeline explosion. These and many other examples illustrate the type of destruction that can occur if the country?s aging infrastructure is not addressed. At the same time, demand for new infrastructure is growing exponentially in emerging markets. Data highlighting the scale of construction, transport, logistics and communications development are so large they render relevant context difficult to comprehend.
2011-05-28 00:00:00 Global Infrastructure a $6 Trillion Opportunity by Frank Holmes of U.S. Global Investors
Each week, more than one million people are either born in or migrate to cities. Much of this rapid urbanization comes from the emerging world, putting tremendous pressure on that country?s feeble infrastructure. Merrill Lynch estimates that $6 trillion will need to be spent by selected emerging market countries over the next three years to meet the basic needs of these citizens. Water, transportation and energy investments will consume the bulk of these funds, 82 percent of total projected spending. Nearly every emerging market country Merrill researched will make an investment in all three.
2011-05-28 00:00:00 Railway Revolution Builds China's Consumer Culture by Frank Holmes of U.S. Global Investors
China is building the world?s largest network of high speed rails. Since opening the first high speed line between Beijing and Tianjin in 2008, the country has laid down more than 4,600 miles of new tracks. This is three times more than Japan, where the bullet train was invented. Once completed near the end of this decade, the high speed rail system will connect more than 250 Chinese cities, span 18,641 miles and reach roughly 700 million people. Currently, the high speed rail network connects about one-third of China?s cities. That figure is set to nearly double over the next two years.
2011-05-27 00:00:00 On Stockpiling and the Commodity Cycle by Andrew Foster of Seafarer Capital
Commodity prices have been in a secular bull market for the better part of a decade?subject only to temporary, albeit violent corrections. Three main explanations have been offered for the trend. The first is that demand from emerging markets is fueling price increases, as the developing countries consume tremendous amounts of raw materials in pursuit of growth. The second is that the dollar is being debased, which in turn is stoking inflation in hard assets. The third argument is that the world is facing a crisis of limits: commodity prices are surging as finite resources are being depleted.
2011-05-27 00:00:00 All That Glitters by Richard Bernstein of Richard Bernstein Advisors
It is hard to find anything in the current financial landscape that has caught investors? attention as much as gold. We were proponents of gold at times over the past decade. However, the rationale for investing in gold has changed in the last three years. The story was once a fundamental one, but today?s general enthusiasm seems more emotionally-based. Gold prices might rise further, but we prefer to sit out the current rally in favor of more fundamentally-based investments that tend to perform well during periods of sizeable nominal growth.
2011-05-26 00:00:00 How Quickly They Forget by Howard Marks of Oaktree Capital
Asset prices fluctuate much more than fundamentals. Rather than applying moderation and balancing greed against fear, euphoria against depression, and risk tolerance against risk aversion, investors tend to oscillate wildly between the extremes. They apply optimism when things are going well in the world (elevating prices beyond reason) and pessimism when things are going poorly (depressing prices unreasonably). If investors remembered past bubbles and busts and their causes, and learned from them, the swings would moderate. But, in short, they don?t. And they may be forgetting again.
2011-05-26 00:00:00 The Case for Equities by Russ Koesterich of BlackRock Investment Management
With global equity markets up over 100% from their 2009 lows, many investors are questioning whether it is time to lower their strategic allocation to stocks. While there are no shortages of risks facing global equity markets, overall we find that most markets are fairly valued and arguably already reflecting some of the risks ? particularly higher inflation and interest rates ? that are likely to challenge the global economy. We believe that over the long term, equities are still likely to produce higher nominal (inflation-adjusted) and real returns than other financial assets.
2011-05-25 00:00:00 Bull Case Nobody Makes by Bill Smead of Smead Capital Management
We feel compelled to make a US stock market bullish case which feels as good to this writer as avoiding tech stocks did in late 1999. It is so lonely that it is divine. Andy Grove, former Intel CEO, college prof John Maynard Keynes said, ?When everyone knows that something is so, it means that nobody knows nothin?.? We believe the majority has put their assets into investments that will provide defeat, insecurity and failure. Out of this comes a very optimistic bull case which is available to those who have courage to look foolish in the short run and avoid today?s popular asset allocation.
2011-05-21 00:00:00 The Dollar and Oil Debate on CNBC Europe by Frank Holmes of U.S. Global Investors
This week in London, I joined CNBC Europe?s Commodities Corner to discuss an earlier post regarding my Three Reasons to Believe in $100 Oil. Of the three reasons I gave, most striking to this group was my belief that higher oil prices will continue because of a weakness in the dollar. What I explained during the discussion was that a falling dollar causes short-term volatility. As the demand for a particular commodity increases and the dollar weakens, or vice versa, investors need to deal with an exaggerated movement in the price. However, I stressed the short-term nature of these events.
2011-05-21 00:00:00 Asian Tiger Sinks Teeth Into Gold by Frank Holmes of U.S. Global Investors
The World Gold Council (WGC) released its quarterly ?Gold Demand Trends? report this week and, as always, it was filled with fascinating data on the strength of the global gold market. Gold demand grew 11 percent to 981.3 tons during the first quarter of 2011, worth $43.7 billion at quarter-end?s price levels. The increase was driven by a significant rise in demand for gold as an investment, up 26 percent from a year ago, as emerging markets look to protect their assets from rising inflation. Demand for gold bars and coins was up 62 percent and 42 percent, respectively.
2011-05-20 00:00:00 What?s Eating You? Global Inflation and Your Portfolio by Matt Tucker of BlackRock Investment Management
Headlines have been filled with news about inflation, from rising commodity, precious metals and gas prices to higher prints of the consumer price index. Traditionally investors have looked to US real estate, commodities and US TIPS to help protect against inflation. As news of rising foreign inflation reaches the US, investors may now be asking if they need to think this in the context of their portfolios. Is global inflation different than US inflation? Could investing in assets that help protect against global inflation increase a portfolio?s efficiency? Am I missing an opportunity?
2011-05-20 00:00:00 RCM China Update: Economic Indicators Signal Robust Growth by Christina Chung of Allianz Global Investors
Christina Chung?head of Chinese equities at RCM, an Allianz Global Investors company?sees few signs of a hard landing in China, as inflation concerns have likely already been discounted by the country's equity market. The latest figures show that China's GDP rose to 9.7% year-over-year in the first quarter of this year, meaning that growth was slightly higher than the market consensus of 9.4%, but slightly lower than the 9.8% in the previous quarter. For the first time in history, the Chinese National Bureau of Statistics (NBS) has issued a comparison with the previous quarter.
2011-05-20 00:00:00 RCM?s Spotlight on India: March 2011 by Michael Konstantinov of Allianz Global Investors
India is widely assumed to have huge catch-up potential compared with China. Yet while China?s centrally guided economy swiftly executes structural changes, India generally discusses structural reforms without executing them. Michael Konstantinov?BRIC investment style leader for RCM, an Allianz Global Investors company?recently returned from India and discusses promising changes that, finally, are just about to be implemented.
2011-05-20 00:00:00 More People by Bill Smead of Smead Capital Management
As value managers, we are interested in secular trends. We seek company characteristics which lead us to non-cyclical businesses which are not capital or labor intensive. For this reason, we love businesses which need more people (as customers) to become more profitable. Unfortunately, from time to time, markets massively over-capitalize industries which they believe will benefit from having more people. Historical examples: The 1929 stock market peak was built around the idea that there would be more people to listen to radio, drive cars and fly on planes. The concept was over-capitalized.
2011-05-19 00:00:00 Chart of the Week: Emerging Europe's Middle Class by Frank Holmes of U.S. Global Investors
Middle-class, affluent, bourgeois - they describe a group of people who enjoy a comfortable life, have access to healthcare and, have discretionary income. And across developing nations, there is a growing group that are just settling in to this lifestyle. A few weeks ago we discussed how economic power is gradually shifting eastward and highlighted a McKinsey Global Institute report that showed China, Latin America and South Asia are projected to account for most of the middle class children by 2025. Those regions aren?t the only ones. A surging middle class exists in Eastern Europe as well.
2011-05-19 00:00:00 Cause or Effect: ETF Trading Volume Impact on Volatility (and Vice Versa) by Noel Archard of BlackRock Investment Management
If you read Russ Koesterich?s blog post from Monday, May 12th, you already have an idea of what has been going on with the price of silver. The commodity was up over 150% over the prior 12 months before going through a downward correction and shedding 30% of value. Our iShares Silver Trust (SLV) became a focal point during the course of the week as volatility spiked, and the usual questions popped up about how people use ETFs, and whether or not ETF trading volume is caused by price volatility, or if it?s in fact a contributor to the volatility.
2011-05-17 00:00:00 Pippa Malmgren on Inflation and its Geopolitical Impact by Robert Huebscher (Article)
The Cold War may have been over for a quarter century, but the inflation-driven challenges that characterized that historical era are heating back up. Today, global volatility is back, according to Pippa Malmgren, who says that commodity-driven inflation will lead to political instability in emerging markets.
2011-05-17 00:00:00 Are we at a Market Detour or merely a Speed Bump? by Matt Lloyd of Advisors Asset Management
The market has been predisposed to a positive bias over the last quarter. This is in light of what we see as a bit of rolling over in the economic metrics and various global forces. The market has somewhat disregarded the impacts of natural disasters, the European Central Bank (ECB) turning generally hawkish and placing the rating of U.S. Treasuries on negative outlook. A few years ago, any of these events would have proven to be a detour to the markets road to higher levels, currently they are merely speed bumps.
2011-05-16 00:00:00 Secular Outlook: Navigating the Multi-Speed World by Mohamed A. El-Erian of PIMCO
It is a world that heals slowly and unevenly, and remains structurally impaired. Balance sheets, both across and within economies, are still out of equilibrium. We expect advanced economies will face sluggish growth and persistently high unemployment over the secular horizon. Emerging economies will achieve higher growth but face recurrent inflationary concerns. We do not expect policymakers to boldly address structural problems. By targeting negative real interest rates, they will pursue financial repression that undermines the ?real return? contract that savers expect.
2011-05-13 00:00:00 Market Turbulence Increasing by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
We are entering a traditionally tough period for the market and economic data has been raising questions about the sustainability of the recovery. While still optimistic on the longer-term outlook, there could be more choppiness in the near term as markets adjust to a changing environment. The Fed continues to buck the global trend by maintaining loose monetary policy, which contributed to a weaker dollar. But lately the dollar has gotten a lift as QE2 comes to an end, contributing to a rout in commodity prices.
2011-05-13 00:00:00 Three Reasons to Believe in $100 Oil by Frank Holmes of U.S. Global Investors
After selling off nearly 14% last week, oil prices finished this week slightly higher at $99.65 per barrel. While the end result was a net positive, the volatility continued. Oil reached $104/bbl, then fell to around $96, before nesting just below $100. As an investor, this volatility can be difficult to handle. Throw in the uncertainty of today?s geopolitical environment, and investors feel the need to downsize their positions in commodity investments, such as oil. Markets could remain volatile in the short-term, but here are three long-term indicators to support $100+/bbl oil prices.
2011-05-12 00:00:00 Pacific Basin Market Overview - April 2011 by Team of Nomura Asset Management
Equity markets in Asia continued to gain ground in April after a volatile first quarter of 2011. Stock markets ended higher as companies reported strong earnings, while expectations that inflation may have peaked out also helped to support market sentiment. Disruption to manufacturing industry supply-chains and ongoing problems surrounding the Fukushima nuclear power plant have continued to weigh on Japanese stock prices, although the market was able to stabilize from the massive sell-off that followed the Tohoku earthquake.
2011-05-11 00:00:00 Supreme Moment by Bill Smead of Smead Capital Management
Kairos- is an ancient Greek word meaning the right or opportune moment (the supreme moment). The world of value investing and portfolio management includes mean reversion and patience. Speculative episodes typically go on for much longer than expected. This fact forces us to take a stand by avoiding overvalued common stocks and owning undervalued shares. Everyone would love to make their adjustments at the ?Kairos?. We believe that the greatest existing misallocation of capital in the world today is based on over-confidence in the uninterrupted growth of emerging markets.
2011-05-10 00:00:00 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 00:00:00 Emerging Europe: Economic Review by Team of Thomas White International
The International Monetary Fund in its latest report observed that the economic recovery in Europe as a whole is proceeding modestly. However, the agency noted that the pace of growth varied substantially across countries in the region. The large emerging European economies in the region are performing at or above capacity, according to the agency. Preliminary data showed that the Euro-zone economy expanded at a better-than-expected pace in April, allaying concerns that the recent rate hike by the European Central Bank would strengthen the euro and slow down German export growth.
2011-05-10 00:00:00 Emerging Asia Pacific: Economic Review April 2011 by Team of Thomas White International
Faced with persistent inflation, central banks across emerging Asian economies turned more active in the foreign exchange markets during April, aggressively raising interest rates. However, these actions have coincided with a loose monetary policy in the developed markets. Consequently, the investment capital, which typically chases high interest rates, continued to flow from the developed markets to emerging markets, pushing up the value of the currencies of emerging markets. To prevent a sudden appreciation of their respective currencies, central banks turned into buyers of the U.S. dollar.
2011-05-10 00:00:00 Developed Asia Pacific: Economic Review April 2011 by Team of Thomas White International
Developed Asia Pacific economies that were hit by natural disasters during the initial months of 2011 registered mixed economic performance with some countries in the group recovering faster even as other countries are still dealing with the aftermath of the crisis. While Japan, finalized a fiscal and monetary plan, investment-led growth was helping Australia recover from floods. New Zealand, which also suffered a devastating earthquake, showed a considerable rise in dairy exports. Other advanced economies continued to do well, although strong growth has been stoking inflation.
2011-05-09 00:00:00 Me, Lord Marlboro and the Dow!? by Jeffrey Saut of Raymond James Equity Research
While the intermediate/long-term internal stock market energy remains fully charged for a move higher, the markets short-term energy still needs some time to rebuild. This probably means another week, or two, of consolidation and/or attempts to sell stocks down before we begin another leg to the upside. Even so, I dont think any selling will gain much downside traction, implying the zone between the S&P 500s (SPX/1340.20) 50-day moving average (DMA) at 1320 and the 1340 level should provide support for stocks.
2011-05-07 00:00:00 Don?t Turn Out the Lights on Commodities Just Yet by Frank Holmes of U.S. Global Investors
The prices for many commodities suffered the worst week in recent memory this week. Oil prices dipped below $100 per barrel, gold fell below $1,500 an ounce and silver gave back much of the past month?s gains by falling to the $35 an ounce level. The prices for other commodities such as sugar, tin, nickel, aluminum, lead and copper also pulled back. Immediately, headlines on websites such as Marketwatch, Bloomberg and SmartMoney read ?Has the Commodity Bubble Popped?? and ?Imploding Commodities Complex.? In our opinion, not likely.
2011-05-06 00:00:00 Opportunities in Southeast Asia (video) by Mark Mobius of Franklin Templeton
Asia presents a wealth of investment opportunities. Economic giants like China and India, with their increasing demand for commodities and natural resources, play a pivotal role for growth in the region, including emerging markets in Southeast Asia. I think the outlook for Southeast Asia remains very positive. Countries like Thailand and Indonesia have seen very rapid growth in the last decade, and frontier markets like Vietnam and Laos, with their strong growth potential, are also very interesting to us.
2011-05-05 00:00:00 A Roadmap For The Coming Changes In Fed Policy by Will Denyer of GaveKal
Last week?s FOMC statement, and Bernanke?s first press conference, were predictably anticlimactic. But they did confirm what the FOMC plans to do this summer, and what they currently think should be the next steps thereafter. Based on this apparent plan, market participants would be right to assume that Fed policy will continue, well after QE2 ends in June, to weigh on the Dollar and support the already elevated Euro, commodity prices, commodity currencies, etc? In other words, the Fed?s telegraphed trajectory would continue to contribute to the world?s biggest macro risks today.
2011-05-03 00:00:00 Profiting From the Urge to Merge by Team of Emerald Asset Advisors
If it seems there has been a significant uptick in mergers & acquisitions ("M&A") lately, it's not your imagination. In the first quarter of 2011, worldwide M&A activity rose 55% from the comparable period in 2010. More than 9,600 deals with a value of nearly $800 billion were announced, the highest levels since the second quarter of 2008. We believe the recent pick-up in M&A activity is more than a simple rebound off the lows of the Great Recession and is likely part of a broader, longer-term trend. A confluence of factors supports this hypothesis.
2011-05-03 00:00:00 RCM Sees Double-Digit Earnings Growth for S&P by Josh Orth of Allianz Global Investors
Scott Migliori, CIO of RCM U.S., of Allianz Global Investors?says U.S. equities should continue to receive support from stronger corporate profits, a high level of new orders, favorable taxes and rising capacity utilization rates?which should also boost capital spending. We believe a 2011 full-year S&P 500 earnings growth rate close to 12%?15% is attainable. Profit margins are high and vulnerable in some sectors. Unit labor costs are to remain well behaved with the unemployment rate likely to remain above 8%. We believe 2011 S&P 500 earnings can reach the $95?$96 range, with an 9% gain 2012.
2011-05-03 00:00:00 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Strong earnings and a benevolent report from the Federal Reserve Board combined to keep the stock market rally roaring ahead despite scant media coverage. The Dow Jones Industrial Average gained 2.44% led by our shares in Boeing and Caterpillar while the NASDAQ Composite reached multi-year highs and gained 1.84% on the week.
2011-05-02 00:00:00 Schwab Market Perspective: Making Sense of a Mixed Bag by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Earnings season is winding down and is largely positive and CEO confidence is high. This points toward a continued improving labor outlook but could mean more grinding in the stock market. Housing remains moribund but the market seems to be largely dismissive. A ratings warning on US debt rattled the stock market but bond markets were relatively unmoved. Issues need to be addressed, but they are more likely to affect money flowing into the economy and highly unlikely to result in failure to pay obligations. Meanwhile, the Fed is striving to communicate more effectively-but about what?
2011-05-02 00:00:00 Global Market Commentary by Monty Guild and Tony Danaher of Guild Investment Management
As we have been saying for some time, U.S. economic growth is stuck in the slow lane.We have seen a serious slide in the American standard of living over the past three years, since the beginning of the recession.The slide can be measured in many ways.Food stamps recipients have increased by 48 percent and the cost of the program ballooned by 80 percent.Medicaid recipients are up 17 percent and programcosts are up36 percent.Welfare recipients are up 18 percent, and program costs up24 percent. That isnt the kind of growth thats good for any economy!
2011-04-29 00:00:00 This Time Isn?t Different by Richard Bernstein of Richard Bernstein Advisors
Hearing the phrase ?this time is different? is often a warning signal. History demonstrates that rationalizing an overvalued market by suggesting that the economy has structurally or that we?ve entered a ?new paradigm?, is not generally a fruitful strategy. Whether bullish or bearish, we believe that macro cycles rarely diverge from historical patterns. Indeed, current global economic cycles appear to be following historical trends. However, there appears to be a significant disconnect between investor sentiment regarding risk and where problems are actually emerging within the global economy
2011-04-29 00:00:00 We Are Not Perma-Bears, But We Are Cautious Now by Team of Litman Gregory
To understand the potential upside for stocks it's important to evaluate the factors that drive returns and how they might behave over our investment horizon. The three key variables are dividends, earnings growth, and changes in the price/earnings ratio. Our analysis focuses on assessing these key factors under several broad economic scenarios. This allows us to estimate return ranges for stocks, and to weigh these potential returns against the risks we see to make informed portfolio allocation decisions.
2011-04-29 00:00:00 Coal Use in China Shines Light on Growth by Frank Holmes of U.S. Global Investors
International coal prices hit $124 per ton this week, the highest levels in five months, as strong demand from reconstruction projects in Japan and reduced supply from flood-ravaged Australia has made coal supply tight. The floods in Queensland, Australia cut the country?s output of coal by 15 percent and other big coal producers such as Indonesia, South Africa and Colombia are experiencing similar production cuts due to floods of their own.
2011-04-27 00:00:00 Turkey?s Shaky Foundations: Structural Deficit Underpinned by Volatile Capital Inflows by David Rogovic of Roubini Global Economics
In 2009, at the height of the global financial crisis, a reduction in capital inflows and domestic demand caused a narrowing of external imbalances across Europe. Now, as the region returns to growth and recovers from the crisis, Turkey stands out in terms of the size and speed at which its current account deficit is expected to grow. This is due in part to a more rapid recovery, but also to a shortfall of domestic savings relative to investment. The country is more reliant now than in previous episodes on short-term and historically more volatile foreign capital to finance the deficit.
2011-04-26 00:00:00 The End of QEII: It?s Time to Make the Donuts by Tony Crescenzi, Ben Emons, Andrew Bosomworth and Lupin Rahman of PIMCO
With quantitative easing the Federal Reserve has in essence picked the pockets of Treasury bond investors throughout the world. Ultimately, the U.S. must own up to its past sins and let the deleveraging process play itself out. The U.S. must invest in its people, its land, and its infrastructure, as well as promote free trade, to achieve economic growth rates fast enough to justify consumption levels previously supported by debt.
2011-04-26 00:00:00 Portfolio Strategy by Bradley Turner of Chess Financial
At the outset of the second quarter, the major trends that have shaped our portfolio strategy since last summer remain largely intact. These include: A global economy that is experiencing a two-track recovery. Growth in the developed markets is generally subdued while growth in the emerging markets is more robust. Inflationary pressures continue to build as evidenced by price increases in many commodities, notably food and oil. Interest rates have begun to move higher, either due to central bank actions (e.g., China, India) or specific country risks (e.g., Portugal).
2011-04-26 00:00:00 Africa: Challenges and Outlook by Mark Mobius of Franklin Templeton
In this post, I will discuss what I think are Africa?s key challenges. Corruption is a major problem in Africa. However, accusations of corruption against African governments could also be lodged against entities in the developed world that seek to buy the influence of these governments. One important development has been the Cardin-Lugar amendment to the Dodd-Frank finance reform bill in the U.S., requiring that oil, natural gas and mining companies registered on the New York Stock Exchange disclose any payment made to a foreign government for the purpose of the commercial development.
2011-04-25 00:00:00 Yemen: Different Sort of Story by Douglas Clark Johnson of Codexa Capital
Yemen may now be worth a second look by the private sector, with the pending departure of Ali Abdullah Saleh from office. While the country?s distorted economy puts limits on growth, its international context could soon take a more constructive turn. The key is broad-based GCC participation in the economy, something that was never seriously on the table while President Saleh was in office.
2011-04-22 00:00:00 Don?t Fear a Pullback in Prices by Frank Holmes of U.S. Global Investors
The S&P credit agency sent shockwaves through the global financial system on Monday. This sent markets lower and the prices of commodities such as oil rocketing back above $110 per barrel and both gold and silver to new highs. It should be clear the S&P announcement was just a warning, the rating was affirmed at AAA. The fears quickly subsided and U.S. markets hit fresh three-year highs. Essentially there?s only a one-third chance of a downgrade and anyone who?s ever listened to the weather man knows that a 33 percent chance of rain means you probably don?t need your umbrella.
2011-04-21 00:00:00 Equity Market Review and Outlook by Richard Skaggs and Thomas Davis of Loomis Sayles
The global equity bull market continued in the first quarter despite significant global strife. Most major US indices posted total returns of about +5.0% to +8.0%. Continuing the trend since the March 2009 low, small cap and mid cap stocks outperformed their larger brethren. US markets were among the best in the world, although the MSCI World Index also posted a solid gain of 4.9%. Emerging markets were among the weaker equity asset classes. As the returns demonstrate, however, emerging market stocks remain the winners by a wide margin over the past five- and ten-year periods.
2011-04-19 00:00:00 Managing Exposure to Extreme Markets by Geoff Considine (Article)
Volatility in the equity markets has subsided, courtesy of a strong bull market and fading memories of the 2008 financial crisis. Risks remain, however, ranging from the turmoil in northern Africa to sovereign debt instability in Europe. Investors can take advantage of the complacency in the equity markets by purchasing inexpensive insurance against adverse events.
2011-04-19 00:00:00 Emerging Europe: Economic Review March 2011 by Team of Thomas White International
Upbeat forecasts from the European Commission as well as stable financial and economic conditions in European economies indicated that the recovery is on track in the region despite the tragic developments in Japan, increasing oil prices, and the continuing political unrest in the MENA region. Equity markets also seem to be signaling that the sustained pace of global economic recovery will offset these developments. The decision by seventeen Euro governments to strengthen the ?440 billion rescue fund and to lower interest rates on Greece?s bailout helped allay fears of a lingering debt crisis.
2011-04-19 00:00:00 Global Overview by Team of Thomas White International
While the earthquake and the tsunami have caused extensive damage in Japan, the impact on global economic growth is not expected to be significant. Though exports to Japan may slow in the short term, this will likely be offset by increased demand as the country starts rebuilding. The supply disruptions faced by manufacturers who depend on Japanese components are also likely to be short-lived. Global equity prices saw increased volatility during March, but recovered towards the end of the month as fears of slower global economic growth due to the disaster in Japan subsided.
2011-04-19 00:00:00 Middle East/Africa: Economic Review March 2011 by Team of Thomas White International
The turmoil in the Middle East region continues, with Libya exploding into civil war, and troops from the Gulf Cooperation Council being called in to suppress the protests in Bahrain. In terms of the economic repercussions, stock markets in the MENA are estimated to have lost around $140 billion in market capitalization during the last month. According to the Arab Monetary Fund, the market capitalization of 16 Arab bourses was valued at $862 billion on March 4, compared with $1.002 billion on January 25, a day before the political crisis in Egypt triggered upheaval across the Middle East.
2011-04-16 00:00:00 Will China's Economy Overheat? by Frank Holmes of U.S. Global Investors
China?s GDP growth continued at a blistering pace during the first quarter of 2011, rising 9.7 percent from the previous year. Once again this outpaced many forecasts and reignited the discussion of China?s overheating economy. While its robust growth may raise a few eyebrows, the economy isn?t in danger of ?red-lining.? Andy Rothman points out that the first quarter growth figures ?[aren?t] dangerously high given the GDP growth rate and strong income growth? After rising nearly 8 percent during 2010, inflation-adjusted urban incomes rose 7.1 percent during the first quarter.
2011-04-16 00:00:00 Inside Information by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Earnings season gives an 'insider' look at economic growth. Businesses see and react to changes in the economy before the broader macro data show a clear trend. The Fed has floated some trial balloons about reining in its extremely accommodative policies, the time for which is overdue. Budget issues remain a problem at all levels of government, but likely wont derail the recovery at this time. Despite ongoing debt problems in peripheral European nations, the ECB hiked interest rates. Europe still faces significant issues that make it more likely to underperform other areas of the world.
2011-04-14 00:00:00 Pacific Basin Market Overview by Team of Nomura Asset Management
Asian equity markets began the year in a particularly volatile state as they came to terms with regional inflationary pressure, unrest in the Middle East and North Africa, and the natural disaster in Japan. Notwithstanding these negative factors, most markets in Asia rebounded in late March to end the quarter on a positive note. The MSCI AC Asia Pacific Free Index including Japan, however, decreased by 1.4% in the first quarter of 2011, while the MSCI AC Asia Pacific ex Japan Free Index increased by 1.5%.
2011-04-13 00:00:00 Global Demographic Trends: 1950 - 2050 by Team of Bespoke Investment Group
The OECD recently issued its annual Society at a Glance report which highlights and compares trends in income, age, and other vital statistics across countries. One interesting aspect of the report highlights trends in the age of the global population. In the charts below we compare the percentage of the entire OECD population above the age of 65, as well as in BRIC and G7 countries. As shown in the top chart, 14.61% of the population within all OECD countries is currently above the age of 65 years old. Between now and 2050, this percentage of the population will increase to 25.66%.
2011-04-13 00:00:00 Powering Up Asia by Team of Matthews Asia
Energy is a fundamental building block of all modern economies. As such, it should not be an overstatement to say that the availability, or lack of energy has been a primary driver of growth. This is why it has been imperative for all nations, to secure stable sources of energy. With Japan?s current nuclear crisis and high oil prices causing concern, the topic has drawn recent attention. And as Asia's population continues to climb, the region?s energy demands are also set to soar. China and India, are expected to develop ever greater appetites for energy sources, such as nuclear power.
2011-04-12 00:00:00 Equity Market Review & Outlook by Richard Skaggs and Thomas Davis of Loomis Sayles
The global equity bull market continued in the first quarter despite significant unrest across parts of Northern Africa and the Middle East, a massive earthquake in Japan, sovereign debt issues in Europe, and inflationary pressures in certain emerging economies. US markets were among the best in the world, although the MSCI World Index also posted a solid gain of 4.9%. Emerging markets were among the weaker equity asset classes. As the returns demonstrate, however, emerging market stocks remain the winners by a wide margin over the past five and ten year periods.
2011-04-11 00:00:00 Bond Market Review & Outlook by Thomas Fahey, Teri L. Mason and David W. Rolley of Loomis Sayles
The power of easy money policy to dampen volatility is evident in the global bond markets. There has not been any systemic credit spread widening or major jump in risk aversion on the back of the significant political upheaval or natural disaster. The collective investor conclusion seems to be that the impact of the losses will not derail global growth, and Japanese reconstruction may even contribute to it later this year. Specifically, Chinese growth still looks on track for a strong year, and labor markets in the US have at last begun to show something like a normal recovery.
2011-04-09 00:00:00 Risk 3.0 Investment Solutions for the New Market Realities by Mitchell Eichen and John Longo of The MDE Group
In spite of the stock market rebound from its March 2009 lows, the 2007-2009 bear market still looms large. Investors have lost faith in the conventional methods of portfolio management. Investor confidence was not merely shaken, but shattered. Risk was either improperly measured, or considered a distant second to return. In this paper, we introduce a new approach to portfolio management that builds upon prior work. The main contribution is that specific kinds of risk are explicitly considered. The portfolio is then optimized, using human judgment, for the current market outlook.
2011-04-09 00:00:00 The Curve in the Road by John Mauldin of Millennium Wave Advisors
We have chosen deliberately to take the inflation road. We have not traveled that road for some time. The Fed may think they know what is around the curve and what to do if inflation comes back, but no two crises are the same. I worry about these things. If the Fed and the US government wanted a weaker dollar, the return of inflation, and the potential for yet another boom-bust, they could not have designed better policies than the ones they?re pursuing.
2011-04-08 00:00:00 Important Recent Developments by Louis-Vincent Gave of GaveKal
It seems obvious to us that we are approaching a tipping point. The rise in commodity prices and risk assets does not seem to be compatible. Neither does the rise in commodity prices, equity prices, and inflation expectations and overly easy central banks. The recent surge in certain currencies to two standard deviations above their purchasing parities should also have economic consequences. So the situation does not seem stable from a bottom-up perspective. And from a top down perspective, it seems obvious that the recent period of exceptionally easy fiscal policies should come to an end.
2011-04-08 00:00:00 Near-term Outlook For A Troubled World by Victoria Marklew, Richard Thies and James Pressler of Northern Trust
Although 2011 is only three months old, the world has changed dramatically. Along with the evolving European debt crisis, seemingly -isolated Tunisian protests grew to varying levels of upheaval throughout the Arab world, and an historic earthquake and subsequent tsunami have left Japan?s outlook under a cloud of uncertainty. Each of these situations is significant in its scope and magnitude, but by focusing on just the key elements, the main risks can be appreciated.
2011-04-08 00:00:00 Why High Oil Prices Are Likely Here to Stay by Frank Holmes of U.S. Global Investors
A number of forces continued to push oil prices higher this week, reaching their highest levels in the U.S. since September 2008. One factor fueling the run has been the continued decline of the U.S. dollar. Oil and the dollar historically are negatively correlated. This means that a rise in oil prices generally coincides with a decline in the dollar, and vice versa. The U.S. dollar has seen a dramatic decline since the beginning of the year as oil prices have moved some 30 percent higher. This could be due to fact that roughly two-thirds of the U.S. trade deficit is related to oil imports.
2011-04-08 00:00:00 Spotlight: Pivotal Peru Election by Frank Holmes and Jacek Dzierwa of U.S. Global Investors
Peruvians will take the first step in electing their new president on Sunday. The top-two finishers in this round will compete in a runoff election next month. The outcome is meaningful to improving the quality of life in Peru, continuing its strong historical GDP growth and making the most from its ample natural resources. Politics in Peru have a history of surprises and this year?s surprise is how left-wing candidate Ollanta Humala is leading in the polls, though one-third of Peru?s population is still undecided. Several local news services show Humala well ahead of opponents.
2011-04-07 00:00:00 100 Years of Shifting Growth by Frank Holmes of U.S. Global Investors
As part of our research, we track the fiscal and monetary policies of countries around the world. We believe government policies are a precursor to change and that this change can lead to economic devastation, such as the nationalization of oil companies in Venezuela, or generate substantial growth, such as Colombia?s successful efforts to encourage foreign investment. Historical context allows us to gauge the outcome of these situations. For example, these pie charts from Credit Suisse show the relative sizes of the world stock markets from two very different periods.
2011-04-06 00:00:00 Let Them Eat Crude by Robert Stimpson of Oak Associates
World events over the past month have received a lot of media attention, but few accounts have emphasized the long-term effects on equity markets. The revolts in Tunisia, Egypt, Libya, unrest in Bahrain and Yemen, and the earthquake in Japan are significant for equity investors going forward. While most of the media have focused on the human aspect of the events, the influence of food inflation, rising oil prices, and the state of the US dollar have been overshadowed by the regime changes and nuclear disaster in Japan.
2011-04-05 00:00:00 The Future of Investment Manager Due Diligence (and a Look Back at Q1 Performance) by Ron Surz (Article)
Despite the continuing global financial crisis, the uprisings in the Middle East and the Japanese disaster, global stock markets delivered positive results in the first quarter of 2011, as described in this capital market review. In the second part of the article, you'll discover what due diligence procedures need to change and why.
2011-04-05 00:00:00 Mega Caps and Russia by Russ Koesterich of BlackRock Investment Management
While we remain underweight emerging markets in general, one emerging market is looking particularly cheap. While we would be concerned about having a long-term overweight to Russia given that country?s political situation, from a short-term perspective the market looks interesting. We first mentioned Russia as a possible play in early February ? since then the benchmark index is up nearly 7%, but Russia still looks cheap trading for less than 6x earnings. Also unlike China or India, which are negatively impacted by higher oil prices, Russia is a natural beneficiary of the spike in crude.
2011-04-05 00:00:00 Inflation Worries? Commodities May Help by Team of Emerald Asset Advisors
Many of you may remember the movieThis classic shed some interesting light on the world of commodities.Commodities include natural resources, industrial metals, precious metals, and agricultural products. Or, as Duke explained to Billy Ray Valentine, "Commodities are agricultural products...like the coffee you had for breakfast...wheat, which is used to make bread...pork bellies, which are used to make bacon, which you might find in a BLT sandwich. And then there are other commodities, like frozen orange juice...and gold. Though, of course, gold doesn't grow on trees like oranges."
2011-04-02 00:00:00 Above the Fray by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Attacks on Libya and recovery efforts in Japan have dominated the headlines, but behind the scenes US economic growth remains solid and we remain optimistic on the stock market. Commodity prices have backed off a bit and the Fed is likely to see QE2 through to its June 2011 end. Of particular concern is the unwillingness or inability for Congress to agree on a budget that addresses the growing deficit issues in the US. Japan has a significant debt burden with which to deal as it rebuilds, while Europe is struggling to come up with a comprehensive plan to deal with the eurozone debt crisis.
2011-04-02 00:00:00 Expert Roundtable on Inflation: Should You Be Worried? by Mark W. Riepe, Liz Ann Sonders, Rob Williams, Michael Iachini & Brad Sorensen of Charles Schwab
Inflation is a rise in the general level of prices of goods and services; your money buys less. With oil and other commodity prices rising, the Federal Reserve's current easy monetary policy and the economy picking up, many investors are worried about inflation. Mark Riepe, head of Financial Research and president of Charles Schwab Investment Advisory, led a roundtable discussing why Wall and Main Street may have different perspectives on inflation. The roundtable also covers our inflation outlook, ways to protect your investments and inflation-savvy investments you might want to consider.
2011-04-01 00:00:00 The Bedrock of the Gold Bull Rally by Frank Holmes of U.S. Global Investors
Naysayers started calling gold a bubble back when prices hit $250 an ounce and though gold?s bull market has tossed and flung the bubble callers around for almost a decade now, their voices have only gotten increasingly louder as prices broke through $1,000, $1,200 and now $1,400 an ounce. However, gold prices appear asymptomatic of the signs generally associated with financial bubbles.
2011-03-31 00:00:00 Why Africa, Why Now? by Larry Seruma of Nile Capital Management
There are a number of reasons that Africa is an excellent investment opportunity ? Nile discusses a few that highlight why now is a good time to invest in African markets.
2011-03-30 00:00:00 Middle-Class Middleweights to be Growth Champions by Frank Holmes of U.S. Global Investors
Over the next 15 years, the number of children in middle-class households in emerging market cities around the world may grow 10 times faster than those in developed countries. This future generation living in places such as China, Latin America and South Asia should drive the demand for goods and services, housing and transportation that extend beyond the basic necessities of life. In McKinsey's report, ?Urban world: Mapping the Economic Power of Cities,? the researchers focus on demographic and economic trends to determine which cities will provide the most economic growth in the future.
2011-03-30 00:00:00 ?Agri?-vation by Scotty George of du Pasquier Asset Management
Recent events in the Middle East, combined with weather, have put tremendous pressure upon raw materials prices. The fear is that cyclical pricing pressure might become secular (generational) trends, accelerating inflation in energy prices, foodstuffs, and industrial components, thus undermining a tenuous uptick in consumer spending, global trade, and consumer confidence. While Wall Street rejoices that something, anything, has stimulated trading activity and profit margins, the world watches as surpluses contract and statistics become human convoys of disaster.
2011-03-29 00:00:00 GMO's Market Outlook: 'Disappointingly Overvalued' by Robert Huebscher (Article)
Opportunities across US and foreign assets classes are unattractive, according to Ben Inker, the head of asset allocation at the Boston-based global money manager Grantham, Mayo, van Otterloo & Co. (GMO). Neither the equity nor fixed income markets hold the potential for investors to earn acceptable inflation-adjusted returns, Inker said.
2011-03-28 00:00:00 A Central Bank Match by Chris Maxey of Fortigent
Equity markets donned the rally cap last week as the S&P 500 index finished higher by 2.7% and the Dow Jones Industrial Average experienced a 3.1% gain. Stability in the price of crude oil and improvement in Japan lent a helping hand to the markets, as did the announcement that AT&T would buy T-Mobile. On the domestic front, investors turned a blind eye to the slew of negative economic data. Housing, in particular, experienced the brunt of the disappointment. Existing home sales offered the first piece of bad news after falling 9.6% to 4.88mln on a seasonally-adjusted annual rate in February.
2011-03-26 00:00:00 Unintended Consequences by John Mauldin of Millennium Wave Advisors
Governments around the world need to be alert and make difficult choices to deal with a world excess liquidity. From an investor?s point of view, enjoy the current ride in emerging markets but recognize that they are high beta to the U.S. economy and stock markets. The next time the United States goes into recession?and there will be a next time?it is likely that emerging markets will suffer significant losses. So, emerging markets are a trade and not a long-term investment.
2011-03-26 00:00:00 How Capture Ratios can Help you Prepare for the Next Downturn by Isbitts of Rob Isbitts
Alpha and Beta tell us a lot, but they also lead us to an even more useful measure of performance and manager acumen, which allows you and your client to better understand the range of possibilities they are bound to experience in different types of market environments. That is what we call ?Capture Ratio,? and that special topic is what we?ll focus on here.
2011-03-25 00:00:00 Quantitative Easing: How the Rest of the World Reacts by Komal Sri-Kumar of TCW Asset Management
The decision was made to implement new purchases of $600 billion in U.S. Treasurys by June 2011. The transactions would expand the balance sheet of the Federal Reserve to about $2.9 trillion, a multiple of the $800 billion dollar level it was at in September 2008. This paper examines how the countries which have been recipients of the newly created liquidity have responded to the Feds move. While the Fed explained that its purchase of securities was intended to make riskier assets, the excess liquidity also made its way to foreign countries to take advantage of attractive interest rates.
2011-03-25 00:00:00 What's Driving Russia's Outperformance? by Frank Holmes, John Derrick and Tim Steinle of U.S. Global Investors
All ten sectors of the S&P 500 Index increased this week. The best-performing sector for the week was energy which rose 4.08 percent. Other top-three sectors were technology and materials. Financials was the worst performer, up 0.50 percent. Other bottom-three performers were utilities and healthcare.
2011-03-24 00:00:00 Bernanke Ducks as Food Prices Shoot Higher by Peter Nielsen and Bryce Fegley of Saturna Capital
As rising food prices gain prominence in media headlines worldwide, Federal Reserve chairman Ben Bernanke now finds himself deflecting accusations that the Fed's $600 billion "QE2" Treasury buying program is the main culprit of global food price inflation. In his February 18, 2011, speech to governors of the Group of Twenty in Paris,1 Bernanke completely rebuffed these claims and offered up other explanations as well, but nowhere in his speech did he concede any possibility that the Fed's QE2 program is playing a role.
2011-03-23 00:00:00 PIMCO Cyclical Outlook: U.S. Economy, Global by Saumil H. Parikh of PIMCO
PIMCO continues to foresee a multi-speed global recovery over the next few years. The U.S. is experiencing a cyclical economic rebound, but its strong durability is uncertain. Several countries in Europe face headwinds to growth over our cyclical horizon. Japan?s growth rate will likely fall in the near term, but reconstruction activities should stimulate growth over time. We expect real economic growth in key emerging economies to remain at a solid rate during 2011, but lower than 2010.
2011-03-22 00:00:00 There are Still So Many Unknowns by David A. Rosenberg of Gluskin Sheff
There are still many unknowns with regard to the global macro picture, but what we do know are the following 10 things: 1. There are more upside than downside risks to the oil price. 2. Japan was already the number-one importer of liquefied natural gas (LNG) and this status will be accentuated as replacements for a damaged nuclear grid is sought. 3. Nuclear energy development takes a near-term hit here by the politics of the Japanese crisis but not a permanent hit. 4. The aftershock in Japan will be related to contaminated food supply so we can expect to see more inflation on this score too.
2011-03-22 00:00:00 Emerging from Developed Profit Pools by Gregory A. Nejmeh of HS Management Partners
Much has been debated about the anticipated growth of the emerging markets and the tectonic shifts in political, economic and military force that such changes may yield. While the implications are significant, we are also mindful that economic activity in developed markets not only make them worthy of investor attention, but provide the stability of cash flows that will facilitate multinationals ability to invest in developing markets. We take a holistic perspective and appreciate the size and scope of developed market profit pools as a means of self funding developing economic participation
2011-03-21 00:00:00 World Near Tipping Point? by Mohamed A. El-Erian of PIMCO
Much of the potency of policy responses has been used up in the successful efforts since 2008 to avoid global depression. The longer the persistence of supply disruptions, the greater the risk of core inflation increasing. Questions about the end of quantitative easing in the U.S. pose a challenge for policymakers.
2011-03-19 00:00:00 Middle East Politics and Oil: The Influences on Global Interest Rates, Credit Spreads & Stock Prices by Tom Fahey, Ryan McGrail, Richard Skaggs and Joseph Taylor of Loomis Sayles
The market has added a substantial risk premium to the price of oil given the unrest in the Middle East and North Africa. Prices have increased by more than 20% since December 2010; half of that increase occurred during the past three weeks in reaction to unrest spreading to Bahrain, one of the Gulf States. Market participants have raised their probability calculations for black swan events. There may be excess pessimism in the market, as reflected in increased concerns about unrest spreading to the other Gulf States. Those concerns are potentially overblown.
2011-03-19 00:00:00 How the VAR Model and Japan?s Tragedy Affect Investors by Frank Holmes of U.S. Global Investors
The threat of disaster from the damaged Fukushima nuclear power plant unleashed a ferocious sell-off of Japanese equities, but the damage to other major markets has been limited. Already experiencing a slight pullback prior to the events on March 11, U.S. equities and emerging markets have held up quite well. The MSCI Emerging Markets Index has only pulled back 2 percent since the earthquake and the S&P 500 Index only 3 percent.
2011-03-14 00:00:00 Anatomy of a Bubble by John P. Hussman of Hussman Funds
Over the past decade, investors have seen near-parabolic advances in a variety of assets, followed by crashes. These have included dot-com stocks (which peaked and crashed well before the general market peak in 2000), technology stocks, housing, commodities, and stocks in a variety of emerging markets. These experiences have made investors somewhat more attuned to the destructive potential for speculative bubbles in various assets, but has also created something of a "casino economy" where a great deal of resources are directed in hopes of participating in these bubbles.
2011-03-14 00:00:00 Monday Market Calls by Russ Koesterich of BlackRock Investment Management
Call #1: Underweight European equity market (with emphasis on banks) Call #2: Overweight developed (with preference for large/mega cap) vs. emerging markets. Year-to-date, emerging markets are down roughly 1.5% while developed market mega caps are up roughly 5%. Our view is reinforced by the recent market volatility and growing unrest in the Middle East. In this type of environment, large, quality companies are likely to prove more resilient.
2011-03-12 00:00:00 Domestic Equity Market by Frank Holmes of U.S. Global Investors
The figure below shows the performance of each sector in the S&P 500 Index for the week. Four sectors increased and six decreased. The best-performing sector for the week was utilities which rose 1.5 percent. Other top-three sectors were telecom services and consumer staples. Energy was the worst performer, down 4.0 percent. Other bottom-three performers were materials and technology. Within the utilities sector the best-performing stock was Constellation Energy Group which rose 6.8 percent. Other top-five performers were Exelon, First Energy, DTE Energy, and Duke Energy.
2011-03-12 00:00:00 Volatility on the Rise by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Geopolitical unrest and rising inflation concerns have conspired to increase market volatility. We remain bullish on US stocks and believe that this recent increase in consternation will ultimately be healthy for stocks. The US government keeps kicking the debt can down the road, while the Fed seems unconcerned about inflation and is intent on completing QE2. We believe changes are needed at both entities to foster sustainable economic growth. The European debt crisis is bubbling up again, while the ECB is talking interest-rate hikes. Future growth depends on the path of both issues.
2011-03-11 00:00:00 The Middle East: A Youthful Reawakening by Mark Mobius of Franklin Templeton
The upheavals in the Middle East and N.Africa can be attributed to rising food prices, unemployment, corruption and political stagnation. Unemployment has stayed high and waves of new young job seekers entering the labor market have not been absorbed. As in many emerging markets, the populations in MENA countries are young. Most politically explosive is that an increasing number of the unemployed are high school and university graduates. It is important to note that the recent protests have come not from the lowest income levels but from middle-class and educated Arabs seeking fair treatment.
2011-03-11 00:00:00 Middle East turmoil not yet a significant threat to the global economy by Team of Thomas White International
The political unrest spreading across the Middle East and the resultant disruptions to the regional economy are not considered very significant for the global economic prospects for this year. Though oil prices have reacted on fears of lower supplies from the region, there have been no actual disruptions so far and any perceptible deceleration in global economic growth is expected only if prices shoot up further. It is widely believed that, unless the agitations spread to the region?s major oil producers like Saudi Arabia, the prospect of a sustained upsurge in energy prices is limited.
2011-03-11 00:00:00 Europe: Economic Review February 2011 by Team of Thomas White International
Various data released in Feb. confirmed once again that the economic recovery in Europe is gaining momentum. Nevertheless, investor sentiment on the continent, and indeed everywhere in the world, remained largely subdued during the month due to the growing political uncertainty in the Middle East and N.Africa region. Since rising food, raw material, and crude oil prices have already pushed up inflation to worrying levels in most parts of Europe, the recent surge in oil prices amid the protests in Libya and some MiddleEastern countries eclipsed encouraging signals about the Euro-zone economy.
2011-03-10 00:00:00 Stock picking is dead? Long live stock picking by Robert McConnaughey of Columbia Management
A recent frontpage story in The Wall Street Journal was titled ?Macro Forces in Market Confound Stock Pickers.? The article quoted a prominent Wall Street strategist as saying, ?Stock picking is a dead art form.? The article is now prominently displayed on my office bulletin board as I believe it (and similar articles and research notes) marks a high in skepticism regarding active investing. I also believe these sentiments will be proven dramatically wrong in the months and years to come, as certain active investors take advantage of the inefficiencies that this very skepticism is causing.
2011-03-09 00:00:00 Searching for Growth in Asia by Taizo Ishida of Matthews Asia
There are many ways one might define ?growth? and go about uncovering it. There are a few key elements I look for: main drivers of growth, sustainability and scope of growth, and market expectations. Many global investors today are seduced by the last several years of strong stock performance in China and India, fueled by robust economic growth. However, economic growth alone does not guarantee good stock performance. In fact, many studies argue that, historically, there has been little correlation between stock market performance and economic growth.
2011-03-09 00:00:00 Finding Low Risk Value in Today's Market by Team of GaveKal
The investment environment is transitioning from a macro-driven, reflation environment into one where earnings drive performance. US companies are well positioned at this juncture and contrary to consumers and the government have come out of this crisis in good shape. Some commentators question the outlook for corporate profitability, arguing that profits are meanreverting and that they can only weaken. We disagree, however, we acknowledge that price pressures are now showing up in import prices, and companies will need to offset these costs with increased prices or improve their productivity
2011-03-09 00:00:00 iShares Bi-Weekly Strategy Update Part 2 by Russ Koesterich of BlackRock Investment Management
Recently, silver prices have benefited more than gold from the economic rebound. The relative gap between gold and silver suggests that it may be time for a pause in silver?s run. One of the many ironies of markets last year was the extent to which inflation occupied investors? attention, despite its near universal absence. While inflation has recently accelerated in emerging markets and a few developed ones, inflation was and is still largely absent in the developed world. Yet, record low inflation did not stop investors from worrying about it.
2011-03-08 00:00:00 Ed Hyman: The Key Threat to Economy Recovery by Robert Huebscher (Article)
Ed Hyman is not worried about China, quantitative easing or fiscal deficits. Equity market performance this year will be strong, he predicts, and the US economic recovery will proceed. But there is a caveat in his outlook ? and it is an immense one.
2011-03-08 00:00:00 Will the Global Recovery be Brought to its Knees by Commodity Prices? by Chris Maxey of Fortigent
There is a dangerous trend developing in food and energy costs, one that threatens to derail the global recovery. Thus far, consumers are able and willing to accept higher commodity prices. With consumers still feeling the effects of the worst recession in nearly a century, though, there is only so much that people will be willing to tolerate and the second half of the year may be too far away, at least when it comes to crude prices.
2011-03-07 00:00:00 The Philosophy of Tops by Jeffrey Saut of Raymond James Equity Research
This week I am celebrating the two-year anniversary of the stock market's bottom by attending our institutional conference where more than 300 companies will be presenting to nearly 600 portfolio managers. It's a great conference, as well as an appropriate time to reflect on the past 24 months. Recall, the bottoming process began on October 10, 2008 when 93% of the stocks traded on the NYSE recorded new annual low prices. It was then I declared, "The bottoming process has begun."
2011-03-04 00:00:00 And That's The Week That Was? by Ron Brounes of Brounes & Associates
Unlike Egypt?s Mubarak, Libya?s Gadhafi is not going down without a strong fight. With tensions escalating throughout the region, the world?s oil supply and crude prices soared above $104/barrel over the past few days to levels not seen in 29 months. While optimists point out that Saudi Arabia has been quick to pick up the slack for any shortfall out of Libya, others worry that a prolonged crisis limits its ability to do so indefinitely. The bigger pessimists fear that the uprising could spread to Saudi (Anyone think it may be time to reduce our dependency on foreign oil?)
2011-03-04 00:00:00 Are Emerging Markets Still by Team of Emerald Asset Advisors
Political unrest in Egypt, Libya, and elsewhere in the Middle East, along with surging food prices around the world, has provided fresh reminders of the inherent risks of investing in emerging markets. Indeed, while the U.S. stock market has been inching steadily upward in recent months, emerging markets have been struggling. Year-to-date through February 28, the MSCI Emerging Markets Index is down -3.79%, while the S&P 500 Total Return Index has gained 5.88%.
2011-03-03 00:00:00 Driving Without Restrictor Plates by Cliff W. Draughn of Excelsia Investment Advisors
Since mid-January we have found ourselves in a quandary over ?jumping in? or ?diving in? to the strongly flowing bullish current of the developed markets. The warning signs have been the Mideast riots, unemployment, commodity inflation, and the US percentage of debt relative to GDP. The positives are corporate earnings, an accommodative Fed, cash-rich balance sheets, and no new taxes for now. Therefore we wanted to share with you a number of charts and statistics that are part of our process.
2011-03-03 00:00:00 Emerging Markets Vision 2020 by Mark Mobius of Franklin Templeton
There will always be unforeseen factors and circumstances that might become catalysts for greater changes in the global landscape, as we have seen from the current unrests in the Middle East.. No one knows what will happen in the future, but below is some of what I envision for the emerging markets landscape in the next decade.
2011-03-03 00:00:00 Multi-Asset Real Return: Assessing & Exploiting Price Pressures in their Many Forms by Kevin Kearns, Laura Sarlo and James Balfour of Loomis Sayles
An asset manager?s challenge is to preserve and grow the purchasing power of investors? portfolios under a variety of economic conditions. Understanding the breadth of global inflationary or deflationary trends that can occur, and the ways different assets might perform in these environments, is critical to this objective. Based on our research, we have determined that no single asset class can protect investors from inflation. On the contrary, we believe the flexibility and diversification offered by a multi-asset-class strategy is necessary to help weather changing inflation regimes.
2011-03-01 00:00:00 The Absolute Return Letter by Niels C. Jensen of Absolute Return Partners
Two remarkable events unfolded during the month of February. One cleared the front pages all over the world. The other one barely got a mention - outside of its home country that is. Both have the ability to derail the economic recovery currently unfolding. The first one is not surprisingly the uprising in the Middle East and North Africa. The other one is perhaps less obvious; we are referring to the Irish elections. We take a closer look at both of those events and what the implications may be for financial markets.
2011-03-01 00:00:00 The 10% Problem by Nathan Rowader of Forward Management
Many investors continue to expect 10% returns ? but these days, are doing well if they earn 5%. They need to understand why major shifts in the global investment climate are challenging them to reset return expectations and reboot their plans. After six decades of double-digit average U.S. stock market returns, many American investors may have come to expect that they will earn similar returns going forward. And why wouldn?t they? From 1948 to 1978, for example, the U.S. stock market generated an average annualized total return of 10.7%.
2011-02-28 00:00:00 Oil that is by Jeffrey Saut of Raymond James Equity Research
?Oil that is, black gold, Texas tea,? Jed Clampett (Buddy Ebsen) got rich in the hit series The Beverly Hillbillies by discovering oil on his property. Similarly, investors have become enriched recently by owning oil stocks. Verily, crude oil has surged from ~$84 per barrel in mid-February into last week?s peak of $103.41 with an ascent for most oil stocks. As stated in Friday?s verbal strategy comments, ?Libya is particularly troubling because I think there is a fifty-fifty chance that Gaddafi, rather than cede power, will begin blowing up Libyan oil pipelines ? it?s either me or chaos.?
2011-02-28 00:00:00 Pushed to Extremes by Scotty George of du Pasquier Asset Management
Among the economic havoc wrought by turmoil in the Mid East and severe weather around the globe has been the impact upon inflation and upward pressure on prices for raw (and core) materials. Today, most economists and market analysts fear that this confluence of factors could accelerate inflation in energy prices, foodstuffs, and industrial materials, thus undermining a nascent uptick in consumer spending, global trade, and consumer confidence.
2011-02-25 00:00:00 Asia Insights from EM Analyst Conference by Allan Lam of Franklin Templeton
Many tend to focus on China and India, the two rising Asian economic powers, and there are reasons why we believe both, which are currently among the top five largest economies in the world will likely be among the top three in 2020. Land and labor costs remain cheap in China. In addition, the country appears to have a competitive edge in terms of work ethics, relatively flexible labor laws and excellent logistics. India?s strength is in its young, growing and increasingly well-educated population, which is fluent in English. This has enabled the country to become a leader in IT consultancy.
2011-02-25 00:00:00 Worry ... Friend or Foe? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Interest rates have moved higher, inflation concerns are growing, debt issues remain and global tensions are heightened. All valid concerns, but in our opinion not enough to derail stocks?although they could potentially in the future. Violence in the Middle East and North Africa is creating tension in global markets, but there are other concerns for emerging markets as well. Europe is becoming a bifurcated situation, with investors distinguishing between those with debt issues and those without.
2011-02-23 00:00:00 2011 Outlook: Private Equity by NB Alternatives private equity team of Neuberger Berman
As a result of the financial crisis, for the latter part of 2008 and all of 2009, very few new private equity transactions were completed and portfolio company monetization was minimal. However, the operating performance of existing private-equity portfolio companies was better than generally expected and investment returns were superior to public equity benchmarks. Although some of this outperformance can be attributed to the resistance of some private equity firms, we believe the majority of the outperformance was the result of effective cost cutting, cash conservation and debt reduction.
2011-02-23 00:00:00 Asian Emerging Markets Will Grow on You by Peter Nielsen and Bryce Fegley of Saturna Capital
A year has passed since Saturna put staff on the ground in the heart of Kuala Lumpur, Malaysia, at the offices of our subsidiary, Saturna Sdn. Bhd. As expected, we have gained valuable insight into the emerging markets of Asia. We find the key to unlocking the opportunities these markets have to offer is an understanding of the intersection of market structure, demographics, economic growth, and asset allocation. Our analysis of trends in these four areas reveals an economic environment with favorable prospects for long-term growth.
2011-02-23 00:00:00 Right Brains and the Dismal Science by Herbert Abramson and Randall Abramson of Trapeze Asset Management
It has been said that successful investors need to employ not only the left side of their brains which is the analytical or scientific part but also the right side which is the centre for creative thinking. Thats because much of investing has to do with the unpredictable, the down cards, variables about future demand, growth, political policy changes, psychological responses, weather, oil spills, and so forth. Value investors dont want to pay for the down cards, but want to buy so cheaply in the here, that there is little or no risk of losing, and the hereafter can take care of itself.
2011-02-23 00:00:00 Right Brains and the Dismal Science by Herbert Abramson and Randall Abramson of Trapeze Asset Management
It has been said that successful investors need to employ not only the left side of their brains which is the analytical or scientific part but also the right side which is the centre for creative thinking. Thats because much of investing has to do with the unpredictable, the down cards, variables about future demand, growth, political policy changes, psychological responses, weather, oil spills, and so forth. Value investors dont want to pay for the down cards, but want to buy so cheaply in the here, that there is little or no risk of losing, and the hereafter can take care of itself.
2011-02-22 00:00:00 Fiscal Contraction is Coming ... This is a Key Theme by David A. Rosenberg of Gluskin Sheff
Well, if you haven?t yet heard, major budgetary restraint is coming our way in the second half of the year, and so we would recommend that you enjoy whatever fiscal and monetary juice there is left in the blender. There isn?t much that is for sure. The weekend newspapers were filled with reports of how the conservative wing of the Republican party have banded together to ensure that spending cuts will be in the offing. The state and local governments are already putting their restraint into gear.
2011-02-22 00:00:00 Investment Commentary by Bob Doll of BlackRock Investment Management
The bearish view of the current rally is that it is liquidity-driven and based on artificial propping-up by overly easy monetary and fiscal policy support. While we agree that the stimulus from the Federal Reserve and other policy makers has been an important pillar in helping to restore economic growth and drive risk asset prices higher, we also believe that the economy is transitioning into a self-sustaining expansion. In our opinion, this environment of improving growth, low inflation and a supportive policy backdrop continues to represent a ?sweet spot? for risk assets.
2011-02-19 00:00:00 Let Yourself Feel Good Again by Doug MacKay of Broadleaf Partners
The stock market has continued to perform exceedingly well so far in 2011 and is now up roughly 7% year to date. While an oil spill or European contagion type event could always disrupt the progression, the stock market, S&P 500 profit levels, and leading economic indicators are all pointing to a similar conclusion. The economy is likely to graduate from its recovery phase to an outright expansion sometime this year. It's time to start letting yourself feel good again.
2011-02-17 00:00:00 Baby Steps in the Complex Global Recovery Wasatch Funds by Sam Stewart and Roger Edgley of Wasatch Funds
The U.S. recovery is generally headed in the right direction. The good news is that credit markets are easing and many economic indicators are slowly improving. The bad news is that unemployment remains stagnant, companies are hoarding cash, and we have a growing federal deficit to address. The recently passed tax bill is good psychologically. People are generally pleased that their taxes won?t be going up this year, despite other concerns they may have with the bill. More importantly, this was one of several pieces of recent legislation showing the renewed possibility of bipartisanship.
2011-02-16 00:00:00 The Cocktail Theory by Jeffrey Saut of Raymond James Equity Research
?How can you be sure that the pullback, you have wrongly been expecting, is for buying?? Since 1940 there has never been more than one 10% or greater pullback in a bull move; we had a 17% pullback last year between April?s high into June?s low. Moreover, the retail investor is nowhere close to fully embracing this rally, which is typically what occurs around intermediate/long-term stock market ?tops.?
2011-02-15 00:00:00 Food Chain: Do Spiking Food Prices Warn of Generalized Inflation? by Liz Ann Sonders of Charles Schwab
Food inflation has heated up and has incited global unrest. But for now, it's unlikely to become a monetary phenomenon. Investors should expect geopolitical risk to stay elevated in 2011, with implications for emerging markets performance.
2011-02-14 00:00:00 Fiscal Drag Coming and No More QEs by David A. Rosenberg of Gluskin Sheff
In an otherwise uneventful weekend, what did come out is that fiscal stimulus is about to turn towards restraint in a significant fashion. Even the White House recognizes the need for fiscal discipline and is on the precipice of unveiling a much more austere budget. And this will coincide with massive tax hikes and spending cuts at the lower levels of government too. The surgery is much more preferable now than becoming a banana republic down the road.The future of QE2 is looking more certain ? it will live to see June of this year but the chances of a QE3 are remote.
2011-02-14 00:00:00 Financial Disconnect by John Browne of Euro Pacific Capital
The printing of fiat money is likely to be able to sustain a false economic recovery for some time. But, eventually, the cost will be a rapid erosion of the value of the US dollar ? not just in real terms, but also against almost every other foreign currency. Despite possible short-term corrections, gold and silver holdings are likely best to shield investors from the perils that lie ahead.
2011-02-14 00:00:00 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
No one knows what the longer-term direction of the Egyptian state will be, and as a consequence the investment outlook now has an additional source of uncertainty. As far as the global economy is concerned, the failure of the European leaders to agree on to how to handle future sovereign debt crises has cast a shadow once again over Portugal and even Ireland. The problem that Ireland poses is that the elections to be held shortly will bring about a new government who may wish to renegotiate their bailout agreement.
2011-02-12 00:00:00 Foreign Investments in India by Sunil Asnani of Matthews Asia
Foreign investment plays a significant role in India?s economic growth, which has historically been constrained by supply factors, and most notably, the availability of capital. Domestic savings in India have risen, but high government deficits still don?t leave enough for the private sector. The result has been a vicious cycle in which the high cost of capital prevents many businesses from flourishing, which further limits India?s capacity for capital formation. Let us examine the ways in which India can use foreign capital to emerge from this low-growth equilibrium.
2011-02-12 00:00:00 Balancing Act by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Strong US economic signals and solid earnings continue to provide a positive backdrop for stocks. We expect pullbacks if optimistic sentiment gets too elevated, but remain optimistic about the stock market. Inflation concerns are rising, but the Federal Reserve is unlikely to react with tighter policy. There's not much it can do to fight commodity inflation, but Treasury yields are rising in response to headline inflation, even with little near-term risk of companies passing on rising costs.
2011-02-11 00:00:00 Reiterating Our Investment Thesis for 2011 by David A. Rosenberg of Gluskin Sheff
For 2011, not only do I still favor credit, especially the spread compression left in the high-yield space, but relative value portfolios, hybrids with a decent running yield and exposure to Canadian dollars. The resource sector is also attractive, especially oil, with a long-term view towards buying these companies on dips and not just for the commodity price uptrend. Corporate bonds, especially BB-rated product. Hedge funds, with low correlations with the direction of the market or the economy. And precious metals as a hedge against periodic bouts of currency and monetary instability.
2011-02-10 00:00:00 The Two Faces of Ben Bernanke by Peter Schiff of Euro Pacific Capital
When the rest of the world no longer links their currencies to ours, the Fed will truly not have to worry about fueling global inflation. Instead, all of its inflation will burn through our banks accounts right here at home. And that blaze, so concentrated, will burn a lot hotter than the fires we see abroad.
2011-02-09 00:00:00 How to Play in 2011 by David A. Rosenberg of Gluskin Sheff
At the start of every year I remind myself that each individual year has its own story. For example, 2007 taught us that it never hurts to take profits after the market doubles and that if something is too good to be true (housing and credit bubble) it probably is. The 2008 lesson focused on capital preservation strategies and the urgency of managing downside risks. 2009 it was vital not to overstay a bearish stance in the face of massive fiscal and monetary stimulus. Last year?s lesson was how to handle the many post-stimulus market swings that are inherent in a post-bubble credit collapse.
2011-02-08 00:00:00 The Key Ingredient to Effective Communication by Dan Richards (Article)
When it comes to communicating with clients, too often we revert to the habit of using words alone. To maximize the impact of your communication, you need to help others visualize your message.
2011-02-08 00:00:00 Conundrum Investing by James G. Tillar and Steve Wenstrup of Tillar-Wenstrup Advisors
The range of possible outcomes for the economy and market is still wide. We believe QE2 is simply a continuation of a boom-and-bust regime. Fundamentals are good now but are unlikely to be sustainable. Printing money to support asset prices cannot go on forever and usually ends in disaster like it did after both the technology and housing busts. Therefore, we dont believe this is a time to be aggressive. We are maintaining our strategy of emphasizing steady-growth businesses, with strong balance sheets, healthy dividends, attractive valuations and exposure to emerging economies.
2011-02-08 00:00:00 'Conversation' by Jeffrey Saut of Raymond James Equity Research
While it?s true the DJIA and SPX have made new reaction highs many indices have not. Many emerging markets are declining, the MACD has been negatively configured since Jan 18th, Lowry?s Buying Power Index is falling and it's Selling Pressure Index is rising, and the 30-year Treasury Bond?s yield is about to break out above a spread triple top. The top gaining sector since November has been the Financials, but in the past few weeks the Financials have weakened noticeably. All of this continues to keep me cautious (but not bearish) as we enter February, a historically down month.
2011-02-08 00:00:00 Give ?Em Credit; Looking at Sales, Not Just Earnings by David A. Rosenberg of Gluskin Sheff
Across many indicators, this goes down as a horrible recovery, especially in view of all the stimulus. Of course things look much better than they did in the ?double dip? risk days of last summer but absent the impact of the GDP deflator?s collapse and the decline in the savings rate, Q4 real GDP would have actually come in closer to +0.5% SAAR than the posted +3.2% print. We are hearing how great S&P 500 sales are doing so far for Q4 ? up 7.7% and beating estimates by the highest margin in 5 years. We scoured the data and found almost all the growth in sales is coming from outside the US.
2011-02-08 00:00:00 Muni Market Bargains? A Closer Look at Municipal Debt, Deficits and Pensions by Christian Stracke and Joseph A. Narens of PIMCO
Although real, pension problems will not lead to an immediate debt crisis this year or the next five years. A default by Detroit, for example, would not precipitate bankruptcy filings by large cities across the nation. The municipal market will continue to migrate from being a low-risk asset class to a credit asset class.
2011-02-07 00:00:00 Jobs Data Redux and Inflation Spasm Ahead by David A. Rosenberg of Gluskin Sheff
The labor market in the US is not improving. Lost in the debate over the weather impact was the benchmark revision to 2010 ? overstated by 215k or 24%. The economy generated 909k jobs last year -insignificant considering that the population grew around 160k/month. The level of employment today is where it was in 2003. There have only been a handful of times in the past when both food and energy prices were rising so sharply in tandem. Since almost 25% of the CPI basket is in food and energy directly, it would seem logical to assume that we are going to get headline inflation in coming months.
2011-02-07 00:00:00 Strong News and Stronger Markets by Charles and Louis Vincent Gave of GaveKal
Bears have little to munch on right now: economic activity is bouncing back strongly, jobs are being created (albeit at a slow pace), global trade is soaring, the great majority of companies are reporting better than expected sales, and US profit margins are making new all-time highs. Given this plethora of good news, financial intermediaries are responding coherently and once again expanding their balance sheets.
2011-02-04 00:00:00 Portfolio Commentary : Fourth Quarter, 2010 by Jay Compson of Absolute Investment Advisors
For our 4Q commentary we have decided to alter our approach and provide direct insight into our managers? thoughts by pro?viding portions of their commentaries in a series of indepen?dent ?short stories.? Collectively they represent many of the thoughts that we have utilized for writing our quarterly com?mentaries, but we feel the current environment offers a unique time to hear things ?directly from the horse?s mouth.?
2011-02-04 00:00:00 Seeking Equity Dividends: Now More than Ever by Robert McConnaughey of Columbia Management
The evidence is clear that dividends have been a crucial part of total returns through history and that dividend payers (particularly sustainable dividend growers) have significantly outperformed their non-dividend-paying peers over the long haul. Couple those higher returns with the lower volatility that comes with the dividend-paying class vs. broader equity markets and it makes a clear case for the power of dividends.
2011-02-03 00:00:00 Regime Change: A Global Domino Effect? by Monty Guild and Tony Danaher of Guild Investment Management
We are bullish for commodities, stock markets, and for income-earning real estate. It will be most felt in those countries where governments are stable and democratic. For stock investments throughout the world, we base our recommendations on careful study of individual companies and industries, always keeping in mind that companies and sectors are at differing stages of growth. We recommend continuing to hold shares of growing companies in Canada, South Korea, and the U.S. We favor technology, metals, auto and auto-related, agriculture-related, and energy, including oil and coal.
2011-02-02 00:00:00 Devil?s Bargain by Bill Gross of PIMCO
Money has become the economic and political wedge for profound changes in American society. Perhaps the most deceptive policy tool to lessen debt loads is the ?negative? or exceedingly low real interest rate that central banks impose on savers and debt holders. Old-fashioned gilts and Treasury bonds may need to be ?exorcised? from model portfolios and replaced with more attractive alternatives both from a risk and a reward standpoint.
2011-02-02 00:00:00 Unrest in Egypt, Uncertainty in the Region by Rachel Ziemba and Ayah El Said of Roubini Global Economics
Egypt?s political direction could have profound effects on regional stability?potentially involving, the Israeli-Palestinian conflict and efforts to contain Iran?s nuclear ambitions?with broad economic and financial ramifications. The recent economic and political developments do not bode well for Egypt?s debt, and this contagion could continue to spread within the region, leading to the persistent underperformance of local currency debt and equity markets. Regarding wider implications, the oil market remains the key link between instability in the Middle East and the global economy.
2011-02-02 00:00:00 Random Thoughts from the Lone Star State by David A. Rosenberg of Gluskin Sheff
I still consider this to be a bear market rally. With respect to the economy, the illusion of sustainable prosperity has done wonders for consumer spending in the U.S. The consumer has been an upside surprise and the ISM was a whopper too as these manufacturing indices have been in general around the globe. There are so many other headwinds out there. Dramatic cutbacks and tax hikes at the state and local government levels are in motion. Federal government austerity is next. The housing market has not yet stabilized.
2011-02-01 00:00:00 Market Implications of the Turmoil in Egypt by Kevin D. Mahn of Hennion & Walsh
Here are the potential implications of the events in Egypt as we see them: 1)The risk of contagion in the Middle East and the civil, political and economic unrest that could result across the globe. 2) The energy commodities sector, specifically related to crude oil prices, but this time not based upon oil production but rather based upon the importance of the Suez Canal and Sumed Pipeline to oil transportation. 3)the travel sector - travel advisories that will likely be established in the affected countries.
2011-01-31 00:00:00 Market Ripe for Correction by David A. Rosenberg of Gluskin Sheff
The stock market headed into this post-Egypt action terribly overbought and a correction was overdue. It is incredibly ironic that 18 months ago, President Obama gave his first foreign policy speech at the University of Cairo (the Investor?s Business Daily dubs it the ?ill-conceived Muslim outreach speech? in today?s editorial), and now, Egypt is burning. Oil, gold and TIPS should be on anyone?s ?buy list? if the turmoil does spread within the Arab world.
2011-01-31 00:00:00 The Investment Outlook: An Overview by Milton Ezrati of Lord Abbett
This is the first of a four-article series on the macro considerations behind Lord Abbett?s fixed-income and equity outlooks. This first installment offers an overview. The three pieces that follow will, in turn, take up the reasons behind 1) the general preference for credit-sensitive fixed-income issues; 2) the positive overall stance on equities; and 3) the call for a thorough capitalization mix within equities.
2011-01-31 00:00:00 Investment Commentary by Bob Doll of BlackRock Investment Management
At present, most investors appear to have increased their expectations for global growth and for growth levels in the United States. The words ?double dip? have virtually vanished from investors? vocabularies and while we agree with the generally optimistic tenor of the conversation, we are also somewhat uneasy about the positive shift in sentiment and growing sense of complacency. As last week?s events remind us, there are a number of risks to be wary of, including one we have not yet mentioned ? monetary tightening in emerging markets.
2011-01-29 00:00:00 And That's The Week That Was by Ron Brounes of Brounes & Associates
Consumer confidence in January rose to its highest level in eight months as individuals seemed to overlook the ongoing labor concerns. The long-ailing housing sector received a bit of good news as new home sales jumped to the best showing since May and home prices even surged to levels not seen since early 2008. Though claims for jobless benefits rose in the most recent week, analysts believe that harsh winter weather may have temporarily halted hiring and the recent improvements on the claims front should resume in the weeks to follow.
2011-01-29 00:00:00 Schwab Market Perspective: Confidence Climbing by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Although still relatively low, confidence is returning to businesses and consumers. We believe this confidence is well-placed and could portend healthy gains for the economy and the market as the year matures. Risks remain: commodity prices are rising, housing is still moribund, and federal and local governments have severe fiscal budget crises to deal with. Confidence in developed international markets is still lagging.
2011-01-26 00:00:00 World Bank Says Developing Countries Driving Global Growth by Team of American Century Investments
During the recent Great Recession, developing countries such as China and India played a key role in sustaining global economic growth, while developed economies struggled to cope with issues such as the subprime market meltdown, sovereign debt issues, and soaring unemployment numbers. In the coming years, developing nations will continue to play an increasingly important role in driving the global economy.
2011-01-24 00:00:00 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
There is a lot of talk about the direction of interest rates and the cost of money.Sometimes, exogenous influences also exert influence over monetary factors.Today, tightening supplies of natural resources have created a subterranean inflation whose gross result has been to raise prices at the production and consumption sites.Corn, sugar, coffee, soybeans and other crops are at their lowest reserve levels in a generation.Demand, however, has not ebbed.
2011-01-24 00:00:00 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Earnings are coming in at a very strong pace. The problem is that stock prices in many cases have risen in anticipation of these results. As far as the economy is concerned the bulk of the evidence released last week was encouraging, but the impact of higher oil prices is really starting to be interpreted as a negative for future consumer spending and corporate hiring plans.
2011-01-24 00:00:00 Investment Commentary by Bob Doll of BlackRock Investment Management
A number of factors bear close watching for investors, including the potential for additional Chinese policy tightening, ongoing weakness in the housing market and ongoing European sovereign debt issues. The overall strength of the economy, however, suggests to us that a repeat of the environment of fear that surfaced last year when the Greek sovereign debt problem developed is unlikely. We believe the strength in profit margins coupled with a less-hostile regulatory posture from D.C., should spur increased confidence, which should lead to a pickup in employment.
2011-01-22 00:00:00 And That's The Week That Was by Ron Brounes of Brounes & Associates
With another corporate earnings season moving into high gear and equities riding a seven week winning streak, a healthy bit of skepticism (not necessary pessimism) has crept into the investor mindset.Some analysts still want to see more revenue growth as opposed to cost-cuts in the earnings reports.Others fear that ?the trend is your friend? may be a nice guide, but investors may be disregarding the ongoing debt issue in the EU and the rise in interest rates throughout emerging markets.
2011-01-21 00:00:00 Pricey Eats by Michael Pento of Euro Pacific Capital
From all accounts it appears that the world is in the early stages of a major leg up in food prices. The major macroeconomic trend will likely drive economic policy and the investment outlook for years to come. Although mainstream pundits like to focus on cyclical drivers like the weather, the real force behind the move is secular. The U.S. is leading the world in a pandemic of monetary inflation that is helping to cause commodity prices, food in particular, to skyrocket across the globe.
2011-01-20 00:00:00 Word on the Street: Cautious Optimism by Eagle portfolio managers of Eagle Asset Management
The general consensus among Eagle managers is that companies are more optimistic than they have been in many years. Businesses are starting to loosen their purse strings, albeit slowly and deliberately, to take advantage of competitive opportunities. Eagle managers continue to believe independent, diligent research is paramount in selecting stocks right now and that this likely will prove to be an excellent opportunity for long-term investors.
2011-01-20 00:00:00 Addressing Concerns about a Two-Track World by Mark Mobius of Franklin Templeton
I recently had a conference call with our investors around the world. Depending on where they were from, some of them were concerned about inflation while others were worried about sovereign debt problems. Here are a few topics that we discussed.
2011-01-19 00:00:00 2011 Capital Markets Outlook by Joseph V. Amato of Neuberger Berman
During 2010, macroeconomic factors largely dominated the financial markets, creating a volatile, emotional environment as investors appeared at times to be thinking less about what stocks to own than whether they should own stocks at all. As a result, many equities with very different fundamental characteristics often showed very high correlations to one another, while valuations converged. Over time, we believe that the market will differentiate these stocks based on their individual fundamentals. A similar statement can be made about other assets as well.
2011-01-18 00:00:00 Richard Bernstein: The Antidote to Pessimism by Robert Huebscher (Article)
For an antidote to the bearish sentiment coming from David Rosenberg, look at Richard Bernstein. In contrast to Rosenberg's vision of Japan's lost decade, Bernstein expects the S&P to outperform emerging markets, at least in the near term.
2011-01-18 00:00:00 A Market Story by Robert J. Horrocks of Matthews Asia
It is not the headline rates of growth in Asia that excite me?it?s the profit-making opportunities within those economies that are necessary to sustain reasonable rates of growth and support the changing lifestyles of Asian households. And that, I hope, is a sentiment with which both the old and the reformed Scrooge might embrace.
2011-01-18 00:00:00 China and the Dollar by Brian S. Wesbury and Robert Stein of First Trust Advisors
The US should not take this week?s visit as an opportunity to lecture the Chinese about the yuan. If we do, Fed Chairman Ben Bernanke may find himself on the receiving end of a lecture about the importance of price stability and how to run a central bank. And he would deserve it.
2011-01-17 00:00:00 Adding Up the Inflation Carnage; US Consumer Hitting an Air Pocket by David A. Rosenberg of Gluskin Sheff
This is just the fifth time in modern history that BOTH food and energy prices have risen at a double-digit annual rate for any length of time ? 1979, 1980, 1996, and 2008. At this rate, the energy bill is going to create a drag U.S. household spending power by $60 billion this year. Beneath the veneer of all the enthusiasm is the reality that real organic incomes are under pressure.
2011-01-15 00:00:00 Further Fuel? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Stocks may be vulnerable to a near-term pullback thanks to elevated sentiment, and earnings season could provide an impetus for some profit taking. The economy appears to be strengthening and we remain optimistic. Despite signs of growth, the Fed seems insistent on letting QE2 play out, pointing to continued high unemployment and housing. The new congress also has to deal with these issues, while attempting to pare deficit spending. International exposure is important, but we recommend taking some profits and rebalancing if your emerging-market exposure gets above your target allocation.
2011-01-14 00:00:00 2011 Outlook: International and Emerging Market Equities by Benjamin Segal and Conrad Saldanha of Neuberger Berman
We anticipate modest but positive global economic growth in 2011. Economic growth in emerging markets should benefit developed-market firms with global reach as well as emerging-market companies. Issues we are closely watching: the potential for currency/trade wars, asset bubbles and inflation in the emerging markets, increasing regulation and possible negative impacts of monetary tightening. Many overseas corporations are profitable and healthy, with cash available for M&A, higher dividends and other corporate activities.
2011-01-13 00:00:00 TW3?! by Jeffrey Saut of Raymond James Equity Research
?That Was The Week That Was,? also known as TW3, was a satirical TV comedy first broadcast on the BBC in November of 1962 and subsequently moved to America. The program was radical in that it chronicled events of the previous week and broke new ground in lampooning the establishment. It was also the first show to demonstrate it was truly television by allowing the cameras and boom microphones to be seen, giving the program an exciting and modern feel. I revisit TW3 this morning because despite last week?s holiday-like environment there were some pretty amazing headlines.
2011-01-12 00:00:00 Digging for Hidden Gems Among Small Caps by Mark Mobius of Franklin Templeton
Small-cap companies in emerging markets are generally under-researched and not as established as their large-cap counterparts. Some have very short track records, not much background and little publicly accessible information, therefore presenting a higher level of perceived risk and deterring many investors. But for these very reasons, share prices of small?cap companies are less likely to reflect their true value with fewer analysts covering them, thus creating attractive investment opportunities.
2011-01-12 00:00:00 Equity Market Review and Outlook by Richard Skaggs and Thomas Davis of Loomis Sayles
Global equity markets continued the uptrend that began in the third quarter and finished the year with solid gains across all major equity categories. Such a powerful second half of 2010 seemed improbable just last summer, when concerns over a potential double-dip recession dominated investor thinking. Other macro issues, such as the ongoing financial challenges within the European Union, remain unresolved. However, these macro concerns have remained manageable in the eyes of equity investors.
2011-01-11 00:00:00 Global Outlook and Strategy by Team of Loomis Sayles
After being challenged in November by renewed Eurozone sovereign debt concerns, global risk markets ended 2010 on a strong note. The key to the late-2010 and early-2011 optimism was the potential for the two biggest engines of global growth ? the US and Chinese economies ? to pull together this year.
2011-01-11 00:00:00 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 00:00:00 Inflation a Growing Concern for Emerging Market Countries by Team of American Century Investments
As a group, emerging market countries have rebounded from the Great Recession in much better shape than developed economies. And driven by higher commodity prices, robust domestic consumption, and a growing middle class with buying power, the emerging market asset class appears poised for more growth heading into 2011. While investors have been focusing on the European debt crisis, however, many emerging market economies have been getting a little overheated from the rapid pace of growth, and inflationary fears are quietly becoming a daily reality.
2011-01-10 00:00:00 Investment Commentary by Bob Doll of BlackRock Investment Management
We see a number of potential risks for the economy and the markets in the year ahead, including sovereign debt issues, emerging markets inflation and the possibility of higher tax rates, but we remain positive on the overall environment. Inflation should remain low throughout 2011, economic growth should accelerate slightly with the quality of that growth improving, and corporate earnings should remain strong an environment that should provide a solid backdrop for stocks to post further gains over the course of the year.
2011-01-10 00:00:00 Q4 Bond Market Review and Outlook by Teri L. Mason of Loomis Sayles
The US economic picture brightened as policymakers announced additional steps to stimulate the economy. Bond yields rose, causing many sectors of the bond market to lose ground in the final quarter of 2010, though high yield bonds, selected currencies and equity markets roared ahead.
2011-01-08 00:00:00 Forecast 2011: Better than Muddle Through by John Mauldin of Millennium Wave Advisors
Mauldin reviews his prior-year forecast. He was right on currencies and gold, but missed the bull market in equities. For 2011, he likes gold relative to the euro, pound and yen, but is less bearish on the pound than he was a year ago. He fears the Kamchatka volcanoes (in Russia) will trigger a spate of bad wealth which will lead to scarce resources and inflation. He is optimistic about the job market and employment, and forecasts that the US economy will grow 2.5-3% in 2011. He fears, however ,that structural problems in the work force will leave many untrained for employment.
2011-01-06 00:00:00 Some Risks Worth Factoring In For The Year Ahead by David A. Rosenberg of Gluskin Sheff
Home price declines are an added significant risk to household wealth and spending. The Dallas Fed just published a report concluding that home prices have potential to decline more than 20% from here. Perhaps the banks can handle that, but the implications for the household wealth effect, consumer confidence and spending are hardly constructive.
2011-01-05 00:00:00 Things Are Looking Up in LatAm by Nouriel Roubini of Roubini Global Economics
In our 2011 Outlook, we revised up our growth forecasts for Latin America, in anticipation of resilient domestic demand, improved external conditions and elevated commodity prices. We now envision annual growth rates of 4.7% in 2011 (compared to the forecast of 4.1% we set in September) and 6.1% in 2010 from 5.7% previously. If we are correct, 2010 will mark Latin America?s strongest economic performance of the last decade and its fastest growth since 1980.
2011-01-05 00:00:00 Off With Our Heads! by Bill Gross of PIMCO
American politicians and citizens alike have no clear vision of the costs of a seemingly perpetual trillion-dollar annual deficit. Meanwhile, policy stimulus is focused on maintaining current consumption as opposed to making the United States more competitive in the global marketplace. Dollar depreciation will sap the purchasing power of U.S. consumers, as well as the global valuation of dollar denominated assets.
2011-01-04 00:00:00 Glory Days: Another Good Year in 2011? by Liz Ann Sonders of Charles Schwab
Setting targets doesn't make sense to us, but we do believe in reading the market's tea leaves, and the outlook is healthy. However, frothy sentiment has us a little concerned in the very near-term. Investors need to be mindful of complacency, but also to make sure they're not still loaded up on bonds?a major capitulation from bonds to stocks is possible.
2011-01-02 00:00:00 Hangovers by Isbitts of Emerald Asset Advisors
The overhang of US unemployment, long-term inflation, and risks of temporary overheating in the Commodity and Emerging markets is a wicked one, so the best posture for 2011, and most years for that matter, is to be invested, but with a net to catch you when you fall. However, the longer out one looks, and the wider the breadth of investment themes one is permitted to consider, the more the truly dynamic secular investment opportunities become visible. The ability and willingness to see the "forest" over the ever-present "trees" is the best advice I can give you.
2010-12-31 00:00:00 2011: A Look Ahead by Bob Doll of BlackRock
As a way of discussing our economic and market views for the coming year, we present our 10 predictions for 2011: 1. US growth accelerates as US real GDP reaches a new all-time high. 2. The US economy creates two to three million jobs in 2011 as the unemployment rate falls to 9%. 3. US stocks experience a third year of double-digit percentage returns for the first time in more than a decade as earnings reach a new all-time high. 4. Stocks outperform bonds and cash. 5. The US stock market outperforms the MSCI World Index.
2010-12-29 00:00:00 Deciphering Debt by Dr. Victoria Marklew, Richard Thies, James Pressler and Dr. Asha Bangalore of Northern Trust
2011 is likely to raise more issues about debt, with periodic market panics about debt sustainability and bailouts. We offer this primer on the issue of debt ? specifically the various measures and the roles they play in determining a country?s risk of facing some form of debt-related crisis. Metrics to assess indebtedness of nations are classified as solvency and liquidity measures. Each are discussed, as is the special topic of the banking sector and its relation to public debt. We give our view of global public-debt-related challenges in 2011.
2010-12-28 00:00:00 Emerging Markets in 2011 ? Strong Economies, Rising Prices by Mark Mobius of Franklin Templeton
I believe emerging markets are now in a secular bull market, and as discussed below, I expect this trend to continue into 2011. Even more money is likely to be directed into these markets as investors around the world realize that emerging economies on average are growing three times faster than developed economies, and generally have more foreign reserves and lower debt-to-GDP ratios than their developed counterparts.
2010-12-23 00:00:00 Global Market Commentary by Monty Guild and Tony Danaher of Guild Investment Management
Investors should continue to hold gold for long-term investment. Food and food-related shares remain a favorite of ours and we believe that oil-related investments have promise. For long-term investment, we do not like the U.S. dollar, Japanese yen, British pound, or the Euro.As we mentioned in our September 14th letter, we like the Singapore, Thai, Canadian, Swiss, Brazilian, Chinese, and Australian currencies. In summary, investors should continue to hold shares of growing companies in India, China, and Colombia. We believe U.S. stocks can rally further.
2010-12-23 00:00:00 A Smoother Ride for Target-date Funds by Rob Arnott of Research Affiliates
Asset allocation is a critical step in the asset management process. No matter how diversified the portfolio, risk and reward aren?t linear. But target-date funds tacitly assume they are! Just because you are willing to take more risk doesn?t preordain higher returns, even over decades-long stretches. Rather, managing risk should be done either explicitly with active asset allocation of the glide path or implicitly through the natural contra-trading embedded in the Fundamental Index approach.
2010-12-23 00:00:00 And That's the Week That Was... by Ron Brounes of Brounes & Associates
Anyone reading this commentary needs to get home for the holidays (or for some Chinese food and a movie for those non-Christmas celebrators). A few numbers, some last-minute window-dressing, announced global transactions, and a race to end with double-digit gains. Let?s close 2010 on a high note. Have a nice season and a very happy new year
2010-12-22 00:00:00 2011 Outlook: Fixed Income by Fixed Income Investment Team of Neuberger Berman
Entering 2011, there is no shortage of potential issues that could ignite periods of extreme market volatility. While short-term market gyrations are unsettling for both novice and experienced investors alike, for the year as a whole, we believe the outlook for the economy and the fixed income market is generally positive. In particular, certain non-Treasury sectors have compelling fundamentals going into the New Year. In our opinion, these areas could benefit generally from an increased risk appetite, should investors seek incremental yields given a continued low interest rate environment.
2010-12-20 00:00:00 Do You . . . Sincerely?! by Jeffrey Saut of Raymond James Equity Research
For themes in 2011, I continue to embrace no double-dip recession, slow economic growth, dividend yield, stuff (energy, agriculture, water, electricity, metals, etc.), emerging/frontier markets and their consumers (although the emerging markets are well overbought currently), technology, financials, active investment management over passive (indexing), and hedging portfolios to reduce the downside risk.
2010-12-20 00:00:00 Weekly Investment Commentary by Bob Doll of BlackRock
As the year is winding to a close, we thought it would be a good opportunity to take a look back at the predictions we made at the beginning of 2010 to see how they are shaping up. We didn?t get them all exactly right, but most of our predictions were on track.
2010-12-17 00:00:00 Capital Markets Brace for Exciting 2011 by Andreas Utermann of RCM
Andreas Utermann, global chief investment officer at RCM, a company of Allianz Global Investors, highlights key themes likely to shape the direction of capital markets in the coming year and provides a brief outlook on how he expects major asset classes to perform.
2010-12-14 00:00:00 The End of the Asian Bull Market by Robert Huebscher (Article)
A broadly diversified emerging market investor would have earned nearly 12% annually over the last five years, far outpacing investors in the US and other developed markets. Over the next five or even ten years, investors relying on emerging economies will not be as fortunate, however, according to Louis-Vincent Gave, CEO of the Hong Kong-based research and investment management firm GaveKal.
2010-12-14 00:00:00 Year-end Letter to Clients: Investment Advice from Winston Churchill by Dan Richards (Article)
For the past 18 months, my draft letters have been designed to balance some of the extreme pessimism among many investors with an objective, positive outlook - the draft year-end letter for 2010 continues with that goal. In it, I borrow from Winston Churchill's insight into the difference between optimists and pessimists.
2010-12-14 00:00:00 A Notable Year of Emerging Market Growth by Mark Mobius of Franklin Templeton
I view 2010 as a year of economic resurgence. Many emerging markets recorded strong GDP growth as they continued to recover from the impact of the 2008 financial crisis. In several cases, robust domestic consumption, government expenditure and intra-regional trade offset weak external demand from developed markets. This led many countries in Asia and Latin America to return to pre-crisis growth levels much faster than expected. China and India were among the world?s fastest-growing major economies during the year, with China overtaking Japan as the world?s second-biggest economy.
2010-12-13 00:00:00 Dr. Copper by Jeffrey Saut of Raymond James Equity Research
The most important chart patterns of December (at least so far) are the charts of the 10- and 30-year Treasury bonds, whose yields have backed up more than 10% since the end of November (see the first chart on page 3). The second most impressive chart for the month is copper, which is up 10.8%. Copper is often referred to as ?Dr. Copper? for it has a better predictive record on economic growth than many economists; and last week copper came a cropper as it traded to new all-time price highs.
2010-12-13 00:00:00 Perception versus Reality by David A. Rosenberg of Gluskin Sheff
I've been a secular bond bull and am not yet changing my view of the fixed-income market, but the perception that the economy will grow vigorously is now extremely strong. I think it will only grow about 2% next year and that core inflation will continue declining. These are the primary downside risks: 1. The U.S. Treasury market becomes unglued. 2. Further sharp increases in energy prices. 3. Renewed fiscal problems in Europe. 4. Bad inflation news out of emerging markets. 5. U.S. state & local cutbacks become more severe. 6. Latest down-leg in home prices accelerates.
2010-12-11 00:00:00 Unintended Consequences by John Mauldin of Millennium Wave Advisors
The recent rise in interest rates is due to the reallocation of globally indexed funds away from sovereign debt and into something else. The may be a prelude to a sovereign default or a more rapid rise in rates, which could unfold very quickly. Global deleveraging is not over. QE2 and the nervousness of investors around the world are pushing up interest rates.
2010-12-10 00:00:00 Fleshing Out Our Themes for the Year Ahead by David A. Rosenberg of Gluskin Sheff
Consensus views of 1,350 on the S&P 500 and 4% real GDP growth are far too high. In my view, real GDP growth in the U.S.A. is set to slow from around 3% in 2010 to 2% in 2011, or possibly even lower. This is not a double-dip but it is a slower growth profile. The fiscal and sovereign credit problems in Europe are not going away. The U.S. dollar is likely to strengthen, particularly versus the yen. Emerging markets will struggle as central banks move more forcefully to curb accelerating inflationary pressure.
2010-12-07 00:00:00 Looking at the Tax Compromise Measures by David A. Rosenberg of Gluskin Sheff
The just-announced comprise tax measures along with the Fed?s pump-priming, have pretty well extinguished double-dip risks, notwithstanding the myriad of other headwinds. This amounts to a new stimulus measure. If the U.S. government opts for a series of fiscal measures that could end up adding as much as $750 billion to the existing large public debt burden, the fixed-income market is not exactly going to like it. Elsewhere, EU finance ministers ruled out an immediate aid package for Portugal or Spain (putting the onus on the ECB to restore calm).
2010-12-06 00:00:00 Cutting Through the Noise by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data is rarely clear-cut, but we believe the weight of the evidence indicates a strengthening US economy. The negative rhetoric surrounding the Federal Reserve's recent decision reached a crescendo, but while we were among the first to voice our belief that it wasn't necessary, we believe the dire warnings of potential consequences from a second round of quantitative easing (QE2) are overblown. The European debt crisis continues to plague world markets. Finally, we believe the European Central Bank (ECB) needs to be more proactive instead of continually reactive.
2010-12-06 00:00:00 Festivus by Jeffrey Saut of Raymond James Equity Research
The stock market is once again over bought so it would not surprise me to see a pause and/or pullback in the short-term. Nevertheless, I still expect the trend of buying the ?dips? to continue. Watch the Financials; they may be the key to the stock market?s near-term directionality.
2010-12-06 00:00:00 The Worst US Employment Report of the Year? by David A. Rosenberg of Gluskin Sheff
This was arguably one of the worst employment reports of the year. It was fascinating to see what little negative market reaction there was to the data ? not just nonfarm payrolls but also the news that factory orders slipped 0.9% MoM in October, the steepest decline in five months. This is why everyone seems to believe the economy is improving and it?s so easy to do that when you simply ignore the bad data points! One of the key features of the payroll report was the continued retrenchment in the state/local government sector. This promises to be a major macro theme for 2011.
2010-12-06 00:00:00 Real Return Expectations by Michael Nairne (Article)
There is nothing more important to long-term investors than the real rate-of-return that they can reasonably expect to earn on their investments. We forecast the expected real annual return for US stocks over the next 10 years and then set out ways to potentially improve on what many will find to be a discouragingly low expected return.
2010-12-04 00:00:00 Rebalancing the World by Mark Mobius of Franklin Templeton
We are currently witnessing a largely one-way flow of capital, as money moves from countries of disinflation or deflation to countries with inflation, possibly perpetuating the situation for both. We need to see a rebalancing of the world economy. In recent history, financial authorities in the developed world have encouraged a period of easy credit and loose monetary policy, driving a debt-fuelled rise in consumption. There needs to be more ?balance? in the world economy, so high-savings countries should spend more and develop their own vibrant domestic market as we see in the U.S.
2010-12-04 00:00:00 Short Skirts and Second Shoes by Herbert Abramson and Randall Abramson of Trapeze Asset Management
We are in an honest-to-goodness bull market. There is much more upside ahead. Possibly for years. Tops are made in euphoria, as when the Fed decides to tighten money and raise interest rates. With the evident despondency today the Fed continues to bring on the punchmore liquidity, accommodative easing, to keep interest rates low and make credit readily availablefor consumer spending, for housing and autos and apparel and necessaries, for government borrowings. And for stocks. Well be swimming in punch.
2010-12-03 00:00:00 Fundamentals and the Stock Market by Matthew Rubin of Neuberger Berman
Is continued discomfort in the stock market justified? It can be argued that the economy is relatively weak, and with high unemployment, the weak housing market and a new focus on fiscal restraint, few expect rapid expansion anytime soon ? not exactly a bullish sign for an asset class that is supposed to benefit from expansion. However, from a number of vantage points, stocks are displaying what we consider attractive characteristics that suggest the benefits of maintaining substantial exposure to equities in the current environment.
2010-12-03 00:00:00 The Dirty Dozen by Niels C. Jensen of Absolute Return Partners
In the following I list a number of risk factors which I believe investors should give serious consideration, but I do not for one second pretend for that list to be exhaustive. Neither should you read anything into the order of which those risk factors are listed. If you want my assessment of how to rank the various factors, you need to take a look at the risk scatter chart at the end of the letter.
2010-12-01 00:00:00 Open and Shut by Howard Marks of Oaktree Capital
Today some assets are fairly priced and others are high, but there are no bargains like those of 2008. Capital and nerve can?t hold the answers in such an environment. We?re no longer in a high-return, low-risk market, especially in light of the inability to know how today?s many macro uncertainties will be resolved. Instead of capital and nerve, then, the indispensable elements are now risk control, selectivity, discernment, discipline and patience.
2010-12-01 00:00:00 Allentown by Bill Gross of PIMCO
The global economy is suffering from a lack of aggregate demand. In the U.S. and Euroland, many policies only temporarily bolster consumption while failing to address the fundamental problem of developed economies: Job growth is moving inexorably to developing economies because they are more competitive. Unless developed economies learn to compete the old-fashioned way ? by making more goods and making them better ? the smart money will continue to move offshore to Asia, Brazil and their developing economy counterparts, both in asset and in currency space.
2010-11-30 00:00:00 Macro and Market Thoughts by David A. Rosenberg of Gluskin Sheff
All these ?rescue? packages in euroland really do is provide bridge financing ? they do not resolve the underlying structural problems or the deflating asset values in bank balance sheets. The massive selloff in government bond markets, even in countries like Belgium and Italy (let alone Portugal and Spain), is a clear sign that the bond vigilantes are now targeting the supposedly stronger governments in the eurozone. The austerity packages needed to bring intractable deficits down will fuel deflation, which will further destabilize the financial system and damage the economy.
2010-11-30 00:00:00 Currency Focus: QE2 and the Course Ahead by Ugo Lancioni of Neuberger Berman
We believe the dollar is likely to move higher on an intermediate-term basis. QE2, in our opinion, could lead to stronger economic growth in the U.S. and eventually drivehigher yields, making the dollar more attractive to investors. In our view, the impact of QE2 was already in the price of the U.S. dollar at the time of the announcement. And the market is generally still shorting dollars.
2010-11-29 00:00:00 The Debt is Still Here by Eric S. Ende of First Pacific Advisors
In the world of investment management, results are typically measured each quarter. While markets sometimes experience a dramatic shift in the course of ninety days, usually the most important influences on the economy evolve more slowly. That is the situation today, where from our perspective, little about the investment backdrop has changed in 2010. This commentary summarizes our view of the current situation, the policy options available and likely outcomes.
2010-11-29 00:00:00 Valuation Opportunity by Milton Ezrati of Lord Abbett
Because the fears forged during the 2008?09 crisis still linger, investors continue to avoid equities. For a while, extreme caution drove almost all new flows of funds into cash and U.S. Treasury bonds. As these flows drove down Treasury and agency yields, investors sought returns in more credit-sensitive bonds, but still, they largely avoided equities. The pattern has by now distorted valuations enough to present a special opportunity in stocks, even after their impressive rise from spring 2009.
2010-11-29 00:00:00 A List of Concerns ? A Dozen of Them by David A. Rosenberg of Gluskin Sheff
Among Rosenberg?s concerns: China undergoing a significant, though likely brief, economic adjustment by 2012; The contagion reaching Spain, which would likely be game over for the euro; A renewed deflation in home prices in the US; State and local government budgets ? the critical source of downside risk for the U.S. economy in 2011, which could easily result in 1.5-2.0 percentage points of withdrawal from GDP growth.
2010-11-29 00:00:00 Ripeness is All by Jeffrey Saut of Raymond James Equity Research
Shakespeare once wrote, ?Ripeness is all.? And timing is ?all? when it comes to Wall Street as any whipsawed investor will tell you.
2010-11-29 00:00:00 A Time to Invest in Africa by Nile Capital Management of Nile Capital Management
In this report, I will summarize my answer to the often-asked question: ?Why is this a good time for investors to focus on Africa?? I also will explain why the best way to participate in African markets and manage their risks is through an actively managed fund that offers ?feet-on-the-ground? expertise in Africa.
2010-11-29 00:00:00 Not Fade Away: European Debt Crisis Hits Markets by Liz Ann Sonders of Charles Schwab
Optimism is waning as global concerns are taking center stage, notably in the euro-zone. Investors shouldn't be complacent, but should heed the more-positive message coming from the US economy.
2010-11-24 00:00:00 A More Integrated Latin America by Claus Born of Franklin Templeton
Chile, Colombia and Peru are planning to integrate their stock exchanges, providing local investors with more investment opportunities and also allowing companies to access a broader investor base. We are likely to see increased foreign investor participation with improved liquidity. Once fully integrated, this new regional exchange should have the highest number of issuers in Latin America (before Mexico and Brazil), the region?s second-largest market capitalization (after Brazil) and its third-largest trading volume (after Brazil and Mexico).
2010-11-23 00:00:00 Ned Davis - Still Positive on Stocks by Robert Huebscher (Article)
Just over a year ago, Ned Davis correctly forecast a continuation of the cyclical bull market in stocks. In February of 2008, he foresaw that year's market upheaval, and a year later he predicted the rally that began in March of 2009. Today, Davis is moderately bullish on stocks, as long as the Fed maintains its policy of quantitative easing.
2010-11-23 00:00:00 Global Tensions Rising Over Fed's QE2 Initiative by Team of American Century Investments
QE2 represents a dramatic intervention in the capital markets, and its ultimate impact is hard to predict at this point in time. Critics of the plan, including some Fed members, believe that too much monetary stimulus might lead to runaway inflation, which in turn could derail economic growth or even create future asset bubbles. Alternatively, a weaker dollar could create incentives for other countries to implement capital controls and foreign exchange interventions that negatively impact global trade.
2010-11-23 00:00:00 They?! by Jeffrey Saut of Raymond James Equity Research
Jeffrey Saut analyzes the DJAI and continuously favors the upside. Thus, he states his longstanding strategy that a "profits boom" will give way to an inventory rebuild, and then a capital expenditure cycle followed by increased hiring, and then a pickup in consumption, remains "stirred," but not shaken. As for the strongest sectors, they remain Energy, Basic Materials, and Information Technology, while the best performing market capitalization class is the mid-caps.
2010-11-23 00:00:00 The Glad Game by Rob Arnott of Research Affiliates
In a world of low-single digit yields, a conventional 60/40 asset mix will get pension funds just over halfway toward an expected 8% return. But investors should not wring their hands: there are ways of achieving their return expectations.
2010-11-22 00:00:00 The Science of Risk by Scotty George of du Pasquier Asset Management
We?re in a particularly vulnerable time in world financial markets. Having just completed a significant 2 year market response (upwards) to the global credit crisis, the question of whether or not we can sustain similar economic magnitude has everyone?s attention. Although financial data seems more or less in line with a nascent recovery, investor confidence and activity are still less than robust.
2010-11-22 00:00:00 Europe's Latest Victim Enters the Spotlight by Chris Maxey of Fortigent
Now that Ireland?s domino is falling, what next? It turns out that the vultures are circling back to get another piece of Greece. Officials restated Greece?s budget deficit for 2009 to a whopping 15.9% of GDP. Couple that with recent rumors that Greece was hoping for a payment extension on its $150bln bailout and you have a recipe for further disaster. Not to be forgotten is Portugal, a country with a budget deficit of 9.3% of GDP in 2009. It may be a period of months before Portugal is forced to pay the piper, but make no mistake, eventually Portugal will face its day of reckoning.
2010-11-22 00:00:00 Commodity Prices: What is Likely Impact in the United States? by Asha Bangalore of Northern Trust
The S&P GSCI commodity index has moved up 11.3% from a year ago on November 19, 2010 (see Chart 1). The trade weighted dollar declined 1.2% from a year ago as of November 12, 2010. The immediate inference is that the extent of gains in the commodity price index is larger than the decline of the dollar. By implication, commodity price gains reflect more than the depreciation of the greenback.
2010-11-17 00:00:00 A Tale of Two Countries by Mark Mobius of Franklin Templeton
Argentina?s economy has been growing at a steady pace since the 2001-2002 economic crisis, typical of a recovery following a period of depression. The country has also benefited from a global environment that has allowed it to enjoy the best terms of trade in more than a century. While the external environment remains favorable, adjustments are needed to sustain Argentina?s economy in the long run.
2010-11-16 00:00:00 Touch of Grey: Market Takes a Breather by Liz Ann Sonders of Charles Schwab
My best guess as to the scenario that is unfolding is that the economy is gaining traction, which could cause the Federal Reserve to pull QE2 into the dock sooner than expected. It could also lead to a lift in the dollar, a related pullback in commodity prices, and rising bond yields. Given the high correlation recently between bond yields and stock prices, if yields were to continue to rise, they could take stock prices up with them; especially if the reasons are a better economy and lessened deflation fears.
2010-11-12 00:00:00 A Bad Plan Poorly Disguised by John Browne of Euro Pacific Capital
With our economy sagging and our international clout waning, one of the few assets upon which the US can rely is the confidence that the rest of the world has traditionally showered upon us. That confidence is the reason why the US dollar was elevated to global reserve status more than 65 years ago. With so much riding on perception, Tim Geithner?s recent statements denying the existence of a dollar debasement campaign could not be seen as anything less than foolhardy.
2010-11-12 00:00:00 And That's the Week That Was... by Ron Brounes of Brounes & Associates
Investors surveyed the landscape in the aftermath of two major market moving events (Fed stimulus and midterm election), retreated from their recent optimism, and booked profits heading into the homestretch of the year. Despite the overall success of another earnings season, investors fretted over the global progress (or lack thereof) from the G20 meeting of world finance ministers and news that China may have inflationary problems on its hands.
2010-11-12 00:00:00 Down the Home Stretch by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data has shown signs of strengthening. We believe we could be emerging from the soft patch and that stronger-than-expected growth could be in the offing. The elections are done and the Federal Reserve made its move, but the question remains as to whether much-needed confidence returns to businesses. Additionally, housing remains a problem that may not be helped substantially by either event. Competitive currency devaluations are dominating the international conversation, while investors are flocking to emerging markets, making us a bit skittish in the near term.
2010-11-11 00:00:00 Ahead in the Clouds: Capturing Opportunities in Technology by Walter Price of RCM
Many corporations are finding themselves in a situation that should bode well for technology spending: They are holding record amounts of cash on their balance sheets and consuming their existing capital base as they depreciate their equipment. At the same time, many technology firms have likewise emerged from the crisis with strong balance sheets and in good financial condition. Yet the market has been slow to re-embrace the sector, keeping stock valuations at historic lows.
2010-11-11 00:00:00 Leadership Changes in Latin America by Mark Mobius of Franklin Templeton
In Latin America, we are seeing a large and young population moving up rapidly to the new ?consumer? middle class, but at the same time having one of the lowest loan penetrations in the world. The rise of this consumer middle class and growth in per capital GDP is resulting in an increase in domestic spending, which drives the domestic economy. Secondly, the region has vast resources available at low cost.
2010-11-09 00:00:00 How Modern Is Your Portfolio Theory? by Direxion Funds (Article)
After 58 Years, is there Another Way to Conquer the Efficient Frontier? In the past, active or "tactical" investment management referred to jumping in and out of stocks and bonds - market timing. With the introduction of sophisticated funds that help the masses harness the power of institutional managers and alternative asset classes and strategies, today, tactical management may help to renovate your portfolios - and help you retain and attract assets.
2010-11-09 00:00:00 Everybody?s Happy!? by Jeffrey Saut of Raymond James Equity Research
Over the decades I have come to trust my 'day count' indicator because it has worked so well. Since the late-June ?lows? there have been ten 90% Upside Days, accompanied by strong Advance-Decline readings, reflecting the durability of this rally. In fact, the New York Composite Advance-Decline Line is well above its April rally peak and Lowry?s Buying Power Index has risen to a new rally high, while the Selling Pressure Index tagged a new reaction low, late last week. All of this only reinforces my view that any correction will be shallow and brief.
2010-11-09 00:00:00 RCM's Global Strategic Outlook: Fourth Quarter 2010 by Andreas Utermann of RCM
Analyzing various leading indicators, there is hardly any hint of a recession. This is not to say that there is no risk of a recession happening. A continued weak labor market is weighing on household consumption in industrialized economies. The housing market in the U.S. is showing signs of weakness. There is a risk of a policy failure in emerging markets, especially of China overdoing policy tightening. Fiscal policy tightening in the West may actually turn out to be too strong. In sum, we think that structural headwinds and tailwinds could balance each other out.
2010-11-09 00:00:00 Chinks in the Armour by David A. Rosenberg of Gluskin Sheff
Nobody thought a year ago that things would have weakened to such an extent that we would have needed QE2 or the extension of Bush tax cuts. The Fed is doing $600bln in quantitative easing, which is about one-third what it did last year. I?m not convinced that it alone will prevent the economy from weakening, even if contraction risks have abated. Now what will it take to turn me more positive? Well, a sustained job creation for one and if we can get initial jobless claims down to 400k that would be huge. But I have to admit, QE2 does not do it for me.
2010-11-08 00:00:00 What Has the Fed Really Done? by David A. Rosenberg of Gluskin Sheff
In the Fed?s latest QE quest, by targeting the front- and mid-part of the U.S. Treasury curve, it is only really influencing yields that were already at microscopic levels before anything was even announced. It is hard to figure out what a 0.3% yield on the 2-year T-note or a sub 1 % yield on the 5-year T-note is really going to accomplish as far a spending stimulus is concerned. The Fed?s action seems to have unleashed a wave of speculative trading activity in risk assets ? from stocks, to commodities, to emerging markets
2010-11-08 00:00:00 The Hail Mary Pass by David Baccile of Sextant Investment Advisors
With the announcement of $600 bn in new QE this week, Fed quarterback Bernanke has dropped back deep into the pocket and launched a last ditch Hail Mary pass with the hopes of stimulating growth to bring down persistently high unemployment. There is one major problem this view. The magnitude of the debt overhang is far greater now than at any other time in history, making the relatively trivial QE1, QE2, QE3, etc. ultimately doomed to failure. For those with a long-term approach to asset allocation, chasing a hot asset class or reacting to a 'clueless' Fed policy is not an option.
2010-11-06 00:00:00 Equity Valuation, Earnings and Relative Yield: A Compelling Point in the Cycle? by Richard Skaggs of Loomis Sayles
Large-cap US stocks, as represented by the Dow Jones Average, quadrupled in the 1980s and again in the 1990s. Given this historical perspective, the market?s long pause since 2000, accented by calamitous financial events, particularly in 2008, has left investors impatient and fearful. That said, investors would be wise not to wallow in this sentiment and overlook the long history of stocks returning to good form following lengthy periods of underperformance. The S&P 500 Index could be on the cusp of a positive long-term cycle based on its valuation, earnings and relative yield.
2010-11-05 00:00:00 More on QE2 - Will it Work? by David A. Rosenberg of Gluskin Sheff
Quantitative easing is no antidote for structural economic problems, even if it manages to give investors a short-term sugar high. Let's learn from the Japanese QE experiment. The day the Bank of Japan launched the program on March 19, 2001, the Nikkei surged 7.5 percent, from 12,190 to 13,103. Three months later, as it became painfully obvious that the real economy was not responding well to the shock therapy, the Nikkei index slid 16 percent to just over 12,000.
2010-11-05 00:00:00 Effects of Quantitative Easing on Asia by Teresa Kong of Matthews Asia
While the U.S. intends to stimulate its domestic economy with quantitative easing, the actual effect of QE has been to turbo-charge emerging markets, especially the markets of Asia. There is some concern that short-term portfolio flows or 'hot money' could cause sharp price volatility, and we will continue to monitor these effects and their implications on Asia.
2010-11-04 00:00:00 Thoughts on QE2 by David A. Rosenberg of Gluskin Sheff
While the Fed could have done more yesterday, it didn't because the economy is doing better than expected, even if it is still quite fragile. Auto sales, for example, rose to 12.3 million at an annual rate in October from 11.8 million in September (best result since August 2009). However, recall that motor vehicle sales also jumped 2.4 percent in September and all that translated into was a +0.08 percent inch-up in total real consumer spending, which was one of the weakest months of the year. Consumer spending excluding auto will now be essential to watch.
2010-11-02 00:00:00 Flaws in Vanguard?s Withdrawal Strategy: Income versus Total-Return Portfolios by Geoff Considine, Ph.D. (Article)
Vanguard advertises that its mission is to simplify investors' retirement decisions. In a recently published study, however, it oversimplified the critical choices investors and their advisors face in constructing a portfolio for the withdrawal phase of retirement.
2010-11-02 00:00:00 November Economic Update by Team of Cambridge Advisors
We have enjoyed the recent rally, but we expect volatility to continue. Investors should remain cautious. It is not necessary to chase stocks higher as buying opportunities are expected to present themselves throughout the next year. If Bill Gross is right, government bonds may not be the safe investment they once were. To reduce risk, broad diversification across many asset classes is the best strategy during these uncertain times.
2010-10-30 00:00:00 Schwab Market Perspective: So Now What? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
The Federal Reserve and upcoming elections are in sharp focus and results and actions in these two areas could determine whether the momentum seen since September can continue. Earnings season was better than expected and the market reacted as such. But confidence remains a major issue, with brewing mortgage-related problems and continued uncertainty around tax policy causing consternation. Debt remains a major issue that's just now being addressed and protectionism still threatens economic expansion. China remains a bright spot for global growth.
2010-10-29 00:00:00 Asset Allocation in an Uncertain Economy by Robert Huebscher (Article)
Advisors should not bet on whether the recession will be L-, V-, or W-shaped. Instead, Ron Albahary said they should use strategic asset allocation and overweight or underweight those asset classes that have historically done well at certain points in the economic cycle. Albahary is the CIO of Convergent Wealth Advisors, a Washington, DC-based wealth manager.
2010-10-29 00:00:00 Postcard from Vietnam by Taizo Ishida of Matthews Asia
As much as two-thirds of Vietnam's GDP can be attributed to strong personal consumption in a country of 86 million (with an average age of 26). Over the past 20 years, the country has shown impressive economic expansion, averaging 7.1 percent growth per year, which has pushed GDP per capita up to just over $1,000 U.S. Although Vietnam still faces potential problems with inflation, it is still encouraging to witness the real changes taking place in the country's consumer behavior.
2010-10-29 00:00:00 Asset Allocation: Fall 2010 by Tony and Rob Boeckh of Boeckh Investment Letter
Excess liquidity will continue to act as a tailwind for equities, commodities and non-dollar currencies well into 2011. Deflation will dominate in the short term; the inflationary threat is probably further away than most investors expect. Gold is expensive relative to the inflationary outlook. Fixed income markets are heavily influenced by government intervention. While it is likely that continued intervention will succeed in depressing bond yields below market levels, even a modest increase in inflationary expectations would undermine these actions. We recommend shortening duration.
2010-10-28 00:00:00 Night of the Living Fed by Jeremy Grantham of GMO
This is a summary of Grantham Mayo Von Otterloo chairman Jeremy Grantham's 3Q 2010 newsletter. Grantham notes that in the third year of a presidential cycle, risky, highly volatile stocks have outperformed low-risk stocks by an average of 18 percent per year since 1964. Levels of 1400 or 1500 on the S&P 500 one year from now are about a 50/50 bet. The biggest threats to this possibility are that Congress will initiate a new trade war, or that the Federal Reserve will start a currency dispute with quantitative easing.
2010-10-28 00:00:00 What the G-20 Achieved by Komal Sri-Kumar of TCW Asset Management
A key item on the agenda last weekend during the meeting of G-20 finance ministers was the U.S. desire to have member nations' current account deficits and surpluses limited to 4 percent of GDP. A country with a bigger surplus (e.g., China) would have to let its currency appreciate. The United States, however, cannot insist on deciding on the size of QE2 based purely on domestic considerations, accuse Chinese authorities of currency manipulation, and expect other countries to provide a level playing field for American exports all at the same time.
2010-10-27 00:00:00 Reflections: Venturing into a New Frontier by Mark Mobius of Franklin Templeton
Frontier markets are the next emerging markets. These economies are more domestic-oriented, with a limited number of publicly listed companies; hence, frontier market investments tend to be primarily limited to private equity. Quality of company management is a frequent concern. Frontier market investing therefore often requires additional time and due diligence to assess the quality of corporate management teams, including more frequent on site visits to evaluate businesses effectively.
2010-10-27 00:00:00 Run Turkey, Run by Bill Gross of PIMCO
The Fed's announcement of a renewed commitment to quantitative easing has been well-telegraphed, and the market's reaction is likely to be subdued. We are in a 'liquidity trap,' where interest rates or trillions in asset purchases may not stimulate borrowing or lending because consumer demand is just not there. The Fed's announcement will likely signify the end of a great 30-year bull market in bonds and the necessity for bond managers and, yes, equity managers to adjust to a new environment.
2010-10-26 00:00:00 Emerging Market Uprising: What it Means for Investors by George Magnus of Boeckh Investment Letter
This special report by George Magnus, a senior economic advisor at UBS Investment Bank, takes a look at some key economic and investment issues regarding emerging markets and China. Magnus, who has just completed a book on emerging markets, argues that while EMs have boomed in recent years, there are a number of unresolved problems which suggest the past may not repeat, and investors must be careful.
2010-10-26 00:00:00 Hope is Not a Strategy by John West of Research Affiliates
Most pension funds and 401(k) calculators assume total returns in the 7-8 percent range. Is this assumption realistic, however, with a mature economy saddled with unprecedented debt levels and an aging workforce? This commentary examines retirement plan assumptions and calculates that we can reach this return level only if we assume top quartile results for stocks, bonds, and alternatives over the next 10 years. That's like expecting a decade of sunshine in the markets.
2010-10-25 00:00:00 It's All About Earnings by David A. Rosenberg of Gluskin Sheff
The equity market has now managed to climb three weeks in a row despite the fact that the U.S. dollar has done likewise in a classic countertrend rally from oversold conditions. Almost one-third of the S&P 500 universe has reported, and the year-over-year earnings growth rate is now running at plus-28 percent from plus-24 percent last week. Fully 83 percent of the companies have beaten their bottom-line estimate, which is far above the historical norm of 62 percent; although barely over 60 percent are bettering their revenue estimates, which is below average.
2010-10-25 00:00:00 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The economy continues to throw off some outstanding corporate profit reports. Profits are what the stock market is all about. While the pundits and politicians talk endlessly about jobs and how to create them (like they would have a clue,) the market is most looking forward to profit growth. In that sense the lower dollar, strength in emerging markets and strong expense control are reaping huge rewards for global companies who lead their industries.
2010-10-21 00:00:00 Readers' Questions Answered Part IV by Mark Mobius of Franklin Templeton
Mark Mobius responds to reader questions on initial public offerings, non-listed entities, China's 20-year prospects, and markets in Thailand, Indonesia and Sri Lanka.
2010-10-21 00:00:00 North America Losing Some Serious Momentum by David A. Rosenberg of Gluskin Sheff
The U.S. economy may in fact be contracting again. The monthly data from Macroeconomic Advisers showed that real GDP contracted 0.6 percent in August. While this did follow a red-hot +1.25 percent gain in July, this marks the third decline in real activity in the past four months. Maybe the bond market does not need the Fed's help after all ? the super-soft economic environment is all the Treasury bond market really needs to sustain the downward trend in yields.
2010-10-19 00:00:00 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.
2010-10-19 00:00:00 Bernanke's Impossible Dilemma by Robert Huebscher (Article)
David Wessel, economics editor of the Wall Street Journal, examines the challenge Ben Bernanke faces. His goal is to provide full employment and price stability. Yet he faces a slowly growing economy, unemployment close to 10%, consumers deleveraging and spending frugally, renewed fears of banking system instability, and the threat of an asset bubble is growing somewhere in the markets. Monetary and fiscal policy options have been seemingly exhausted, and the public is losing confidence in all aspects of government.
2010-10-18 00:00:00 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
After the steady run-up in natural resources equities the past year, some are concerned that the progression might come to an end. Based upon improving policies and demand worldwide, however, it is still entirely appropriate to reserve an overweight ranking for these investments. As long as industry prudently manages inventory-versus-demand cycles, upward valuations might persist. In the long term, depleting resources might provide the science and politics for an elongated trend with significant capital gains potential.
2010-10-18 00:00:00 It's All About Ben, the Fed's Intent and the Market Reaction by David A. Rosenberg of Gluskin Sheff
The U.S. economy is caught in a classic liquidity trap. With additional fiscal stimulus no longer a viable political option, even though the government is better equipped to deal with many of the structural hurdles to growth than monetary policy, Mr. Bernanke clearly feels that the Fed is the only game in town. Monetary policy, even in a non-conventional form, is a very blunt tool to use to reverse a secular uptrend in the savings rate, fix chronic unemployment or induce people to spend rather than correct their debt-laden balance sheets.
2010-10-15 00:00:00 Q310 Portfolio Commentary by Jay Compson of Absolute Investment Advisors
Asset prices appear to be solely supported by the potential effects of QE2. Global credit markets, where liquidity could be highly strained given the large flows into bond funds and the hazardous reach for yield, are particularly disconcerting. While the Fed could successfully create asset inflation in the short term, the asymmetry of these policy efforts is to the downside, and patience should be better rewarded. Additionally, a dollar rally is quite possible given current sentiment, and could create much volatility in both global equity and credit markets.
2010-10-14 00:00:00 Global Market Commentary by Monty Guild and Tony Danaher of Guild Investment Management
Historically, it has taken about four or five years of capital inflows into emerging markets to create an investment bubble. Thus far, we are only one year into a significant capital inflow into emerging markets, and we probably have another three or four more years to go before these markets become so popular that it is time to move on to other pastures.
2010-10-12 00:00:00 Beggar Thy Neighbor, Beggar Thyself by Michael Lewitt (Article)
In the latest edition of the HCM Market Letter, Michael Lewitt argues that reported attempts by countries to devalue their currencies will only result in higher inflation and not economic growth. QE2 will similarly fail, and the necessary "heavy lifting" for the economy should be through fiscal, not monetary, policy. A continuation of Keynesian policies, as advocated by Paul Krugman, will also fail. Lewitt warns of dangers in ETFs and offers his investment recommendations.
2010-10-11 00:00:00 In QE We Trust by Komal Sri-Kumar of TCW Asset Management
Senior monetary officials worldwide have complained about the massive inflows of capital into their financial markets resulting from expectations of monetary easing in the United States. One of the major pitfalls of quantitative easing is that beggar-thy-neighbor currency interventions do not result in increased growth for all participating countries. Instead, they sharply increase the risk to exporters and international investors and, eventually, dampen global growth.
2010-10-08 00:00:00 Back to School... And This Report Gets an F! by David A. Rosenberg of Gluskin Sheff
Considering that policy rates are at zero, the Fed's balance sheet has tripled in size (with more to come), and a 10 percent deficit-to-GDP ratio that would have even made FDR blush, the unemployment situation is an unmitigated disaster that deserves the government's undivided attention. The question that has to be asked - and answered - is why the equity market would be rejoicing over today's somber piece of economic news.
2010-10-08 00:00:00 Narratives vs. Facts: Why U.S. Stocks are Surging Despite Anemic Economic News by David Edwards of Heron Financial Group
Investors chasing yields have bid up the prices of corporate bonds and preferred stock, while Treasury bonds, near post-war lows, barely yield more than inflation. Emerging markets stocks and bonds are doing well, but the high returns of 2008 are unlikely to happen again. Indeed, after a decade of pariah status, perhaps the only asset class that offers a reasonable risk-adjusted return is U.S. stocks. Even so, expect no more than 8 percents returns including dividends until the debt deflation process is complete in another 5-10 years.
2010-10-07 00:00:00 Emerging Markets Commentary by Conrad Saldanha of Neuberger Berman
With emerging market economies posting substantially higher growth rates, many investors are increasingly attracted to emerging equity markets. Equity returns, however, tend to be driven more by earnings growth than by GDP growth. Returns are also influenced by other factors such as a country's financial market structure, fiscal and monetary policies, and legal standards. Furthermore, index or ETF investing may not capitalize on stock-specific factors that contribute to the underlying economy's performance.
2010-10-06 00:00:00 And That's the Week That Was... by Ron Brounes of Brounes & Associates
The economy remains unsteady as an uncertain labor picture continues to limit consumer activity. And yet, corporations have accumulated trillions of dollars in cash and money markets yielding near 0 percent have forced managers to seek other options. Looking ahead, the Fed's stimulus debate wages on although many expect a more limited bond buying program than the $1.7 trillion one offered last year. As for the markets, companies still have lots of cash looking for a home and hopefully equities have more room to run.
2010-10-05 00:00:00 A September to Remember by Ron Surz (Article)
In his quarterly market analysis, Ron Surz notes that September has historically been the worst performing month for US stock markets, losing 1% on average over the past 85 years, while the average return in the other 11 months was a positive 1.3%. Not so this September. Surz reviews global market performance and provides his thoughts on peer group analysis and target date funds.
2010-10-05 00:00:00 Commentary & Market Outlook by Jeff Spitzmiller, Jim Worden and Alan Chauhan of Iron Point Capital Management
While recent economic numbers have been low, they continue to point to growth - albeit slow growth - over the next few quarters. With the Fed poised to continue engaging in quantitative easing and more stimulus programs being promoted in Congress to help small businesses and improve payrolls, it is clear that all monetary and fiscal tools will be used to keep the economy moving on an upward trajectory.
2010-10-05 00:00:00 Win, Lose or Draw: Do We Have a Win-Win Scenario? by Liz Ann Sonders of Charles Schwab
U.S. stocks are not expensive and they're most certainly under-owned. Most individual investors are either pessimistic or indifferent about the stock market, suggesting the 'wall of worry' - the contrarian nature of the market to perform best when pessimism is highest - is alive and well. In the near term, the stock market is likely overbought, and a little pullback to improve the sentiment picture would be helpful. On the other hand, however, strong stock market would be a terrific confidence builder, as Alan Greenspan noted last week.
2010-10-05 00:00:00 Cyclical Outlook by Paul McCulley of PIMCO
The influence of emerging economies is on the rise, while developed countries are retrenching. Monetary policy in the developed countries will remain extraordinarily accommodative for an extended period, with policy rates pinned close to zero and use of quantitative easing. PIMCO will therefore position its duration and curve strategies accordingly: overweight investments in the developed world, concentrated in the 'belly' of yield curves. In contrast, an increasing share of its positioning in the 'spread sectors' will be allocated to the emerging markets, including their currencies.
2010-09-29 00:00:00 Multiple Risks From a Multispeed Eurozone Recovery by Nouriel Roubini of Roubini Global Economics
Although the euro zone's recovery from recession has been better than initially envisaged, there are still external and domestic pressures - some persistent, some new - as potential threats to 2011 growth. The standout performance of the core and Northern European economies, particularly Germany, alongside renewed weakness in the periphery is giving rise to a multi-speed recovery. This adds a new set of risks - such as the implications of one-size-fits-all monetary policy - to the existing list.
2010-09-28 00:00:00 The Future of Oil by Robert Huebscher (Article)
No commodity impacts the global economy more than oil. When geopolitical threats loom, two questions often dominate discussion: Will the price of oil rise? And what will be the economic consequences? We review the key drivers of recent, current, and forecast oil prices, including a template for the necessary eventual alignment of supply and demand.
2010-09-28 00:00:00 Reality Check on the Macro Outlook by David A. Rosenberg of Gluskin Sheff
More than 80 percent of the economic growth we saw from the lows of 2009 in real GDP was due to the massive amounts of federal government stimulus and the huge inventory swing. The underlying trend in organic real final sales is barely above 0.5 percent. One therefore has to therefore wonder, with an estimated 1.7 percentage point drag from fiscal withdrawal in the coming year and the evident signs of a peaking-out in the inventory contribution to growth, how can the economy not contract heading into 2011?
2010-09-27 00:00:00 Are 401(K) Investors Fighting Yesterday's War? by Rob Arnott of Research Affiliates
It is time for investors and their advisors to look forward, not backward, in their 401(k) investment planning. Inflation is the biggest single enemy to long-term investors. A portfolio of real return assets balanced with a stock- and bond-heavy 401(k) fund menu is the best way to build a portfolio for an uncertain future. To do this, one needs to include inflation hedges before inflation strikes and when they are least costly.
2010-09-23 00:00:00 Can Japan Make a Comeback? by Mark Mobius of Franklin Templeton
It seems that everyone is back to moaning and groaning about the Japanese economy. Modest 3 percent GDP growth is expected in Japan this year, compared to a disastrous 5 percent shrinkage of the economy in 2009. Japanese exporters say they are hurting from a strong yen, while the importers are having a field day. While it's true that the Nikkei 225 Index has fallen from a high of 25,000 in 1991 to a low now of less than 10,000, bargain hunters would say that this is beginning to make the Japanese stock market look reasonably cheap.
2010-09-23 00:00:00 Was it really a Lost Decade? by Kevin D. Mahn of Hennion & Walsh
Many have claimed that the decade of the 2000s was a lost decade for stock investors. When you look at the returns of the S&P 500 index over the decade, it is hard to challenge the validity of this claim. For the period of December 31, 1999 through December 31, 2009, the S&P 500 index had an annualized simple price return of -2.72 percent. A look at returns in categories beyond U.S. large-caps, however, including emerging markets, bonds, and U.S. mid-caps and small-caps, reveals that other types of investments actually had positive returns.
2010-09-21 00:00:00 Diminished Expectations, Double-dips, and External Shocks: The Decade After the Fall by Carmen M. Reinhart and Vincent Reinhart of VoxEU
Is the global economic recovery about to grind to a halt? This column provides evidence on economic performance in the decade after a macroeconomic crisis. It finds much slower growth, as well as several episodes of 'double-dips,' as well as many instances of plain 'bad luck' that strike at a time when the economy remains highly vulnerable.
2010-09-20 00:00:00 The Islamic Triangle: Tilting Toward Opportunity by Douglas Clark Johnson of Codexa Capital
The Islamic Triangle - the space between Casablanca, Istanbul and Muscat - may not be a top priority for most global money managers, but perhaps it should be. At just over $1 trillion, the Islamic Triangle's total market capitalization is just a bit less than Brazil's or India's. Among major markets, it compares with Australia or Switzerland. Relative to GDP - a sign of an equity market's importance to a local economy - the number is nearly 60 percent, relatively low, but indicative of the region's structural potential over time.
2010-09-17 00:00:00 Japan Invervenes to Bail Out America.com by Team of Euro Pacific Capital
This week the Japanese government decided to intervene in the foreign exchange market, initiating a vigorous campaign to buy U.S. dollars, thereby stemming the rise of the yen and pulling up the greenback. The effects were immediate, with the yen falling an astonishing 3 percent on the day of the announcement. The media spin doctors cast the Japanese decision as an attempt by the island state to prop up its own fragile economy. The intervention was actually done to help American consumers buy more cars and electronics from Japan.
2010-09-10 00:00:00 Do Countries 'Graduate' From Crises? Some Historical Perspective by Rong Qian, Carmen M. Reinhart and Kenneth Rogoff of VoxEU
Are declarations of victory against the global crisis premature? This column argues that 'graduation' - the emergence from recurrent crisis bouts - is a long and painful process which neither developed nor developing countries look close to completing. Two centuries of evidence suggests that most countries need 50 years before the chances of further crises subside.
2010-09-07 00:00:00 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 00:00:00 Cheap Labor Helps Southeast Asia Compete with China, But It Won?t Be Easy by Team of American Century Investments
Labor disputes in China and other emerging market countries have been catching global media attention. As employees in the low-cost workshops of the world fight for higher wages and better working conditions, the longer-term outcome will be better standards of living and rising disposable incomes in emerging market countries. These changes hold positive implications for many global-based companies' present and future growth. A growing consumer class with 'buying power' will certainly be beneficial.
2010-09-03 00:00:00 Buy and Hold Still Holds by John Browne of Euro Pacific Capital
As Americans have justifiably lost faith in the stock market, the classic buy-and-hold investment strategy has fallen from favor. The problem is that retail investors are wrongly equating the performance of stocks as a class with the trajectory of American stocks in particular. Fortunately, buy-and-hold still works in many parts of the world. Meanwhile, retail investors sitting in U.S. bonds and bank accounts will ultimately pay a steep price through inflation.
2010-09-02 00:00:00 Learning From Past Crises by Mark Mobius of Franklin Templeton
Although it is unrealistic to assume that the structural changes implemented in some emerging markets can completely shield them from the effects of future global crises, they seem to have borne the most recent global financial crisis reasonably well. While risks have not disappeared, things look a lot better today than they did 20 years ago. The growing use of derivatives contracts is just one of the many reasons to remain cautious, but some emerging markets' strong fiscal health is cause for hope and optimism.
2010-08-27 00:00:00 Debt Be Not Proud by Rob Arnott of Research Affiliates
The looming sovereign debt crisis may be the defining influence on capital market returns over the next 10 years. Greece recently hit a wall and had to break a lot of promises to its citizens, including retirees and prospective retirees from government employment. Greece certainly won't be the last. An exploration of the relationship between sovereign debt levels and the economic might of debtor nations reveals a scary situation, particularly for investors who cap weight their government bond market exposure.
2010-08-27 00:00:00 Perception Versus Reality by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Market volume continues its traditional August swoon, making it difficult to gauge much from stock market action. Economic data continues to tell a mixed story, as growth slows and risks rise. Confidence is key to consumer spending, business investment and stock market performance. The Federal Reserve and the government are attempting to instill that confidence in the American public, but so far have had little success. Emerging markets continue to show signs of growth and China's market has been performing well. Germany also has posted some nice numbers lately, but Japan remains a concern.
2010-08-24 00:00:00 India to Open Equity Markets to Foreign Retail Investors by Team of American Century Investments
While opening up its equity market to foreign retail investors will likely benefit India and increase capital inflows in that country, there is also more growth potential for investors who are prepared to accept the risks and invest for the long term. Over the next five years, India and emerging market economies will be driven not only by export demand from the rest of the world, but by growth in domestic consumption, including health care, technology, infrastructure, and finance. This will create huge opportunities for investors and companies doing business in these sectors.
2010-08-24 00:00:00 Urbanization, Past and Present by Douglas Clark Johnson of Codexa Capital
The discovery of an 18th century ship reminds us that the United States was once itself an emerging market. This suggests cues for today's investors as the world's population fills more and more megacities. Continued urbanization will have important implications for resource use and infrastructure development.
2010-08-24 00:00:00 Crowded Trade by Jeffrey Saut of Raymond James Equity Research
Equity markets remain mired in a wide-swinging trading range. In such an environment, stock selection, combined with the ability to sell mistakes quickly, should be the key to portfolio performance. There are also reasonable investment alternatives to the sidelines.
2010-08-20 00:00:00 EM Corporate Debt: Ready for Prime Time by David I. Robbins and Javier Segovia of TCW Asset Management
Emerging Market corporate debt is rapidly growing into a significant asset class backed by the world?s fastest-growing economies. These bonds benefit from strong fundamentals, improving credit quality, declining default rates and superior prospects for economic growth across most of the emerging world. One of the most compelling aspects is their consistent outperformance relative to other fixed income asset classes since 2002. Currently, they offer a yield pick-up over comparably rated corporate issues in the U.S., despite the fact that they frequently enjoy stronger credit fundamentals.
2010-08-19 00:00:00 An Investment Strategy for a Market in Transition by Dan Fuss, Kathleen Gaffney, Matt Eagan and Elaine Stokes of Loomis Sayles
The world is entering a period of rising interest rates on a secular basis. While inflation is not a concern in the near term, the seeds of inflation are likely being planted now, even though it could take quite some time for them to overcome powerful disinflationary forces at work today. If anything, the recent events in Europe and the deceleration of global growth suggest interest rates could remain low for longer than anticipated. The economy will likely grow at a disappointingly meager pace, but it will grow nonetheless.
2010-08-19 00:00:00 Debt and Growth Revisited by Carmen M. Reinhart and Kenneth Rogoff of VoxEU
With the advanced economies at a critical juncture, some economists are urging more fiscal stimulus while others argue that raising debt levels will stunt growth. This column presents the Reinhart-Rogoff findings on the relationship between debt and growth based on data from 44 countries over 200 years with a focus on the debt-growth link during high-debt episodes.
2010-08-18 00:00:00 Pay No Attention to the Headlines by Christian Thwaites of Sentinel Investments
Market valuations are attractive, especially after the recent correction to below 1,100 on the S&P. What should work is buying companies with strong and sustainable cash flows and proven management. What will not work is chasing risk, and investing in companies that dilute shareholders and operate with high leverage. Don't look for an immediate catalyst. This is a market where stealth, opportunity buying and stock picking work. If you hear the word 'momentum,' run.
2010-08-17 00:00:00 Economic, Investment and Asset Allocation Overview ? July 2010 by Jeff Spitzmiller, Jim Worden and Alan Chauhan of Iron Point Capital Management
A buy-and-hold U.S. stock portfolio alone can't be expected to provide attractive returns over the coming years. Alternative asset classes and certain segments of the stock and bond markets are current areas of focus for Iron Point Capital Management. The firm currently favors high-yield bonds, floating rate securities, alternative investments and emerging market debt and equity, amongst other investments that can provide excess return, risk reduction or the ability to capitalize on long-term trends.
2010-08-17 00:00:00 'Promised Land?' by Jeffrey Saut of Raymond James Equity Research
Last week investors gave up on stocks, worried that Wednesday's 90 percent downside day marked the end of the summer rally, and fearing that another big decline was in the offing as we enter the dreaded months of September and October. While statistically those months tend to be the worst of the year, that wasn't the way it played last year, and it is doubtful that it will play out again that way this year. While the equity markets may pull back, none of the characteristics that mark a major 'top' are currently in place.
2010-08-16 00:00:00 Late Summer Slumber? by Liz Ann Sonders of Charles Schwab
The stock market rallied nicely in July after reaching the bottom of its recent range. Incoming data remains mixed but indicates that the economic expansion continues. However, risks remain elevated. The Federal Reserve downgraded its view and is discussing how to combat possible deflation, while federal and state governments continue to grapple with budget issues. Chinese growth has slowed, but the stock market is providing some positive indicators. Central banks around the world are creating a muddied picture.
2010-08-13 00:00:00 Russia: Insights from Templeton?s Emerging Markets Analyst Conference by Mark Mobius of Franklin Templeton
Russia was one of the hardest-hit countries during the recent global economic crisis, largely due to its huge dependence on commodity prices. The worst, however, is over. We already saw a sharp recovery for Russia's GDP growth recently when commodity prices stabilized. The Russian oil supply experienced significant growth in 2009, taking most forecasters by surprise. The International Monetary Fund is even more optimistic about Russia's growth, expecting the country's economy to grow by 4.3 percent in 2010 due to rising oil prices and an improving fiscal outlook.
2010-08-12 00:00:00 Asset Allocation: Volatility, Correlations and Returns in the New Environment by Tom and Rob Boeckh of Boeckh Investment Letter
Slow growth, high unemployment and weak inflation will keep interest rates very low in the short term. Rising government debt levels and heavy reliance on monetary ease from the Federal Reserve, however, suggest rising risks of price inflation later on, possibly much later. The current period of low long-term interest rates should thus be thought of as an extended base-building period for higher rates down the line. Investors should maintain a diversified portfolio, shifting equity exposure to defensive, non-cyclical sectors, and build positions in cash and safe sovereign debt.
2010-08-04 00:00:00 The Emerging Markets IPO Frenzy by Mark Mobius of Franklin Templeton
In recent years, we have seen a rise in initial public offerings in emerging markets as EM companies begin to recognize the advantages of going to the market to raise capital in order to expand and grow. Investors should proceed with caution, however, before chasing IPOs and short-term gains. Not all listings are created equal. There is generally a lot of promotion surrounding all new listings. It is therefore important to conduct your due diligence and evaluate the stock based on its fundamentals with a long-term investment perspective.
2010-08-04 00:00:00 How the Other Half Looks by Nouriel Roubini of RGE Monitor
The global adjustment process has been delayed. In order to support growth and income generation, the over-saving investment- and export-driven nations - China, emerging Asia, Germany and Japan - continue to look to the overspending countries following an Anglo-Saxon model. There is a risk of a weak recovery of global aggregate demand relative to supply, which could contribute to deflationary pressures. As such, the recovery will continue to be multi-speed and rocky, exit strategies will remain uncoordinated and the risk of policy gridlock is high.
2010-08-03 00:00:00 Insights from the U.S. International Balance of Trade by Team of American Century Investments
The U.S. trade deficit increased to -$42.3 billion in May. Large and increasing trade deficits are sustainable as long as the rest of the world is willing to lend money to finance them. Growing trade deficits, however, are unhealthy in the long term. Trade imbalances also cause imbalances in capital flows. There was a time when it was argued that, as the U.S. entered a post-industrial society and economy, its growing trade deficit in goods would be offset by a growing trade surplus in services. Nearly three decades of experience, however, have demonstrated that this isn't the case.
2010-08-02 00:00:00 Growing Federal Debt Will Cause Major Challenges in the Years Ahead by Team of Litman Gregory
A combination of sharply declining tax revenues and a surge in stimulus and bailout spending, both stemming from the financial crisis, caused the federal budget deficit to soar to almost 10 percent in 2009. Total debt to GDP ratios are climbing sharply, and could pass 90 percent by next year. The growth track of entitlement programs has led many to conclude that growing federal debt levels are unsustainable in the long term. Additionally, the Greek debt crisis could trigger increasing awareness of sovereign default risk with investors demanding higher rates for owning government debt.
2010-07-31 00:00:00 Bull/Bear Standoff by Liz Ann Sonders of Charles Schwab
Bulls and bears both have strong cases. With earnings results and economic data indicating continued growth, we lean toward the bullish side?although risks to the bullish case are elevated. Uncertainty and concern regarding government actions continue to weigh on sentiment, while the Federal Reserve leaves all options on the table. Some questioned the credibility of European stress tests, but the market responded favorably. Meanwhile, China's growth appears to be moderating but remains relatively robust.
2010-07-30 00:00:00 Inflation in 2010 and Beyond? Practical Considerations for Institutional Asset Allocation by Michael Katz and Christopher Palazzolo of AQR Capital Management
Traditional institutional portfolios with risk characteristics similar to a 60/40 stocks/bonds allocation are not well-positioned for unexpected inflation. Stocks are not effective inflation hedges, particularly in the short and medium term. Meanwhile, traditional institutional allocations resemble a 'bet' on low inflation. A risk-based approach to strategic asset allocation, however, may generate more balanced performance across both inflationary and deflationary periods.
2010-07-30 00:00:00 Slow Motion Recovery and What Would Make Me Bullish by David A. Rosenberg of Gluskin Sheff
Legions of economists are claiming that it is normal to see the economy take a breather at this stage of the cycle, but in truth, what is 'normal' in the context of a post-WWII recovery is that four quarters into it, real GDP expands at over a 6 percent annual rate. That puts the current 2.4 percent growth rate into a certain perspective. David Rosenberg also lists 10 economic developments that could turn him bullish.
2010-07-27 00:00:00 Active Managers Add More Value in Bull than Bear Markets by Jane Li, CFA, CAIA (Article)
In this guest contribution, Jane Li of FundQuest argues that both active and passive investing have their strengths and weaknesses; it depends on the market segment in question and on the economic climate. Active managers tend to add value in bull markets, but their value is shakier in bear markets.
2010-07-26 00:00:00 The Style Roulette and RAFI Strategy by Rob Arnott of Research Affiliates
The style merry-go-round (where value and growth are alternatively in favor) provides ample opportunity for investors to be their own worst enemy, even within the supposedly balanced broad market indexes. Make no mistake - cap-weighted index funds are stealthy returns chasers loading up on past winners. A simple periodic realignment back to financial size remarkably captures over 100 percent of a perfect style timing strategy in three major non-U.S. equity asset classes.
2010-07-23 00:00:00 So What Else are the Bulls Looking at Right Now? by David A. Rosenberg of Gluskin Sheff
This is still a meat-grinder of a market. The bulls have the upper hand, but only until the next shoe drops in this modern-day depression and post-bubble credit collapse. The best we can say is that we do have a tradable rally on our hands and that we are at a critical technical juncture at the 50-day moving average on the S&P 500 - but remember, in a secular bear market, these rallies are to be rented, not owned. To be sure, 140 companies have reported so far and the news overall is good ? but earnings are a coincident, not a leading indicator.
2010-07-21 00:00:00 Readers? Questions Answered Part IV by Mark Mobius of Franklin Templeton
Mark Mobius responds to a new batch of reader questions. Topics include Brazil's long-term economic outlook, investing in India and the qualities of a successful investment manager.
2010-07-20 00:00:00 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 00:00:00 World Growth on the Rise but Europe's Weakened Economy Threatens Global Recovery by Team of American Century Investments
Global economic activity is improving, but significant headwinds remain, particularly within the developed world, where mounting sovereign debt threatens long-term economic gains. So far, government responses to the crisis have varied, and this lack of coordination may lead to divergent economic performance in the year ahead. Emerging markets have held up relatively well, primarily because they have managed their economies frugally throughout the past several years. Globally, corporations are generally enjoying expanding profit margins, while balance sheets remain solid.
2010-07-17 00:00:00 The Debt Supercycle by John Mauldin of Millennium Wave Advisors
The Debt Supercycle, as posited by the Bank Credit Analyst, is the decades-long growth of debt from small and easily-dealt-with levels, to a point where bond markets rebel and the debt has to be restructured or reduced or a program of austerity must be undertaken to bring the debt back to manageable proportions. The consequences for each country will be different, and the U.S. is a long way off from "the end." A key point will be the 2014 elections, when critical budget decisions must be made.
2010-07-15 00:00:00 Facts on the Ground by Paul McCulley of PIMCO
What the developed world faces is a cyclical deficiency of aggregate demand, the product of a liquidity trap and the paradox of thrift, in the context of headwinds borne of ongoing structural realignments. Front-loaded fiscal austerity would only add to that deflationary cocktail. And that's what the market vigilantes are wrapped around the axle about: They are not fleeing the sovereign debt of fiat currency countries but rather fleeing risk assets, which depend on growth for valuation support.
2010-07-15 00:00:00 It's Always Darkest Before the Dawn (of Earnings Reports) by David Edwards of Heron Financial Group
The gold market looks like yet another bubble. Over the last three years gold gained 85 percent while the broader Commodities Index declined 19.8 percent. The current surge, however, is related to 'fear factor' trade compounded by huge hedge buying of gold futures. Meanwhile, even after the rally of the last week, stocks still look cheap. The S&P 500 should close out 2010 with a gain of 8 percent, which is 9 percent higher than current levels. Corporations flush with cash and with surging revenues and earnings are a buy.
2010-07-14 00:00:00 U.S. Equity Newsletter by Team of W.P. Stewart
One thing is certain - there is a lot of bad news around and many people are now forecasting a double-dip recession. 'Bad news,' however, may already be factored into prices. Global growth is still expected to be solidly positive in 2010 and 2011, albeit somewhat skewed to the emerging markets. Corporate balance sheets are very robust, productivity has never been higher and earnings growth remains strong even on somewhat reduced estimates. Equities should therefore offer significantly better returns than bonds or cash.
2010-07-14 00:00:00 Demographics, Destiny and Equity Markets by George Magnus of Boeckh Investment Letter
This letter contains a special feature by George Magnus, senior economic advisor at UBS Investment Bank, on the coming negative change in global demographics. The world population is aging rapidly and the proportion of retired to working people is rising sharply. While these are slow-moving forces compared to, say, banking crises, they are powerful and inexorable trends that cannot be 'fixed.' Rather, we, and governments, must adjust to them, and investors must pay attention to their complex investment implications.
2010-07-13 00:00:00 Fake Diversification Exposed: Does Asset Allocation Work? by David B. Loeper, CIMA, CIMC (Article)
Domestic equities are down roughly 14.5% from their April 23rd high. Many advisors tout sophisticated (and very expensive) asset diversification strategies, supposedly to protect their clients against precisely these circumstances. So, with this recent decline, Dave Loeper asks whether all of those supposed diversifiers protected portfolios?
2010-07-13 00:00:00 Cage Match by Jeffrey Bronchick of Reed, Conner & Birdwell
Contrary to public opinion, there is enormous opportunity for an investor today to focus on the business and valuation details of a particular investment while everyone else is running around trying to tie the world together into some neatly gift-wrapped strategy that can be easily quantified and traded by a computer algorithm. Yes, it can be frustrating when everything seems to go down on a day when the market goes down, but no one said this is easy. And when it gets that easy, you should be selling into it.
2010-07-12 00:00:00 Trade Deficits As Far As the Eye Can See by Brian S. Wesbury and Robert Stein of First Trust Advisors
As the trade deficit increases again in the next few years, and as manufacturing jobs disappear because of productivity increases, protectionism will once again become an issue. This fear about the deficit, however, ignores a major reason for it. Ultimately, the U.S. trade deficit is a by-product of an attractive investment climate. Foreigners, with assets to invest, often need to worry about the risks of exposing those assets to a local banking system that makes ours look like a pillar of strength.
2010-07-09 00:00:00 Emerging Market GDP Growth: The Past Two Decades, and Our Projections for the Next Decade by Monty Guild and Tony Danaher of Guild Investment Management
Even with all the problems currently experienced in Japan, Europe, and the U.S., some parts of the world continue to grow vigorously. Guild's focus will be on the countries above which have strong prospects for growth. They will also focus on high-yielding income stocks which earn cash flows from the production of oil, and from gold, which will provide an anchor to windward in the current turbulent economic times. Today's markets will continue to produce those opportunities in the form of price weakness if we remain patient.
2010-07-09 00:00:00 In the Shadow of the Dragon by John Downs of Euro Pacific Capital
For investors, the Chinese push into frontier markets may offer promising returns in the medium-term. For example, emerging market bonds have rallied every quarter since the end of 2008, and posted record inflows this year. Unfortunately, accessing frontier markets has historically been difficult for small investors. Poor accounting practices, corruption, lack of local knowledge, and illiquidity are risks to be considered. For the right investor, though, there are increasing opportunities to invest in these markets via enterprising Chinese firms.
2010-07-08 00:00:00 Update: 10 Predictions for 2010 by Bob Doll of BlackRock
Over the long term, policymakers still have a difficult job to do as they work to unwind the massive amount of stimulus that had been injected into the system without causing either inflation issues or renewed deflation threats. Over the short term, the broad macro environment will continue to be buffeted by financial and economic uncertainty that will keep volatility levels elevated. That said, the odds for a double-dip recession are low. As long as a renewed economic contraction is avoided, equity prices should grind higher over time.
2010-07-06 00:00:00 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.
2010-07-02 00:00:00 And That's the Week That Was... by Ron Brounes of Brounes & Associates
So is the temporary pullback actually much more? Since setting recent highs in April, equities have tumbled over 15% and are dangerously close to official bear market territory (>20%). The dramatic volatility has forced many retail (individual) investors back to the sidelines and to the safe-haven of low-yielding treasuries. Then again, the summer months often bring significant price swings as traders head to the Hamptons and away from the daily grind (of flash trades).
2010-07-02 00:00:00 And That's the Quarter That Was... by Ron Brounes of Brounes & Associates
As the quarter began, the economy continued its trek toward recovery; confidence had returned to corporate boardrooms; and investors were pouring their ?cash-on-the sidelines? back into risky assets. Just when all seemed right in the world again, tiny Greece (and huge BP) began dominating the headlines. (Remember when a mere volcano was big news?)
2010-06-30 00:00:00 Asset Allocation Thoughts by Tony and Rob Boeckh of Boeckh Investment Letter
This commentary provides an asset allocation framework for investor?s portfolios that reflects our macro view, concerns about the general riskiness of the financial world and a variety of issues that go into the asset allocation process. In general, we continue to be positive on risks assets in the context of our continuing focus on wealth preservation and diversification. Probabilities favor a recovery in stock and commodity prices rather than an extended bear market.
2010-06-29 00:00:00 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 00:00:00 Inflation Protection Investment Strategies by Vern Sumnicht (Article)
The value of the dollar is sure to erode, and investors will be left to grapple with the inflationary consequences. As Vern Sumnicht shows in this guest contribution, recent policies suggest steep inflation may be just around the corner. Fortunately, investors have some options to bolster their portfolios against the threat of inflation.
2010-06-28 00:00:00 Investment Commentary by Bob Doll of BlackRock
We entered 2010 expecting a modest cyclical recovery countered by the structural problems that faced most of the developed world. For the first part of the year, the cyclical recovery did dominate, but in recent months, structural problems (especially those in Europe) began to win out and risk assets have been struggling. Now at the mid-year point, we thought it would be a good opportunity to take a look back at the predictions we made at the beginning of the year to see where we stand.
2010-06-25 00:00:00 World Cup Fever in Africa by Mark Mobius of Franklin Templeton
The outlook for Africa is positive. It has stirred the interest of countries like China, India and other fast-growing emerging markets, which require increasing resources for their growing economies, as well as countries like Russia and Brazil, who look to expand their enterprises into global operations. South Africa, acting as a representative for the continent through the World Cup, has shown that it can host an international event to international standards, and this bodes well for the region's future investment prospects.
2010-06-22 00:00:00 Indian Economy Poised for Double-Digit Growth by Team of American Century Investments
India was not severely impacted by the global economic recession and the country is projected to grow rapidly over the next decade. For investors, a consumer-based Indian economy holds positive implications because many global companies view potential Indian demand as a ticket to future growth. Indeed, India's is one of the biggest and fastest growing consumer populations in the world. Nevertheless, the government's inability to keep building infrastructure and power generation and tackle core problems in education, land reform, corruption and social reform may temper growth.
2010-06-21 00:00:00 China's Currency Shift Not a Game-Changer by David A. Rosenberg of Gluskin Sheff
The big news over the weekend was the move by China to end the yuan peg to the U.S. dollar. This delink will allow the People?s Bank of China to pursue its own independent monetary policy. In turn, this will help to ease global trade imbalances, ward off the threat of trade protectionism, alleviate domestic credit strains and inflation pressures and accelerate the Chinese shift from export-led to consumer-led growth. It also suggests that the Chinese authorities have confidence in the sustainability of the global recovery.
2010-06-18 00:00:00 Insights on Hungary by Mark Mobius of Franklin Templeton
The Hungarian market was one of the top performers in Eastern Europe in 2009 with the MSCI Hungary Index returning 78 percent in US dollar terms. The Hungarian market significantly outperformed its regional peers - Poland and the Czech Republic. In the first five months of 2010, however, the market was down 12 percent in U.S. dollar terms, mainly due to a 23 percent decline in May alone on concerns that Hungary could face similar financial problems as Greece.
2010-06-15 00:00:00 Today?s Top Economic Historian: The Path to European Stability by Dan Richards (Article)
Harvard's Niall Ferguson is arguably today's leading economic historian. In this interview with Dan Richards, Ferguson discusses the current troubles and future outlook for Europe. We provide a transcript and a video.
2010-06-10 00:00:00 April 2010 Commentary by Bill Middleton of Sound Portfolio Advisors
Perhaps the most encouraging signs in markets today are general pessimism and lowered expectations. Mass expectations tend to be dead wrong, and are therefore excellent contra-indicators. The first- and second-best performing asset classes of the past 10 years, gold and real estate, were so ill-regarded prior to 2000 they weren't even included in the data provided by the Wall Street Journal in January of that year. The best performing asset class for the 1995-1999 period, science and technology, was by far the worst performing for the following 10 years.
2010-06-10 00:00:00 Addressing Investor Concerns after Heightened Volatility by Mark Mobius of Franklin Templeton
Mark Mobius shares responses to investor questions on emerging markets. Emerging markets continue to be fundamentally strong, with high growth levels, a lower debt-to-GDP ratio compared to developed markets, higher foreign reserves and declining risk. Credit default swaps in many emerging market countries now trade at lower spreads than those of some European countries. On average, however, investors still have a weighting of just 3-8 percent toward emerging markets in their portfolios, while emerging markets now represent about 30 percent of the global market capitalization.
2010-06-08 00:00:00 Five Strategies for a Rising Rate Environment by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)
The Federal Reserve can't accommodate forever, and the global stimulus effort will likely lead to inflation. Our growing indebtedness can only result in increased borrowing costs. That much we know. What we don't know is when and how quickly interest rates will rise. In this guest contribution, Kane Cotton and Jonathan Scheid examine five strategies for a rising rate environment.
2010-06-08 00:00:00 Ten Ways to Improve Manager Selection by Nancy Opiela (Article)
Today's emphases on fiduciary responsibility, risk management and increased transparency require better due diligence when selecting managers. Especially in today's turbulent markets, advisors who spend more time and resources to do due diligence well can find themselves at a distinct competitive advantage. While these ten tips won't necessarily help you identify the next active management superstar, they can bolster your manager selection and due diligence program.
2010-06-08 00:00:00 Can Emerging Markets Save the World Economy? by Mohamed El-Erian and Michael Spence of PIMCO
High growth and financial stability in emerging economies are helping to facilitate the massive adjustment facing industrial countries. But that growth has significant longer-term implications. If the current pattern is sustained, the global economy will be permanently transformed. Specifically, not much more than a decade is needed for the share of global GDP generated by developing economies to pass the 50 percent mark when measured in market prices.
2010-06-04 00:00:00 The Parable of the Lifeboat by David Edwards of Heron Financial Group
Many investors are hesitant to add to their stock allocations due to negative returns over the past decade. The problem is that alternative investments have performed just as badly, if not worse. Ten thousand appears to be a hard floor for the Dow, despite investors' fears. Markets are thinner and more easily manipulated during the summer time, but July earnings reports should paint a rosy picture. NASDAQ is implementing expanded 'circuit breakers' to sideline stocks with unusually large moves - anything to reduce volatility and get investors interested in stocks again.
2010-06-01 00:00:00 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 00:00:00 Europe: Value or Value Trap? by Dan Trosch, CFA (Article)
European equities seem much cheaper than in the US, says Dan Trosch of Fortigent in this guest contribution. Europe trades at a 26% Price to Book discount and a 20% Price to Cash Earnings discount to the US. Some European industries and stocks are deservedly cheap and value traps; other industries and stocks are attractive and will benefit from global growth in exports and other macro trends.
2010-06-01 00:00:00 Global Equity Markets Slip on Greek Debt Crunch by Team of American Century Investments
Fears of a Greek default have heightened concerns about the financial stability of several other peripheral European countries. Spain, Ireland, Italy and Portugal, however, are not in the same situation as Greece. Italy in particular is in a separate, stronger category than the others. It is less reliant on foreign financing, with Italians owning a high percentage of their own sovereign debt. Italy also lagged in the economic boom prior to the global recession, a blessing in disguise because its banking sector is now not as over-leveraged to the housing market as banks in other countries.
2010-05-28 00:00:00 May Volatility, Downward GDP Revision and Sputtering Labor Markets by David A. Rosenberg of Gluskin Sheff
We are still in the midst of a credit collapse. There is simply too much debt and debt service globally relative to worldwide income. The fact that we had a year-long respite does not alter this view, because that respite was induced by an unsustainable pace of bailout and fiscal stimulus in practically every country on the planet, not just in the United States. Governments bailed out the banks and stimulated the economy. But because the revenue cupboard was bare, public sector debt loads exploded at all levels of government, and to varying degrees, in every jurisdiction.
2010-05-26 00:00:00 Renewed Risks and Multi-Speed Global Recovery to Restrain World Trade Flows by Nouriel Roubini of RGE Monitor
Global trade growth is unlikely to reach its pre-recession highs in the short term, with exports of several trade-dependent economies, particularly emerging markets, growing at a slower pace due to weaker import demand in the U.S. and EU amidst consumer deleveraging, fiscal austerity and slow recoveries in labor markets and household wealth. In the medium term, however, structural reforms in emerging markets and surplus countries to increase domestic demand will boost trade among emerging markets, as well as global trade flows, changing their direction and composition.
2010-05-20 00:00:00 An Emerging Conundrum by John West of Research Affiliates
Emerging economies have nearly doubled relative to the developed world since the mid-1990s. Despite this growth, however, emerging financial markets have performed relatively poorly over the long term as measured by the traditional indices. This gap between emerging market economic and stock market performance is a direct result of the return drag from capitalization weighting. Often, one, two, or at most a handful of stocks dominate local emerging markets. Not once have these large capitalization stocks collectively outperformed the rest of the market over a five-year period.
2010-05-19 00:00:00 Review of First Quarter 2010 by James F. Keegan of Ridgeworth
The recovery to date has largely consisted of an inventory correction and a response to various government stimulus programs; very little of it will prove to be organic or sustainable. Consumer spending has proven more resilient than anticipated, but this has come at the expense of savings. The consumer remains over-leveraged and the balance sheet repair process can't rely again on asset appreciation; hence, further gains in spending are unlikely. Meanwhile, capital expenditure plans remain tepid, and the tailwind from the stimulus plan is also diminishing.
2010-05-18 00:00:00 Jeremy Grantham Guarantees Gold will Crash by Robert Huebscher (Article)
Jeremy Grantham, the investor celebrated for his ability to spot and exploit bubbles in asset classes, guaranteed yesterday that the current bull market in gold will end. His proof? He bought some - for his own account - at the end of last week. That comment was tongue-in-cheek, but he went on to identify two asset classes likely to go into bubble territory.
2010-05-18 00:00:00 Actively Passive or Passively Active? by Craig L. Israelsen, Ph.D. (Article)
The active-passive debate typically centers on the nature of the investment product - whether it is an actively managed fund or a passive index fund. This, however, is only one aspect of that debate, and to consider it alone represents too simplistic a view, says Craig Israelsen in this guest contribution. A broader issue, namely how a portfolio of actively or passively managed funds is managed over time, has a more profound impact on whether one is truly an active or passive investor.
2010-05-17 00:00:00 Volatility on the Rise by Liz Ann Sonders of Charles Schwab
Volatility in stocks has increased during the past several weeks as investors have grappled with numerous global concerns. Is this the start of a longer-term problem or is it just a short-term phenomenon? Developments in the housing and job markets hold the key to further economic improvement. Meanwhile, the European debt crisis was addressed with a massive package, but long-term issues remain, and China's rapid growth rate could lead to overheating and inflation.
2010-05-14 00:00:00 The Effect of Inflation on Purchasing Power by Robert Urie of Pioneer Investment Management
This paper provides an analysis of what inflation is and its effect on purchasing power. Inflation is a broad rise in the price level of goods and services that reduces purchasing power. In recent decades it has occurred in two predominant forms: rapid, steep increases in prices and a long, persistent rise in prices that gradually erodes purchasing power. Both forms result from a combination of the level of economic growth, monetary policy and unforeseen supply and demand shocks.
2010-05-13 00:00:00 Reader' Questions Answered by Mark Mobius of Franklin Templeton
Mark Mobius responds to reader questions on emerging markets. Mobius notes that global markets tend to react to headlines in the short-term. At the end of the day, however, each country and each company has its own set of dynamics and fundamentals. Research is about identifying the differences among them. Key differentiating factors are often the basis for success in the long run. He also comments on the Greek debt crisis, political stability in Poland, reforms in Colombia and the recent death of Nigeria's president.
2010-05-13 00:00:00 Driving Without a Spare by Mohamed A. El-Erian of PIMCO
Mohamed El-Erian recounts the results of last week's PIMCO Secular Forum on the three- to five-year outlook for the global economy and the markets. Participants concluded that we are heading toward a world that is re-regulated, de-levered, and growing less rapidly in the industrial countries. It will be a world in which concerns about the dark side of globalization temper enthusiasm for its net benefits, and in which politics matter a lot for markets and the economy. The drama playing out in Europe these days is a vivid illustration of this general secular characterization.
2010-05-12 00:00:00 Eight Hundred Years of Financial Folly by Carmen M. Reinhart of VoxEU
This column, first posted on April 19, 2008, argues that sovereign debt crises have historically followed financial crises. Although data covering only the last thirty years might have given few hints about Greece's current problems, the Reinhart-Rogoff database spanning eight centuries reveals that today's event are very much in line with historical experience.
2010-05-11 00:00:00 God Is Dead: The Implications of the Goldman Sachs Case by Michael Lewitt (Article)
Michael Lewitt provides us with the most recent issue of the HCM Market Letter, where his discusses the implications of the Goldman Sachs case. Lewitt says Goldman faces a terrible dilemma, and should heed the lessons of the downfall of Drexel Burnham two decades ago. Lewitt also comments on the private equity industry, public pension funds, and bank capital requirements and the ratings agencies.
2010-05-11 00:00:00 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.
2010-05-07 00:00:00 The Right Page of the Right Book by Team of Beacon Pointe
The beginning of 2010 saw a continuation of the 2009 rally. Most stock exchanges around the world, with the notable exception of China, posted positive returns for the quarter and added to their gains off the March 9, 2009 trough. The major indices, however, remain well below their previous highs. The post-bear rally has been fast and furious and at this time, a pause seems justified. The exact timing and nature of this pause, however, are highly uncertain.
2010-05-07 00:00:00 The Big Picture, the Investment Landscape, and Our Portfolio Strategy by Team of Litman Gregory
Debt reached binge levels during the past decade. Money to reduce the debt will have to come from somewhere, and much of it will come from reduced spending. Spending cuts could produce a sluggish economy, possibly for many years to come. There are some positives that could contribute to a better outcome, however, including continued strength from emerging economies. Domestically, we could see stimulus spending, low rates, and inventory rebuilding create a virtuous circle in which businesses with strong balance sheets add jobs, and consumer and business confidence builds and feeds on itself.
2010-05-06 00:00:00 Chipan? by Team of Emerald Asset Advisors
In this commentary, Emerald responds to a reader question about China and Japan. Emerald says that equities in both countries are overvalued, but that this is less important than the fact that buying pressure is still outweighing selling pressure. The long-term ascension of the Chinese economy is one of the most prominent secular themes in today's markets. Japan, on the other hand, like the U.S., faces an obvious mess. The ultimate ruler is price, however, and Japanese stock prices have stubbornly risen for many months without a long-overdue correction.
2010-05-04 00:00:00 Four Words of Advice from a Top Advisor by Dan Richards (Article)
Last summer, Dan Richards talked to a thirty-year veteran of the business who's consistently ranked as a top advisor. The week before, he'd talked to a group of rookies just entering the business. In the question and answer period, he was been asked about the single most important thing he learned over the course of his career.
2010-05-01 00:00:00 Resilience Resonates by Liz Ann Sonders of Charles Schwab
The stock market has absorbed numerous body blows recently, but continues to chug along?waiting for a big price correction to buy could be detrimental. Economic data remains solid, confounding some recovery skeptics and providing the Fed ample reason to slowly return to normalcy. European debt problems are growing and concerns over contagion are rising; there's no quick fix, and some politically unpopular decisions are going to have to be made.
2010-04-27 00:00:00 Financial Strains and Modest Gains for the Eurozone by Team of American Century Investments
The Eurozone fell into recession later than the U.S., and thus will recover later. European factories are heavily dependent on exports for growth. Investors should note that the global economic recovery and a stronger euro have been positive factors for the Eurozone's export machine. But with exports accounting for 35 percent of Eurozone GDP and half of that number going to other countries neighboring the Eurozone, major headwinds could soon be on the horizon.
2010-04-27 00:00:00 The Four Horsemen of Growth: David Kelly?s Guide to Markets by Katie Southwick (Article)
With unprecedented volatility now largely behind us, J.P. Morgan's Chief Investment Strategist David Kelly believes that the economy is entering a period of recovery. To move forward, we must abandon our negative mindsets and focus on opportunities for expansion.
2010-04-27 00:00:00 Investing Insights from Doctors by Dan Richards (Article)
Dan Richards works out in the early mornings with a psychiatrist, who recently forwarded an article in the New York Review of Books by Jerome Groopman, a physician and frequent writer on the challenges of modern day medicine. As Dan read it, he was struck by the parallels between the things that cause doctors and investors to go wrong.
2010-04-22 00:00:00 U.S. Politics and Bank Reform Legislation by Monty Guild and Tony Danaher of Guild Investment Management
Election years often bring wild political actions as politicians defend their poor records by blaming anything that comes to mind. If the rhetoric against banks is not too strong, the rally could continue. If the rhetoric gets out of hand, we will see a market correction for a few weeks with a resumption of stock price increases later in the year. Guild continues to invest in Asian growth countries, oil, gold, and export driven companies who can grow earnings while shipping products worldwide.
2010-04-20 00:00:00 Lessons from Yale?s Endowment Model and the Financial Crisis by Geoff Considine, Ph.D. (Article)
The Yale endowment's performance during the financial crisis was worse than what would be mathematically expected, but not significantly enough to question the endowment model's tenets. Moreover, Yale's performance and philosophy suggest two very important lessons for advisors and investors- to diversify beyond equities and fixed income, and that some illiquid asset classes can be an important source of alpha.
2010-04-20 00:00:00 A Simple Step to Get More from Your Day by Dan Richards (Article)
Many advisors struggle to get everything done that needs doing. If you're in that category, consider following the example of one successful advisor Dan Richards talked to recently ... and put a dollar value on every hour of your time.
2010-04-16 00:00:00 Update on Thailand by Mark Mobius of Franklin Templeton
While the current political crisis in Thailand poses big headline risks to stocks over the short term, it is not new or unexpected for the country. Since absolute monarchy was abolished in Thailand in 1932, there have been about 20 successful and failed coups, numerous unrests, and several changes in the constitution. The series of political issues from the Asian crisis in 1997 to recent fears of the Thai King?s waning health late last year, however, have not impacted the long-term growth outlook for Thailand.
2010-04-16 00:00:00 Our Quarterly Review by Jonathan A. Shapiro of Kovitz Investment Group
With only a few temporary setbacks, the stock market has continued its move higher since touching its most recent low in early March 2009. Much hand wringing has been done over the S&P 500's approximately 75 percent move since that time, but lost in translation is the fact that prices last March implied a pending financial and social breakdown. These panic-driven prices bore little resemblance to actual or going concern business values, and measuring from that point clearly overstates and exaggerates the return. The worries facing the U.S. and many other regions are still prevalent.
2010-04-16 00:00:00 Where is the Next Rising Tide? by Louie Nguyen of Soledad Investment Management
The S&P 500 and Russell 3000 seems closer to fair value than Europe though there may be some room left to appreciate. At the opposite extreme lie several emerging markets, including Russia, Asia ex-Japan, Mexico, and India. While emerging markets may have captured investors? attention because of their projected economic growth potential, we think developed countries may be a source for compelling investments for long term patient value investors.
2010-04-14 00:00:00 Will Inflation Reemerge as a Dominant Force? by Kendall J. Anderson of Anderson Griggs
The current monetary policy of developed nations is to reinvigorate consumer demand through massive monetary stimulus. There is no doubt that this policy will have its intended effect and revitalize the private sector. Increasing demand from the private sector, along with the fiscal demands of new government obligations, however, could easily create a round of inflation where the aggregate demand of government and the private sector will exceed available supply. There is therefore a real possibility that inflation will be higher in the next 10 years relative to the past.
2010-04-14 00:00:00 The Global Bond Market: Opportunity or Opportunity Cost by David W. Rolley of Loomis Sayles
The U.S. bond market is unlikely to offer investors the yield or capital appreciation opportunities they need to meet their investment objectives in 2010. Instead, investors will need to expand their investment universe. Investments in non-U.S., high-quality governments and supranationals could offer capital preservation, while emerging-markets debt and corporate debt might present performance prospects. In the non-dollar securities arena, investors could take advantage of securities offering capital preservation as well as performance.
2010-04-13 00:00:00 Today?s Number One Way to Demonstrate Your Value by Dan Richards (Article)
Advisors provide the greatest value by being an emotional anchor for clients- keeping the highs from being too high during times of untrammeled optimism, such as we saw in 2000, and the lows from being too low during periods of absolute pessimism, such as we saw a year ago and in many cases still see today. Playing that role takes more than just having an opinion - you need credible evidence to back you up, which Dan Richards offers.
2010-04-07 00:00:00 When the Facts Change by Niels C. Jensen of Absolute Return Partners
An echo bubble is upon us. Echo bubbles are the children of primary asset bubbles, and emerge when monetary authorities respond to the bursting of a primary asset bubble by slashing policy rates. Extraordinarily low interest rates are currently encouraging another bout of excessive risk taking. If policymakers raised rates now, however, they would almost certainly kill the fledgling recovery. The pressure is therefore on monetary authorities to keep rates low and feed the new bubble. Investors should steer toward assets that benefit from high volatility.
2010-04-06 00:00:00 Paul McCulley Discusses PIMCO's Cyclical Outlook by Paul McCulley of PIMCO
In an interview, PIMCO Managing Director Paul McCulley discusses his firm's cyclical economic outlook and its impact on investment strategy. PIMCO's cyclical outlook revolves around two core tensions in the global economy. The first is the huge disparity in the rate of recovery between highly leveraged developed countries and relatively balanced developing countries. The second tension is the resistance to cyclical recovery in the developed world due to deleveraging and other headwinds.
2010-04-06 00:00:00 A Q1 Letter to Send Clients by Dan Richards (Article)
Dan Richards provides the latest in his very popular series of quarterly letters for advisors to send to their clients. This Q1 2010 article combines the attributes he considers essential: a balanced outlook, candor, short enough for clients to get through yet long enough to be substantial, fact-based, and customizable to your own voice.
2010-04-06 00:00:00 Emerging Markets: High Growth does not mean High Returns by Dan Richards (Article)
Recent research explores the return payoff of investing in emerging markets such as Brazil, Russia, India and China, writes Dan Richards. Contrary to popular beliefs, investing in high-growth emerging markets has produced inferior returns to those obtained from slower growth economies.
2010-03-30 00:00:00 China's 2010 Growth Forecasts Upgraded by the World Bank by Team of American Century Investments
The World Bank raised China's 2010 growth forecasts to 9.5 percent last week from the 8.7 percent projected in November, but also predicted that China's growth will slow somewhat in 2011, to 8.7 percent. It also recommended higher interest rates and a stronger currency for China amidst growing concerns over rising inflation and a property sector bubble. The Chinese government emphasized the need for structural reforms in recent presentations to the National People's Congress.
2010-03-30 00:00:00 Multisector Strategies in a Rising Rate Environment by Dan Fuss, Kathleen Gaffney, Matt Eagan and Elaine Stokes of Loomis Sayles
For three decades, the prevailing direction for interest rates was down. This made life easy for bond investors, since principal held up well and even grew for the most part. The cost of these falling rates, however, was steadily lower coupons. One of the best defenses against this reinvestment risk is to maintain a long duration in a bond portfolio with good call protection. The good news is that reinvestment risk appears to be waning as declining interest rates possibly prepare to reverse, and this could create potential for better yields.
2010-03-30 00:00:00 Surprising New Research on Diversification from Emerging Markets by Dan Richards (Article)
Historically there have been two reasons to invest in emerging markets: the promise of higher returns that come with faster growing economies, albeit with greater volatility, and the prospect that emerging markets will offer diversification from the performance of stocks in developed economies. Dan Richards reports that new research into the impact of global diversification, though, has produced some surprising results.
2010-03-30 00:00:00 Not a Lost Decade for Diversified, Balanced Portfolios by Joni L. Clark, CFA, CFP (Article)
Did the last ten years really demolish the foundations of Modern Portfolio Theory and classic investing principles? How did portfolios that stuck to the principles of effective diversification and buy-and-hold investing actually perform during the so-called "Lost Decade?" The answers to both questions is an unqualified "no," writes Joni Clark of Loring Ward in this guest contribution, based on her analysis of a DFA-based strategy.
2010-03-25 00:00:00 Market Thoughts and Shiller Valuations by David A. Rosenberg of Gluskin Sheff
With a stronger U.S. dollar, rising bond yields, lower commodity prices, slower growth and the stock market flirting with post-crisis highs, the stars are aligning for something big to happen. Bond yields are rising temporarily, and this will very likely prove to be a good buying opportunity. In the near term, however, higher yield activity may well persist and the question is how the equity market is going to handle this backup in market rates. In addition, the latest Shiller data shows that the S&P 500 is overvalued by at least 30 percent, benchmarked against historical norms.
2010-03-18 00:00:00 Bear Stearns: The Bear That Started It all by Mark Mobius of Franklin Templeton
It is now two years since the Bear Stearns bailout, which set the stage for the global financial crisis triggered by the collapse of Lehman Brothers, another established name in the business. Some of the key issues that led to the global financial crisis, however, remain unresolved, and could give rise to future problems. While perhaps not popular, it is necessary for governments to insist upon the separation of investment banking and regular banking, and to ensure complete transparency and liquidity of all derivatives.
2010-03-17 00:00:00 U.S.-China Tensions: Codependency Pains by Nouriel Roubini of RGE Monitor
Tensions between the U.S. and China have become increasingly exposed in recent weeks, with rhetorical barbs exchanged over trade, exchange rates and various political and strategic issues. These tensions seem to stem from attempts by both powers to find a 'new normal' in political and economic relations following the financial crisis. RGE expects the two countries to avoid a full-blown confrontation, but uncertain tit-for-tat trade policies still threaten to constrain global growth.
2010-03-16 00:00:00 The Trifecta - Okun's Law and Unemployment - Is the Law of Supply & Demand Obsolete? by Kendall J. Anderson of Anderson Griggs
Okun's law explains the relationship between unemployment and real output, and calculates the gap between real GDP and potential GDP. Based on current GDP growth forecasts, the law predicts a one-half percentage point decline in unemployment this year and a full-point decline in 2011. Despite very positive returns, however, investors continue to allocate to bonds instead of stocks. The laws of supply and demand tell us that this is unwise.
2010-03-13 00:00:00 Dollar Bulls Beware by Peter Schiff of Euro Pacific Capital
The market is perfectly positioned for a massive dollar sell-off. The fundamentals for the dollar in 2010 are so much worse than they were in 2008 that it is hard to imagine that people will keep buying them once political and monetary stability returns to Europe. Indeed, the euro has recently stabilized. Once the dollar breaks decisively below last year's lows, many traders who jumped ship in the recent rally will look to reestablish their positions, and this will bring attention back to the financial disaster unfolding in the U.S.
2010-03-12 00:00:00 And That's the Week That Was... by Ron Brounes of Brounes & Associates
. Let the rally continue. As the country (world for that matter) celebrated the one year anniversary of the market turnaround (bull market sounds too encouraging), investors took time to reflect on just where we have been and where we may be going. Buyers emerged again (though on a smaller scale?
2010-03-02 00:00:00 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.
2010-03-02 00:00:00 Robert Pozen on the Financial Crisis, Social Security, and the Mutual Fund Industry by Dan Richards (Article)
Robert Pozen is the chairman of MFS Investment Management and a senior lecturer at the Harvard Business School. In this interview with Dan Richards, he discusses the financial crisis, Social Security, and the mutual fund Industry. We provide a transcript and a video replay of the interview.
2010-03-02 00:00:00 Letters to the Editor by Various (Article)
In our letters to the Editor, a reader responds to our article How to Squander $170 Billion, and another responds to a claim that clients are moving away from their existing advisory relationship as a result of recent market events.
2010-03-02 00:00:00 Eurozone's Economic Recovery Loses Steam in Fourth Quarter by Team of American Century Investments
Economic growth in the 16-country eurozone stalled in the fourth quarter of 2009, raising concerns about the durability of the region's nascent recovery. Output expanded just 0.4 percent on an annualized basis in the fourth quarter, down from 1.7 percent in the third quarter. Meanwhile, after negative growth in 2009, the world economy is projected to expand by 3.9 percent in 2010 and 4.3 percent in 2011. Asia and emerging markets will lead the charge, while advanced economies such as the eurozone will remain sluggish and dependent on government stimulus measures.
2010-03-01 00:00:00 Lessons from the 'Naughties' by Rob Arnott of Research Affiliates
Sizeable real returns will be difficult in this decade, as they were in the last. Almost all asset classes are priced richly relative to historical norms. We can tilt the odds back in our favor, however, by tactically altering our portfolio risk based on measures as simple as yields and yield spreads. The surest path to success marries tactical asset allocation with a more efficient beta, such as the Fundamental Index methodology, and a full toolkit of alternative markets.
2010-02-26 00:00:00 The Global Banking Crisis Continues... by Monty Guild and Tony Danaher of Guild Investment Management
The Icelandic and Greek financial crises can be seen as the second stage of the larger global banking crisis. This second stage, which centers on European sovereign debt, was caused by years of over-borrowing and now deleveraging. Many countries will print money to help ease the crisis, and this will keep developed economies and their currencies under pressure for years. Guild and Danaher also comment on rising demand for oil and gold, the U.S. stock market rally, rising interest rates and the continued rise of China and India.
2010-02-25 00:00:00 The Global Bond Market: Opportunity or Opportunity Cost by David W. Rolley of Loomis Sayles
The U.S. bond market is unlikely to offer investors enough yield or capital appreciation opportunities in 2010. Investors should instead expand their investments to include global bonds. High-quality governments and supranationals could offer capital preservation, while emerging market debt and corporate debt may present performance prospects. Non-dollar securities could offer both capital preservation and performance.
2010-02-23 00:00:00 Interest Rates, Inflation and the PIMCO Total Return Fund by Robert Huebscher (Article)
The current generation of financial advisors has never experienced rising interest rates, but that will change, based on the forecasts we collected in our survey last week. We review our survey results and look at the implications for the largest bond portfolio, the PIMCO Total Return fund.
2010-02-23 00:00:00 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.
2010-02-22 00:00:00 Value? by Scotty George of du Pasquier Asset Management
It is important not to get carried away with short-term bursts in the market. These bursts have not eradicated the causes of the ubiquitous bear trend. We must not measure our self-worth by the value of our portfolio at the end of the given day. The most aggressive gains emanate from prudent portfolio methodology and a long-term orientation toward economic dynamics.
2010-02-18 00:00:00 The Ultimate Buy-and-Hold Strategy: 2010 update by Paul Merriman of Merriman
An investor's choice of assets if far more important than the times he decides to buy or sell those assets. In a nutshell, the ultimate buy-and-hold strategy is this: Use no-load funds to create a sophisticated asset allocation model with worldwide equity di-versification by adding value stocks, small company stocks and real estate funds to a traditional large-cap growth stock portfolio.
2010-02-18 00:00:00 Personal Qualities that are the Building Blocks for Good Investing by Mark Mobius of Franklin Templeton
Finance industry professionals need four things to succeed in the investment world: Motivation, humility, hard work and discipline. If investors can develop these personal qualities and maintain a healthy sense of optimism, they can succeed in emerging markets.
2010-02-16 00:00:00 Outlook Report: 2010 Searching for the Afterparty by Robert N. Stein of Astor Asset Management
Markets will grow in 2010, but foreign and domestic gains will be harder to find than they were a year ago. The market's panic and robust recovery suggest a return to growth rates closer to historical norms, with some areas outperforming others. Sectors that performed best during the recession may be the highest performers during the recovery.
2010-02-16 00:00:00 Emerging Economies Continue to Show Promise by Milton Ezrati of Lord Abbett
Despite recent financial turmoil in response to policy initiatives in Washington and fears surrounding the finances of Portugal, Ireland, Greece and Spain, markets are up since the beginning of 2009, and are likely to grow this year. Emerging markets have the best prospects for growth, but their success depends on the precarious recoveries in the United States, Europe and Japan.
2010-02-16 00:00:00 Emerging Economies Continue to Show Promise by Milton Ezrati of Lord Abbett
Despite recent financial turmoil in response to policy initiatives in Washington and fears surrounding the finances of Portugal, Ireland, Greece and Spain, markets are up since the beginning of 2009, and are likely to grow this year. Emerging markets have the best prospects for growth, but their success depends on the precarious recoveries in the United States, Europe and Japan.
2010-02-16 00:00:00 Robert Shiller on Trills, Housing and Market Valuations by Dan Richards (Article)
Robert Shiller, a professor of economics at Yale University and co-creator of the Case-Shiller Housing Index, discusses several topics in this interview with Dan Richards, including his plan for governments to finance their debts by issuing "trills," a security representing a fractional claim on the country's GDP.
2010-02-14 00:00:00 And That's the Week That Was... by Ron Brounes of Brounes & Associates
Ron Brounes' weekly market recap
2010-02-12 00:00:00 Insights from CM Analyst Conference Part II by Tom Wu of Franklin Templeton
Tom Wu of Templeton Asset Management says the emerging markets of Turkey and Hungary may offer opportunities for rapid growth. Turkey has built its foreign exchange reserves to $70 billion, while the MCSI Hungary Index posted 78 percent returns in 2009. Wu notes, however, that these opportunities for growth come with higher risks.
2010-02-11 00:00:00 Equity Investment Outlook January 2010 by Team of Osterweis Capital Management
In its equity investment outlook, Osterweis Capital Management says it expects the economy to continue expanding this year, but notes that it might face headwinds from a double dip in the housing market and an unwinding commercial real estate sector. Stocks recovered sharply last year in the face of expected profit recovery, but may but may suffer temporary setbacks if the economy disappoints.
2010-02-10 00:00:00 Global Trade in Recovery Mode by Nouriel Roubini of Roubini Global Economics
In an update to its Q1 2010 global economic outlook, Roubini Global Economics says that world trade will grow by between 4.5 percent and 5 percent in 2010, led by fiscal stimulus spending, inventory restocking and slight improvements to global demand. Global trade volumes shrunk by an estimated 13 percent in 2009 in the first decline since 1982 and the sharpest in the post-war period.
2010-02-09 00:00:00 The China Conundrum by Dan Richards (Article)
Few issues divide investors today more than the investment merits of China, despite that country's tremendous potential. China's strong economic performance through the global financial crisis has reinforced this divide. Dan Richards looks at the cases for and against investment in China, and offers his own opinion.
2010-02-08 00:00:00 Tweedy Browne: Cautious in the Short Term, Optimistic in the Long Term by Team of Tweedy Browne
Robert Huebscher recaps a recent webinar by investment firm Tweedy Browne. The company's four managing partners explained their focus on downside risk, expressed a preference for high-quality dividend-payer stocks and noted their emphasis on developed markets rather than emerging markets. The partners said they were optimistic about recovery in the long term, but cautious about the short term.
2010-02-03 00:00:00 Investment Commentary by Bruce A. Weininger of Kovitz Investment Group
Kovitz is a $1 billion Chicago-based asset manager. This commentary reviews their investment philosophy (value-driven without attempting to ?time? the market), and includes a discussion of certain types of leverage that can be beneficial to the investor (e.g., operating leverage) and others that can be harmful (e.g., revaluation and multiple expansion risk). In this context, they comment that ?the bond market might be a bit frothy and perhaps in some form of a bubble.?
2010-02-02 00:00:00 China's Strong GDP Up 10.7% in the Fourth Quarter, but is Inflation on the Horizon? by Team of American Century Investments
American Century looks at the sources of growth in the Chinese economy its future projected growth rate. Easy credit and stimulus measures are potentially leading to a real estate bubble and inflation. Exports from China grew in December, following 13 months of decline, and ??the world may have to continue to rely on China as the biggest engine of economic growth.?
2010-02-01 00:00:00 Breakfast With Dave by David A. Rosenberg of Gluskin Sheff
Rosenberg provides an update to his bearish outlook. He says credit flows remain constrained, amid new bank failures last week. The spending freeze announced by the Obama administration will provide what amounts to a ?rounding error? of improvement in the context of the unemployment situation. Investors should consider a defensive allocation ? similar to what would have worked in 2008 but did not work in 2009.
2010-01-30 00:00:00 This Time is Different by John Mauldin of Millennium Wave Advisors
Mauldin begins with an analysis of the reported Q4 GDP numbers, saying that it is not indicative of underlying growth in the economy. He then comments on the Reinhart-Rogoff book "This Time is Different," focusing on the point that governments can survive debt-fueled growth until confidence in them evaporates. He is discusses Greece's fiscal problems.
2010-01-28 00:00:00 Monthly Investment Commentary by Team of Litman Gregory
When the dust settled on one of the most eventful and upended years in memory, investors had generous gains in stocks and certain segments of the bond market to salve the wounds of a disastrous 2008 a
2010-01-28 00:00:00 Insights from EM Analyst Conference by Mark Mobius of Franklin Templeton
Mobius? posting has comments from analyst Dennis Lim about the role of commodities and consumer spending in the BRIC economies, notably in China.
2010-01-26 00:00:00 The Ring of Fire by Bill Gross of PIMCO
Bill Gross reviews two recent analyses (the Reinhart/Rogoff book and the McKinsey study) of the plight of economies faced with large fiscal deficits. He says that these support PIMCO?s view of the Ne
2010-01-26 00:00:00 Diversification Really Does Pay Off by Geoff Considine, Ph.D. (Article)
The last decade severely tested investors' belief in the value of diversification and strategic asset allocation, leading some in the financial media to assert that diversification and asset allocation failed and were worthless during the crash of 2007-2008. Now is an ideal moment to look back and assess the carnage.
2010-01-21 00:00:00 Unlocking Potential Through Corporate Governance by Mark Mobius of Franklin Templeton
I cannot stress enough my belief of the strength of the correlation between good governance and good corporate performance. As a result of this connection, we often see stock prices rise as a result o
2010-01-19 00:00:00 Steve Leuthold: The Market will Rally This Year by Robert Huebscher (Article)
Steve Leuthold is chairman of the $4.5 billion Leuthold Group and one of the most widely-followed market analysts. In his keynote presentation at last week's Fortigent conference, he offered an upbeat forecast for the first half of 2010.
2010-01-14 00:00:00 Is Recovery Here to Stay? by William H. McAfee of WHM Capital Advisors
There are still high levels of uninvested cash sitting idly on the sidelines. Equity markets are likely to do well in 2010 as the perception of risk diminishes and cash flows out of low yielding mone
2010-01-11 00:00:00 Economic Freebasaing by Cliff W. Draughn of Excelsia Investment Advisors
"Although the US stock markets received a tremendous boost in 2009 after a debilitating 2008, the performance of the Dow, S&P 500 and NASDAQ Composite indices was not enough to overcome a decade of
2010-01-09 00:00:00 2010 Forecast: The Year of Uncertainty by John Mauldin of Millennium Wave Advisors
"This will be my tenth annual forecast issue. Time has flown by, and I enter a new decade of writing Thoughts from the Frontline. And even as I write about the high level of uncertainty of the curr
2010-01-09 00:00:00 Forecasts by Team of State Street Global Advisors
2010-01-08 00:00:00 4th Quarter Commentary - Investing Proactively Without Predictions by Team of Partnervest Advisory Services
"'If you?re going to predict,' an anonymous economist famously quipped, 'predict often.' 2009 by all accounts was a good year. The S&P500 gained 23.4%. Emerging ma
2010-01-06 00:00:00 And That's the Week that Was by Ron Brounes of Brounes & Associates
2010-01-06 00:00:00 Psychology of why investors 'Buy High/Sell Low,' and how to avoid that trap! by David Edwards of Heron Financial Group
2010-01-05 00:00:00 Paul Krugman on Deficits, Taxes, Inflation, and Recovery by Dan Richards (Article)
Dan Richards' interview with Paul Krugman, the 2008 Nobel prize winner in Economics, covers his views on the size of the next stimulus package, how high marginal tax rates should go, and lessons from the Japanese experience. Whether or not you agree with him, Krugman is highly influential and his views may presage future policy decisions.
2010-01-04 00:00:00 The Decade that Refused to go Quietly into the Night by Chris Maxey of Fortigent
2009-12-29 00:00:00 Jeremy Siegel on the Undervaluation in US Equities by Robert Huebscher (Article)
"I think that earnings growth next year will be stronger than anticipated and will break the all-time high for the S&P, which was in the second quarter of 2007, when earnings for the trailing 12 months were in the low 90s," says Siegel. "In 2011 or 2012 we will break that amount. With $90 in earnings and a 15 P/E ratio, you get 1,350 for the S&P."
2009-12-26 00:00:00 Paul McCulley Discusses PIMCO's Cyclical 2010 Outlook by Paul McCulley of PIMCO
2009-12-22 00:00:00 Staggered Return to Global Growth by Paul Kasriel of Northern Trust
2009-12-15 00:00:00 Barton Biggs on Undervaluation in the S&P 100 by Robert Huebscher (Article)
Barton Biggs, the former Chief Global Strategist for Morgan Stanley who now runs the hedge fund Traxis Partners, says the high-quality, large-capitalization stocks in the S&P 100 are now undervalued by one standard deviation. In our interview, Biggs also discusses his fears and how investors should protect themselves from the worst-case scenarios.
2009-12-08 00:00:00 The 529 Dilemma by Mary Ann Lambert (Article)
The recent market decline coupled with, tax, custodial, management fees and estate planning issues make the decision to use a 529 plan less than straightforward. In this guest contribution, advisor Mary Ann Lambert briefly reviews the history of college savings plans and shows how the current landscape favors 529s for some clients but not for others.
2009-12-01 00:00:00 Allen Sinai: Jobless Recovery and the Failure of Current Economic Policies by Robert Huebscher (Article)
As the Democratic leadership in Congress has looked for ways to simultaneously create jobs and reduce the deficit, a key person they have turned to and continue to rely on is Allen Sinai. Sinai now fears the US is in the "mother of all jobless recoveries" and that the economic policies of the Obama administration are not working.
2009-11-24 00:00:00 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.
2009-11-17 00:00:00 Ned Davis: The Cyclical Bull Rally is Not Over by Robert Huebscher (Article)
In February of last year, Ned Davis, president and senior investment strategist of an eponymous Florida-based institutional research firm, correctly forecast last year's market decline. In February of this year, he called the market rally that began in March. Now, he says, that cyclical bull rally is not over.
2009-11-10 00:00:00 Roubini: Fed Policies are Destabilizing the Financial System by Robert Huebscher (Article)
Nouriel Roubini, the once-obscure economist who gained celebrity and the title "Dr. Doom" after correctly forecasting the financial crisis, believes that current Fed policies are destabilizing the markets and pushing the economy toward another collapse.
2009-10-27 00:00:00 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 00:00:00 Leveraged Index Mutual Funds Evolve to Meet Market Needs by Direxion Funds (Article)
Until recently, leveraged index funds had daily objectives, rebalancing their leverage at the end of each trading day in order to match their stated exposure rate. This characteristic made it necessary for investors to monitor them daily in order to both track and manage the exposure rates applied to their investments in the funds. Direxion Funds has released the first monthly-rebalanced leveraged funds, and they explain how they operate. We thank them for their sponsorship.
2009-10-06 00:00:00 So Far so Good: The Decrepit Decade Winds Down by Ron Surz (Article)
Ron Surz provides his award-winning market commentary, covering performance in the US and global markets, broken down by style, sector, and other dimensions.
2009-09-29 00:00:00 Strategic and Tactical Perspectives on Gold by Geoff Considine, Ph.D. (Article)
There are good reasons for investors to maintain a long-term strategic allocation to gold, which has clear, positive portfolio benefits (due to low correlation to other asset classes). That said, gold is in an historic run-up in value and has been generating unsustainably high returns. Because of its high price and rising volatility, Geoff Considine argues there is significant tactical risk in gold.
2009-09-29 00:00:00 Interview: Jeff Mortimer, CIO of Charles Schwab Investment Management by Robert Huebscher (Article)
Jeff Mortimer is Senior Vice President and Chief Investment Officer-Charles Schwab Investment Management, Inc. (CSIM). Mortimer has overall responsibility for approximately $240 billion in Schwab Funds and managed accounts. We spoke with Mortimer two weeks ago about the economy and why he believes the market has already priced in the bad news trumpeted by the media.
2009-09-15 00:00:00 Mohammed El-Erian: We Have Not Reached Escape Velocity by Robert Huebscher (Article)
Kicking off this year's Schwab Impact conference in San Diego, Mohammed El-Erian told an audience of nearly 1,000 advisors on Sunday night that the US financial system has not fully emerged from the financial crisis. El-Erian and his co-presenter, Larry Fink of Blackrock, addressed a range of topics, including the safety of the financial system, the future of regulation, and the outlook for inflation.
2009-09-01 00:00:00 Additional Thoughts on the ?New Normal? by Geoff Considine, Ph.D. (Article)
A number of readers responded to Geoff Considine's article three weeks ago, What the New Normal Means for Asset Allocation, including Larry Katz, Director of Research at Merriman, whose response we published last week. Katz criticized Considine along a number of dimensions, and in this guest contribution Considine defends his New Normal asset allocation.
2009-08-11 00:00:00 What the New Normal Means for Asset Allocation by Geoff Considine, Ph.D. (Article)
Bill Gross of PIMCO forecasts a New Normal - slow economic growth, higher inflation, and increasing correlations among asset classes. If this view is correct, what should investors do? Geoff Considine examines the implications for asset allocation and financial planning by stress-testing some well-known asset allocations to see how well they will serve investors in the forecast environment.
2009-07-21 00:00:00 Q2 2009 Performance among the Most Popular Mutual Funds in the Advisor Perspectives Universe by Robert Huebscher and Mary Pitek (Article)
Each quarter we analyze changes in the Advisor Perspectives database - a $50+ billion universe of high- and ultra-high net worth assets managed by Registered Investment Advisors. Our analysis has three parts. We look at changes in asset allocation, the performance of the most popular mutual funds, and the mutual funds that showed significant gains or losses in popularity during the quarter.
2009-07-14 00:00:00 Some Signs of Life and Hope for a New Recovery by John P. Calamos and Nick P. Calamos (Article)
Calamos Investments' co-CIOs John P. Calamos, Sr. and Nick P. Calamos discuss the current market climate, implications of Fed and government actions, and investment opportunities in the shorter- and longer-term. Global governmental policies have restored a degree of confidence in the financial markets and many key financial metrics are back to pre-Lehman levels. Many investment opportunities will be available in the future. We thank them for their sponsorship.
2009-07-07 00:00:00 The True Cost of Volatility by Dan Richards (Article)
Most advisors and investors hate volatility - the up and down hits to clients' long term goals. (To be more accurate, we hate the downs - the ups we don't mind so much.) Dan Richards discusses the big price clients pay for that volatility - not just stress and lost sleep at night, but volatility in portfolios that induces behavior that costs many investors serious money.
2009-07-07 00:00:00 Riding the Stock Market Wave in the First Half of 2009 by Ron Surz (Article)
Ron Surz provides his award-winning market commentary, reviewing the first half stock market performance around the world. He looks at the past decade, to set expectations accordingly. Have markets become cheap enough yet? He concludes with a realistic and sobering look at our current debt problems - a cause for concern for both young and old.
2009-06-09 00:00:00 Simon Johnson on Obama?s Achilles Heel by Eric Uhlfelder (Article)
While he agrees with much of what the US administration is doing to confront the economic crisis, Simon Johnson, the former chief economist of the International Monetary Fund, fears that present policy is not addressing a key issue: the overwhelming influence of the finance industry in US economic affairs. He likens this imbalance to what we see at the core of many emerging markets crises.
2009-06-09 00:00:00 Q1 2009 Performance among the Most Popular Mutual Funds in the Advisor Perspectives Universe by Robert Huebscher and Mary Pitek (Article)
Each quarter we review changes in the Advisor Perspectives (AP) Universe, which represents $50 billion in high-net worth assets managed by RIAs. Our analysis looks at changes in asset allocation, the mutual funds and ETFs that gained or lost market share, and the performance of the most popular actively managed mutual funds. This analysis focuses on performance across the most popular mutual funds.
2009-06-02 00:00:00 Jeremy Grantham's Warnings to Investors by Robert Huebscher (Article)
Of the thousands of investment letters penned in the industry, only one draws as much readership as Warren Buffet's annual letter to his shareholders: The quarterly commentary written by Jeremy Grantham. Grantham, the Chairman of the Boston-based investment firm Grantham Mayo Van Otterloo, was a featured speaker at Morningstar's Investor Conference last week, and he spoke at two breakout sessions. Those who, like me, attended both were richly rewarded, as he gave two distinctly different talks, addressing many subjects not covered in his commentaries.
2009-06-02 00:00:00 Letters to the Editor What the "Missing Out" Argument Misses by Various (Article)
We publish a number of responses to Ted Wong's article last week, What the "Missing Out" Argument Misses.
2009-05-26 00:00:00 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.