More on Related Themes
2016-03-29 00:00:00 The Détente Agreement by Steve Blumenthal of CMG Capital Management Group
“Corporate sector metrics have been disappointing of late… Companies are scaling back expenditures of all kinds (capital expenditures, hiring, and inventory-builds, for example), as their top-line revenues and earnings decelerate. Though first-quarter numbers may come in better than beaten-down forecasts, firms are finding that top line revenues are still hard to grow significantly.” Rick Rieder, Head of Global Fixed Income, BlackRock
2016-03-09 00:00:00 On My Radar: Stick With the Drill – Stay Wary, Alert and Very, Very Nimble by Steve Blumenthal of CMG Capital Management Group
I was in Florida this week attending the 32nd Annual Chicago Board of Options Exchange (CBOE) Risk Management Conference. Attendees were mostly asset managers and larger pension and endowment managers. Several comments stood out to me; particularly the one above from Paul R.T. Johnson, Jr., Board Member of the State University Retirement System. “42% funded?” He added that the good news is that his is the most funded of all the states. Yikes.
2016-03-01 00:00:00 Does GMO Add Value for Investors? by Larry Swedroe (Article)
GMO is one of the most highly regarded fund families in the world, and investors have entrusted them with over $100 billion in assets. But is there any statistical evidence that the firm has been able to add significant value versus a passive index fund?
2016-02-24 00:00:00 Why Are Stocks and Oil Prices Moving in Tandem? by Sonu Varghese of Convex Capital Management, LLC
Are stocks up or down this week? It seems that is dependent on whether oil prices are up or down.
2016-02-08 00:00:00 The Most Dangerous Financial Products by Michael Edesess (Article)
What would we think of doctors who deliberately hurt patients by prescribing dangerous and unhealthful products in order to make more money? Fortunately, the medical profession is set up in such a way that such things virtually never happen. This is not so in the financial services industry, where hazardous products are routinely sold to unsuspecting consumers.
2016-02-02 00:00:00 On My Radar: The Last Bull Standing by Steve Blumenthal of CMG Capital Management Group
Today, I share with you some of my high-level notes from this week’s Inside ETFs Conference in Hollywood, Florida. The forward return theme was consistent, from Vanguard to Wharton Professor Jeremy Siegel: expect low equity and fixed income returns. Jeffrey Gundlach left the audience in a state of depression (well the audience, not Gundlach) and Mark Yusko spoke of likely recession citing poor ISM numbers. This left Prof. Siegel to later say, “It appears I’m the only bull at the conference.”
2016-02-01 00:00:00 The Role of Short Selling in Equity Markets by Niall H. O’Malley (Article)
To understand the role of short selling, one has to step back and see how it impacts price discovery in equity markets. We are familiar with terminology such as short squeeze, prime brokers and short interest, but what does it all mean?
2016-01-26 00:00:00 Exit, Voice, and Loyalty by Adam Jared Apt (Article)
There are some activists who object to the belief that investing entails merely interpreting the economy; their point is to change it. The activists seem, at first glance, to have nothing in common with traditional investors, and to inhabit a separate conceptual world. What follows is an in-depth look at socially responsible investing.
2016-01-14 00:00:00 Asset Allocation 2.0™ by Richard Bernstein of Richard Bernstein Advisors
Global markets are experiencing a major paradigm shift, which has rendered traditional asset allocation models all but obsolete. In order to attain true diversification investors must abandon the past and embrace the new. Introducing Asset Allocation 2.0™.
2015-12-18 00:00:00 Past vs. Prologue: Cutting Through the Noise of Investment Returns by David Robertson of Arete Asset Management
While investors are fortunate to have good data on returns to guide them, the quality of translation of that information into investment advice varies considerably.
2015-12-15 00:00:00 Why Dividend-Paying Stocks are Riskier than You Think by Larry Swedroe (Article)
As advisors shift allocations from bonds to high-dividend stocks, they are exposing their clients to equity market risk. But they are also increasing interest-rate risk. Investors in two of the biggest dividend ETFs – SDY and VIG – are among the most exposed to the surging demand for dividend-paying stocks.
2015-12-11 00:00:00 Intelligent Design Sustainable Income by Chris Brightman, Vitali Kalesnik, and Engin Kose of Research Affiliates
The AND principle means building in desirable features without the trade-offs that conventional thinking considers inevitable. Case in point: an equity income index holding liquid, quality stocks with high dividend yields. (1) The AND principle holds that creative product design can surmount some trade-offs that conventional thinking considers unavoidable.Simple investment strategies are easier to govern than complex ones and may be less likely to result in catastrophic outcomes. A simple new design demondemonstrates that income-oriented indices need not trade off yield for capacity & quality.
2015-11-06 00:00:00 Portfolio Risk: It’s More Complicated Than You Think by Harin de Silva of Analytic Investors, Sub-Advisor of 361 Capital
2015-10-23 00:00:00 A Bond-Free Portfolio: Why Cash Should Replace Bonds to Reduce Risk and Improve Returns by Kendall Anderson of Anderson Griggs
In a recent interview, Howard Marks, the great investor and co-chairman of Oaktree Capital, quoted the original Dr. Doom, Henry Kaufman, who once said “There are two kinds of people who lose money: those who know nothing and those who know everything.” Those of us who are selling investment services, whether portfolio management or investment products, have a tremendous ability to locate or create research that rationalizes our approach to building and maintaining a portfolio.
2015-09-14 00:00:00 Investing for Income: Meeting the Challenges of a Low Yield Environment by Paul Reisz, Tina Adatia, Tanya Sanwal of PIMCO
For many investors, generating a high and sustainable income stream is challenging in the current secular landscape, which PIMCO calls The New Neutral. Over the next three to five years, we expect to see global economies converging to modest trend growth rates as central banks are constrained to set policy rates at levels well below those that prevailed before the financial crisis.
2015-09-11 00:00:00 Protecting Against Inflation In a Deflationary World by Steven Malin Ph.D. of Allianz Global Investors
Powerful global deflationary forces will continue to put downward pressure on the prices of inputs and outputs for months, if not years, to come. Even if the US Federal Reserve and the Bank of England raise policy interest rates over the months ahead, inflation risk premiums built into market interest rates will remain small. In the absence of strong wage increases, unprecedented global growth in the supply of resources and outputs relative to demand will linger—and inflation will remain constrained.
2015-08-11 00:00:00 The Hidden Cost of Ignoring Evidence by Dan Solin (Article)
An advisor recently told me that he lost a large client to another firm. This advisor said he had carefully explained the benefits of evidence-based investing to the prospect and thought he had made a convincing case. The losing advisor was distraught and confused. He wanted to know if I could help him understand how the prospect could make such an “irrational” decision.
2015-06-29 00:00:00 Floating-Rate Loan Investors: Clairvoyant or Missing Out? by Scott Page, Craig Russ, Christopher Remington of Eaton Vance
In a rising rate environment, we put floating-rate loans high on the list of fixed-income investment classes likely to perform well in 2015.
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.
2015-06-16 00:00:00 How to Use Color to Make an Impact by Daniel Solin (Article)
Most firms have marketing materials available on their websites and in hard copy. And every advisor communicates with clients via email and through periodic performance reports. I have yet, however, to meet an advisor who pays the same attention to these materials as they do to their clothes or the way their office is appointed.
2015-06-11 00:00:00 Risky Business: Single-Manager Target-Date Funds by Daniel J. Loewy, Christopher Nikolich of AllianceBernstein
Target-date funds are the only big pool of assets overseen by fiduciaries that typically rely on single-manager solutions. Best practices—and our research—suggest a multi-manager approach is better.
2015-06-08 00:00:00 Why Stocks are Not "Cheap Relative to Bonds" by John Hussman of Hussman Funds
One of the constant refrains we hear at present is that while stocks may be richly valued on an absolute basis, they are “cheap relative to bonds.” At least one professor recently told students that valuations are meaningless because the P/E on cash is 100. Technically, with T-bill yields at just 0.01%, the P/E on cash is more like 10,000, but let’s not quibble. Using simple P/E ratios or inverted interest rates as a standard of value only makes sense if you have no appreciation for how securities are valued.
2015-06-08 00:00:00 Risk Revisited Again by Howard Marks of Oaktree Capital Management
In April 2014, I had good results with Dare to Be Great II, starting from the base established in an earlier memo (Dare to Be Great, September 2006) and adding new thoughts that had occurred to me in the intervening years. Also in 2006 I wrote Risk, my first memo devoted entirely to this key subject. My thinking continued to develop, causing me to dedicate three chapters to risk among the twenty in my book The Most Important Thing. This memo adds to what I’ve previously written on the topic.
2015-05-19 00:00:00 Do Goldman Sachs' Funds Add Value for Investors? by Larry Swedroe (Article)
Over the last few years, an expanding line of mutual funds created by commercial banks such as Goldman Sachs and JPMorgan Chase have been drawing billions of dollars from investors looking to earn a good return. While the fees these funds have generated are among the few consistent bright spots of growth on Wall Street, the question for investors is whether or not the active mutual funds managed by these banks actually have been good investment choices.
2015-05-12 00:00:00 The Future of Investing ESG Portfolios: Changing Beliefs, Perceptions and Goals by Sponsored Content by ClearBridge Investments (Article)
Investing consistent with environmental, social and governance (ESG) principles can no longer be dismissed as a short-term fad. Assets under management are growing steadily, accompanied by a rise in the number and type of investment options across asset classes. Clearbridge's research explores how institutions are investing with impact today.
2015-04-27 00:00:00 Fair Value on the S&P 500 Has Three Digits by John Hussman of Hussman Funds
We continue to classify market conditions among the most hostile expected return/risk profiles we identify. The current profile joins rich valuations with continued evidence of a subtle shift toward risk aversion among investors, which we infer from market internals (a variant of what we used to call “trend uniformity”), credit spreads, and other risk-sensitive measures.
2015-03-27 00:00:00 Liquidity by Howard Marks of Oaktree Capital Management
My wife Nancy’s accusations of repetitiveness notwithstanding, once in a while I think of something about which I haven’t written much. Liquidity is one of those things. I’m not sure it’s a profound topic, and perhaps my observations won’t be either. But I think it’s worth a memo.
2015-02-17 00:00:00 Keynesian Contrarianism: Where is the Minority Today? by William Smead of Smead Capital Management
To get a good feel for where the largest pools of money are invested around the world and to identify the minority, we draw from the NACUBO-Commonfund Study of Endowments in North America. This year’s survey included $516 billion in investable assets. The results for the fiscal year ended June 30th of 2014 are listed below. Pay particular attention to the largest endowments, because we believe they represent the asset allocation of the largest worldwide institutions.
2015-01-30 00:00:00 Finding Tax-Free Transfer Opportunities in Undervalued Energy Stocks by Carin Pai, Elisa Shevlin Rizzo of Fiduciary Trust Company International
In the past few weeks, crude oil has extended its biggest price slump since the 2007-2009 global financial crisis, dropping to the lowest levels since 2009 amid signs of softer demand growth from major economies, strong output from the US and steady output from the rest of the world.
2015-01-16 00:00:00 Yesterday?s Gone: Year-End Capital Markets Commentary and Expectations by Chris Brightman, Jim Masturzo of Research Affiliates
With updated return expectations, we estimate that the performance of U.S. stocks and bonds over the next 10 years will be significantly lower than long-term historical averages. Other asset classes may produce moderately better returns.
2014-12-17 00:00:00 Where Did The New Middle Class Citizens Go? by William Smead of Smead Capital Management
The "well known fact" with regards to oil over the last decade read like this: because of huge GDP growth in emerging markets like China, there were going to be 400 million new middle class citizens born of uninterrupted prosperity; they were going to want all the autos, consumer goods, $10,000 watches and food that Americans have.
2014-12-02 00:00:00 The Tooth-Fairy Economics of Jeff Madrick by Laurence B. Siegel (Article)
Incentives don't matter, tradeoffs don't exist and there are no limits to what the government can give you. Those who believe this dogma are likely to still have faith in the tooth fairy. In Seven Bad Ideas, a critique of the neoclassical revival in economics that surrounded Milton Friedman and that affected policy and politics worldwide for more than a generation, Jeff Madrick emerges as tooth-fairy economics' chief exponent.
2014-11-18 00:00:00 Is This Purgatory, Or Is It Hell? by Ben Inker of GMO
GMO is often accused of being a glass half empty investor, and I admit that in a year that has seen the S&P 500 rise 8.3%, MSCI All-Country World rise 3.7%, and the Barclays U.S. Aggregate rise 4.1% through the third quarter, the words Purgatory and Hell are unlikely to come to mind to most investors when opening their brokerage statements. It has been a dull year, perhaps, but certainly not a hellish one. So what is bringing Danteesque visions of damnation into our slightly warped minds?
2014-11-11 00:00:00 Capital Raising in the MLP Sector Remains Active by David Chiaro of Eagle Global Advisors
We continue to see evidence that underpins our long term positive outlook on MLPs and midstream energy infrastructure companies. The need for new midstream infrastructure remains significant and announcements of large projects continue to be made. New export markets for U.S. hydrocarbons continue to develop and offer new profit opportunities for MLPs.
2014-10-30 00:00:00 Got Loans? by Mark R. Kiesel, Elizabeth (Beth) MacLean, Rudy Pimentel of PIMCO
?We believe select investors looking to reposition portfolios may benefit from a move to senior secured floating rate loans. CLOs have been an important source of demand in the market, and even with more strict risk retention rules just announced under Dodd Frank, we think demand will remain strong. While the Fed has criticized some banks for not following their leveraged lending guidelines, Fed members themselves, in our view, do not appear concerned about loans having a major impact on financial stability.
2014-10-28 00:00:00 The Individual Investor's Edge by Patrick O'Shaughnessy (Article)
Even if the sophistication of professional managers makes it seem as though individual investors do not have an edge, they do. Without a job to worry about, individual investors can tolerate short-term underperformance on the path to long-term outperformance.
2014-10-14 00:00:00 Bill Sharpe on Retirement Planning by Robert Huebscher (Article)
Bill Sharpe discusses topics at the forefront of financial-planning research: The role of annuities in a retirement portfolio, the proper glidepath for target-date funds, if investors should anticipate mean reversion in market returns and whether ESG- and SRI-oriented portfolios make sense.
2014-10-14 00:00:00 You Ain't Seen Nothin Yet by William Smead of Smead Capital Management
Someone recently asked a group of us which band we saw at our first rock concert. My answer was the Canadian band, The Guess Who, in 1975. With hits like No Time, Undun and These Eyes, The Guess Who hit the perfect balance between my 17-year old testosterone driven aggressiveness and my urge to romance the woman of my dreams. The key members of the band in the 1960s and 1970s were Burton Cummings and Randy Bachman.
2014-09-30 00:00:00 Microcap as an Alternative to Private Equity by Chris Meredith, Patrick O'Shaughnessy of O'Shaughnessey Asset management
Private equity has become a central component of many institutional and high-net-worth investment portfolios over the past decade. While private equity offers potential advantages, it also requires taking distinct risks. This paper highlights an alternative to private equitymicrocap equitieswhich mitigates several of these particular risks.
2014-09-04 00:00:00 Risk Revisited by Howard Marks of Oaktree Capital
In April I had good results with Dare to Be Great II, starting from the base established in an earlier memo (Dare to Be Great, September 2006) and adding new thoughts that had occurred to me in the intervening years. Also in 2006 I wrote Risk, my first memo devoted entirely to this key subject. My thinking continued to develop, causing me to dedicate three chapters to risk among the twenty in my book The Most Important Thing. This memo adds to what Ive previously written on the topic.
2014-08-05 00:00:00 The Alpha and the Beta of Investing by Adam Jared Apt (Article)
This article conveys two distinct practical lessons worth remembering and applying. One concerns the relationship between risk and return, and it will behoove you to keep this lesson in mind whenever you're inclined to throw caution to the wind in pursuit of better stock returns. The other concerns what counts as skill in selecting stocks.
2014-07-30 00:00:00 The Outlook for MLPs and Midstream Energy Infrastructure Continues to Look Bright by David Chiaro of Eagle Global Advisors
The quarter saw a number of positive developments that underpin our long term positive outlook on MLPs. Firstly, the need for new midstream infrastructure remains significant, and a number of announcements of large new projects highlighted that this need is not abating. Also, a significant new development in the quarter was the emergence of new export markets for ethane and condensate which will entail associated infrastructure development and other possible profit opportunities for MLPs.
2014-07-23 00:00:00 U.S. Equities Continue to Look Attractive: Equity Investment Outlook by Team of Osterweis Capital Management
As we sit down to write this Outlook we are struck by two trends: the consistency of the economic recovery in the U.S. and the dramatic escalation of geopolitical turmoil. Whether these two trends will collide to derail the bull market is an open question, but usually geopolitical flare-ups have only short-term effects and do not overwhelm long-term economic trends. Thus, they tend to appear as hiccups in stock market progress.
2014-07-02 00:00:00 Alternative Investments: The Right Expectations by Roger Nusbaum of AdvisorShares
Every year around this time we hear about the fiscal year investment results for the various college endowments and typically there is much written about the endowments and 2014 is no exception but this year most of the attention seems to be on the extent to which various forms of alternative investments have been a drag on endowment results after years of their having provided outsized gains.
2014-06-24 00:00:00 The Over-Capitalization Curse by William Smead of Smead Capital Management
At Smead Capital Management we are conscious of the few, but significant pitfalls which we believe exist for the long-duration common stock investor. One of the main pitfalls we want to avoid is the over-capitalization curse. This is a situation where investor enthusiasm gets very high, prices get historically high and investors drown the company, industry or sector with capital. In our experience, it pays to avoid the over-capitalized areas for as long as five to ten years as they work their way back to being hated and contentious.
2014-06-10 00:00:00 The Orphaned Bull Market by William Smead of Smead Capital Management
Howard Gold is an inquisitive writer for Marketwatch.com and we think has done us all a great favor in his latest column titled, Not even a bull market can interest people in stocks. He points out via the chart below thatdespite a huge rebound the last five years in US common stocksequity holdings as a percentage of global investable assets just climbed to levels only seen at major stock market low points. Relative to the past 50 years, this stock market has been abandoned and orphaned even as it had made participants wealthy.
2014-05-14 00:00:00 Worried about the Downside? by Richard Bernstein of Richard Bernstein Advisors
There have been numerous academic studies that suggest investors reactions to market risk are not symmetric. Investors consistently react more negatively to losses than positively to gains. At RBA, we incorporate this asymmetry in our sentiment work. Data clearly show that no group of investors is currently willing to take excessive US equity risk. Pension funds, endowments, foundations, hedge funds, individuals, Wall Street strategists, and even corporations themselves remain more fearful of downside risk than they are willing to accentuate upside potential.
2014-04-29 00:00:00 How to Help Business Clients Unlock Wealth by Bob Veres (Article)
Is there a way to help your business clients diversify their holdings, take some risk off the table and create a side investment portfolio that will sustain them if their business runs into trouble? Is there a way you can help your clients find capital when they need it most?
2014-04-16 00:00:00 Every Portfolio Has Faith by William Smead of Smead Capital Management
At Smead Capital Management, we believe that everyone who invests has faith in someone or something. We also believe that who and what you put your faith into is greatly influenced by the time period involved. As we look out into the rest of 2014 and beyond, we would like to consider the kind of faith required by the largest pools of investment dollars in the US. This includes looking at who they are trusting, what they are trusting in, and what time frames they are operating under.
2014-02-28 00:00:00 The Stock Market's Shaky Foundation by Chris Martenson of Whitney Peak
Martenson explains the headwinds that make the long-term case for lower valuations than we've seen in previous decades. But more urgently, he lays out the litany of short-term triggers likely to result in a vicious correction in stock prices this year. In fact, for the first time in years, he believes the time to actively short equities is arriving.
2014-02-12 00:00:00 Harvard?s Endowment: Wise or Foolish? by William Smead of Smead Capital Management
Warren Buffett says, "What the wise man does in the beginning, the fool does in the end." In a Barron's feature over the weekend, writer Andrew Bary dug into the portfolio of Harvard's Endowment through an interview with their CIO, Jane Mendillo. After all, who could possibly be wiser than what many would argue is the most respected undergraduate and graduate university in the world? Using a combination of Bary?s article and our perspective, this missive will seek to determine whether the Harvard Endowment is wise or foolish.
2014-02-11 00:00:00 Focus on Income: The Illiquidity Premium: Opportunities for Investing in Credit Today by Jack Rivkin of Altegris
At a time when many investors are seeking income for their portfolios, traditional sources of fixed income - principally government bonds and high-grade corporate bonds - look less than compelling. Yields are low and there is an increasing risk that interest rates will rise, which would cause the value of existing bonds to fall.
2014-02-04 00:00:00 Letters to the Editor by Various (Article)
A reader responds to Stephanie Keltons article, Code Red or Red Herring? Mauldin and Teppers Code Red Reviewed , and a reader responds to Justin Kermonds article, Harvards Post-Crisis Endowment Strategy, both of which appeared last week.
2014-01-07 00:00:00 Turn the Page: Outlook for Economy/Stocks in 2014 by Liz Ann Sonders of Charles Schwab
In this comprehensive (read: long...sorry!) 2014 outlook report, we assess the likelihood a correction is in the offing given the strong gains since 2009.
2013-12-31 00:00:00 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don’t always get the readership they deserve. We’ve posted the 10 most-widely read articles for the past year. Below are another 10 that you might have missed, but I believe merit reading.
2013-11-19 00:00:00 Levitate: Dismiss Bubble Talk for Now by Liz Ann Sonders of Charles Schwab
Its premature to be calling this market a bubble. Rolling 10 year returns havent even reached a long-term mean. Valuation still well below prior bull market peaks.
2013-10-30 00:00:00 The Thermometer of the Stock Market by Bill Smead of Smead Capital Management
As long-duration owners of common stock, we believe it is the wealth created by the businesses which causes the owners to prosper. We have also been participants in the US stock market since 1980 and are very aware of big swings in enthusiasm for owning common stocks. So we thought it would be helpful to share our opinion on the current temperature of the market. To take the temperature of the market we need to examine the thermometer readings.
2013-10-29 00:00:00 Can Financial Engineering Cure Cancer? by Robert Huebscher (Article)
Securitization and the collateralized obligations it produced led to the financial crisis and the near-collapse of the financial markets. But financial engineering’s bad reputation could turn around. Andrew Lo, a professor at the MIT Sloan School of Management and director of its Laboratory for Financial Engineering, thinks financial engineering can cure cancer.
2013-10-24 00:00:00 Glory Days: Could They Come Back for US Equities? by Liz Ann Sonders of Charles Schwab
A "great rotation" may not be underway by individual investors; even amid record-breaking outflows from bond funds this summer. But fund flow data do show some shift in preferences and highlight the sensitivity of investors to any rise in longer-term interest rates. A more interesting place to look is at the fiduciary community; that has decidedly shifted its attention away from traditional equities (and fixed income) over the past decade.
2013-10-18 00:00:00 Trying to Stop a Bull Market Has Risks by Frank Holmes of U.S. Global Investors
U.S. stocks have been on a tear. The S&P 500 Index has climbed a surprising 20 percent so far this year, as a global synchronized recovery takes shape and funds flow back to equities. As I often say, investors take risks when they try to stop a bull run, and plenty of data suggest you might regret taking that action this year.
2013-10-15 00:00:00 Letters to the Editor by Various (Article)
Readers respond to Robert Huebscher’s article, The Futility of the Endowment Model, which appeared last week.
2013-10-10 00:00:00 Frustrating the Most People by Bill Smead of Smead Capital Management
A venerable sage once said, "The markets do whatever they have to do to frustrate the most people." For the long-duration investor, this means that you need to look at what people are invested in to determine where the frustration will come from. Thanks to the Associated Press, we know what the masses have done with their investments in the last five years.
2013-10-09 00:00:00 Getting Serious About Investing Responsibly by Luke Spajic, Josh Olazabal of PIMCO
To date, much of ESG-related investing has focused on negative screening, but we believe there is a better approach. This approach rests on three pillars: identifying and analyzing key ESG issues facing a given investment sector, engaging with the issuers of securities, and supporting the development of markets for ESG investments.
2013-10-08 00:00:00 The Futility of the Endowment Model by Robert Huebscher (Article)
In the past two decades, the so-called endowment model has been adopted by hundreds of endowments, foundations and advisors ? particularly those serving ultra-high-net-worth clients. By aggressively allocating to illiquid alternative asset classes, those investors hoped to duplicate the results of Yale and other top-tier institutions. New research exposes the futility of those efforts.
2013-08-23 00:00:00 What Does an Improving Economy Mean for Stocks and Bonds? by Charlie Dreifus of The Royce Funds
With the economy improving, inflation tame, and a Federal Reserve meeting approaching in September, Portfolio Manager and Principal Charlie Dreifus believes that small-caps remain an attractive option within the equities market.
2013-07-30 00:00:00 Revisiting “The Cost of Socially Responsible Investing” by Paul A. Ruud (Article)
Endowments have been warned that socially responsible investing incurs a financial cost, based on research by two prominent academicians. But that research ? which has been presented and debated in this publication ? is based on a tenuous model that is highly sensitive to its assumptions. Change those assumptions reasonably, as I did in my research, and the cost of SRI becomes trivial.
2013-07-23 00:00:00 Risk Communicates Signals that Something Important is at Stake by Robert Mark of Castle Investment Management
The equity markets hit new all-time highs again this past quarter. However, we believe this rally is largely due to Ben Bernanke?s policy of Quantitative Easing (QE) which presently equates to the purchase of $85 billion in U.S. government debt every month. Through the Federal Reserve?s policies our government has effectively printed trillions of dollars since the financial crisis began, arguably inflating a host of asset prices including the stock market.
2013-07-17 00:00:00 Men of Steel: How Retail Investors Saved the Muni Market by John Bagley of BondDesk Trading
It looked and felt to screen watchers late last month like the sequel to Man of Steel had arrived prematurely. This time, though, General Zod seemed to set his sights on the bond market, recruiting an army of bond fund managers to annihilate everything from 1-year Treasuries to 30-year corporate and municipal bonds. Over the three trading days following the June Fed meeting, yields on benchmark municipal bonds increased by 60 basis points, the largest move over a 3-day period in more than 25 years.
2013-07-16 00:00:00 Hedge Funds Can Advertise...But Should They? by Chris Maxey, Ryan Davis of Fortigent
In April 2012, the Jumpstart Our Business Startups (JOBS) Act was signed into law. The legislation eased a number of regulatory burdens on small businesses and private industry in a bid to boost job growth. The bill made additional headlines for lifting an 80-year ban on solicitation for private placements, the restriction that prevented hedge funds from advertising their wares to the general public.
2013-07-09 00:00:00 The Five Best New Investment Ideas: New Age Paradigms for the Post-MPT World by Bob Veres (Article)
Over the past four years, Ive been collecting the most tangible, concrete post-Modern Portfolio Theory insights offered by professional investors.
2013-06-21 00:00:00 Asia Brief: China's Energy Demand by Edmund Harriss, James Weir of Guinness Atkinson Asset Management
China has the worlds largest unconventional gas reserves, but these so far remain untapped despite its growing demand for energy. China is now trying to follow the example of the US, and the government has set aggressive targets for unconventional gas production. As the demand for transportation fuels grow over the next decade, this gas could be a major contributor to meeting that need.
2013-06-18 00:00:00 Newsletter June 2013 by Harold Evensky of Evensky & Katz
Do you remember hiding under the sheets listening to radio when your parents thought you were asleep? If so, I have an unbelievable collection of all the old-time radio shows we listened to when we were kids, if you have about six months? spare time. Find your favorite, click on it, and it lists literally hundreds of episodes you can re-live.
2013-06-07 00:00:00 Portfolio Comfort in Stock Splits by Bill Smead of Smead Capital Management
We have noticed that there has been a dearth of stock splits among the S&P 500 index companies in the last 5 years. Our observation is that the natural habitat for stock splits is normally a multiple-year market upswing and numerous stocks trading over $60 per share. What does the history of stock splits tell us about where we are in the long-term stock market cycle for the S&P 500 index? Who will the marginal buyer of common stocks be in the near term and what do stock splits teach us about who the marginal buyer is?
2013-06-06 00:00:00 A Longer Time Horizon Can Be an Advantage for Value Investors by Mark Cooper of PIMCO
We believe that given challenging prospects for attractive investment returns, the value premium could become even more important in the years ahead. Even in an uncertain environment like we are currently experiencing, we believe the merit in owning equities for the long term is unchanged: We want to participate as an owner in a growing, profitable business.
2013-05-21 00:00:00 Measuring the Cost of Socially Responsible Investing by Adam Jared Apt (Article)
Quite apart from its motivations, the consequences of socially responsible investing have intrigued analysts. The actual results, as distinct from the desired results, cannot be taken for granted. Mark Kritzman has written about the subject, but his research was little noticed until recently, when SRI achieved renewed prominence in the form of popular demands that institutional portfolios divest themselves of investments in fossil-fuel companies. Kritzmans point, and the conclusion of his analysis, is that SRI, properly understood, incurs a cost to the portfolio.
2013-04-30 00:00:00 Implementing Behavioral Portfolio Management by C. Thomas Howard, PhD (Article)
Behavioral portfolio management is based on the notion that if the advisor can redirect his or her emotions and mitigate the impact of client emotions, it is possible to build superior portfolios by harnessing market emotions. This article describes how this can be done and presents evidence of the superiority of focusing on investor behavior when constructing and managing portfolios.
2013-04-18 00:00:00 The Lure of Hedge Funds by John West of Research Affiliates
Investors often buy what they think is exciting, sophisticated, and complex with the embedded assumption that all of these attributes will lead to greater returns. We see this today where we witness the continued explosive growth of hedge funds. But, a careful examination of the data reveals that these fancy lures fail to hook as much in excess, after-fee returns as more time tested strategies.
2013-04-10 00:00:00 Making It Possible for Investors to Be Secure in Their Later Years by Michael Golub of The Golub Group
Stock investing should be viewed as old-age insurance. Stocks are serious business because, for most of us, how we handle them will determine how we will be able to live in our later years. The challenge of living comfortably for the rest of our lives has become more of a challenge as the Prudential Life Insurance Company has recently pointed out that the first human to live to 150 years old is alive today. The Wall Street Journal reported in its March 19, 2013 issue, that many workers are saving too little to retire.
2013-03-26 00:00:00 Adapting the Yale Model for Clients by C. Thomas Howard, PhD and Lambert Bunker (Article)
The Yale University endowment fund is one of the most successful in the country, with a 10-year return besting the endowment universe average return by 300 basis points and the Wilshire 5000 return by 400 basis points. David Swensen is the architect of this program, and his guiding principles are widely used to manage large endowments. They are equally useful for client portfolios.
2013-03-13 00:00:00 What's Your Advantage? by Bill Smead of Smead Capital Management
In the March 9, 2013 issue of Barrons, writer Jonathon Laing wrote an excellent piece about Howard Marks. This article provides the base from which we can discuss the main components of investment portfolio composition. These components are information, analysis of information, and decisions made from information and analysis. In doing so, we will bring to light why we believe todays best opportunity is in long-duration common stock investing.
2013-03-05 00:00:00 You?re The Cream of the Crop: Key Findings from the 2012 Advisor Perspectives Reader Survey by Jeff Briskin (Article)
Experienced. Results oriented. Focused on serving the needs of individuals and families. Confident in your abilities. Eager to expand your knowledge. If this sounds like you, you're not alone. These are the traits that stand out among Advisor Perspectives readers, based on the findings of our 2012 Reader Survey.
2013-03-01 00:00:00 Wait for Your Pitch in Today's Market by John West of Research Affiliates
Great hitting in baseball depends in part on waiting for the right pitch. In today's market, most asset classescoming off their impressive 2012 recordare "high and outside" the valuations necessary for future big league returns. Patience is the name of the game today.
2013-02-15 00:00:00 In Defense of Commodity Futures by Seth Masters, Jon Ruff of AllianceBernstein
Several prominent pension funds have slashed their commodity futures investments for delivering poor returns with higher volatility than usual, while failing to diversify equity exposures as expected, The Wall Street Journal recently reported. If inflation rises, they may regret it.
2013-02-07 00:00:00 Investing in a Low-Growth World by Jeremy Grantham of GMO
This quarter I will review any new data that has come out on the topic of likely lower GDP growth. Then I will consider any investment implications that might come with lower GDP growth: counter intuitively, we find that investment returns are likely to be more or less unchanged a little lower only if lower growth brings with it less instability, hence less risk. Finally I will take a look at the reaction to last quarter's letter, specifically about my outlook for lower GDP growth.
2013-02-07 00:00:00 We Have Met the Enemy, and He Is Us by Ben Inker of GMO
If modern portfolio management has a single defining urge, it is almost certainly diversification. We look for diversifying assets, strategies, and managers. A thoughtful investor can argue against almost any asset class stocks, bonds, hedge funds, private equity, commodities, you name it but arguing against diversification is like arguing against indoor plumbing. I dont want to sound like I'm calling for a return to chamber pots and outhouses, so I'm not actually going to argue against diversification.
2013-01-15 00:00:00 It's Not What Happens That Matters by Bill Smead of Smead Capital Management
Late in 2008 and in early 2009, a group of what we like to call "brilliant pessimists" hit the airwaves with their economic theories. The prognosticators' vision of the future was and is predicated on the history of similar situations and the mathematical realities of the huge debt overhang from the prior ten years of profligate economic behavior. They put very effective names on their visions like "new normal" and "seven lean years". They marketed their visions incredibly well to the point of shaming anyone who might disagree with their theories.
2012-12-26 00:00:00 The Ten Key Benefits of Investment Committees by Bob Veres (Article)
In this first part of a two-part report, I'll identify ten core purposes that investment committees serve in different types of firms, ranking them in order of the number of responses I received. If your investment committee is serving all ten purposes, based on the survey, you're among a select minority - which means that many advisors may find new ways to use this versatile new tool in their RIA practices.
2012-11-29 00:00:00 Are E&Fs Jeopardizing Their Missions? by Seth Masters of AllianceBernstein
Many US endowments and foundations (E&Fs) still plan to spend 5% of their assets each year, despite unusually low expected returns. We think few understand how likely it is that this will limit their ability to fulfill their missions in perpetuity.
2012-11-27 00:00:00 A Critique of Grantham and Gordon: The Prospects for Long-term Growth by Laurence B. Siegel (Article)
The vigorous global economic growth of the last two centuries is over, according to Jeremy Grantham and Robert Gordon. That prediction, if correct, has profound and worrisome implications for investors. And the short-term trend is indeed disquieting: Growth has been close to zero over the last decade in advanced countries. But the most likely outcome is that per capita GDP growth going forward will approximate its U.S. historical average of 1.8%, and it will grow faster in developing markets.
2012-08-07 00:00:00 Robert Shiller on the Social Benefits of Finance by Laurence B. Siegel (Article)
It's a bad sign for the finance industry that one of its leading minds - the distinguished Yale economist Robert Shiller - has felt compelled to write a book in order to defend the idea that finance itself is a constructive pursuit, worthwhile to modern society. Have things really gotten that bad?
2012-04-24 00:00:00 The Number One Priority for Advisors by Dan Richards (Article)
What's the single most critical need for advisors to succeed? There are lots of candidates ? investment knowledge, communication skills, the ability to sell, and attracting and motivating a strong team.
2012-02-09 00:00:00 Private Equity: Fact, Fiction and What Lies in Between by Team of Knowledge @ Wharton
What good is private equity, anyway? Critics say these investment pools make money the wrong way -- buying "target companies," slashing jobs, piling on debt and selling the remnants, which by then are doomed to fail. Defenders say PE is a strong creator of jobs and value, and a vital source of outsized returns for pension funds, university endowments and other investment pools that serve ordinary people. Who's right?
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.
2011-10-25 00:00:00 On Market Timing and Whiskey by J.J. Abodeely (Article)
Noah S. 'Soggy' Sweat, Jr. a Mississippi legislator, gave a famous speech addressing the controversial subject of prohibition. The consummate politician, Soggy tried to appeal to advocates on both sides of the issue, illustrating a lesson that advisors today will surely appreciate: In order to get at the substance of a contentious issue, sometimes you have reframe the question.
2011-08-15 00:00:00 Driving Buffalo over a cliff by David Edwards of Heron Financial Group
Who wins from the volatility of last week? High frequency trading firms that can effectively manipulate the markets by placing thousands of one sided trades on individual stocks, or even more effectively on thinly traded ETFs, to force the market one way or the other. There are no uptick rules and no margin requirements preventing these firms from setting up an initial position, manipulating the market in the right direction, and closing out the trades with a profit a few minutes later. Who loses?Pension plans, endowments, mutual funds, individual investors and corporations.
2011-06-28 00:00:00 Reducing Risk through Value-Oriented Tactical Strategies by Mark E. Ricardo, JD, LLM, AAMS (Article)
Conventional wisdom was that the best way to reduce portfolio risk is to adopt a diversified long-term strategic asset allocation. That paradigm was challenged - deservedly so - following the 2008 financial crisis. Fortunately, an improved paradigm has emerged: Investors should combine long-term strategic allocations with a value-oriented tactical rebalancing strategy.
2011-06-07 00:00:00 New Challenges for the Endowment Model by Robert Huebscher (Article)
The multi-billion dollar endowments of elite institutions like Harvard, Yale, and Princeton are supposed to never be strapped for cash, but that's not how things played out during the financial crisis, when all those schools and many others were forced to raise liquidity under adverse market conditions. The endowment model, despite those failures, is still basically sound, according to Luis Viceira, but it needs several key improvements before institutions and individuals can rely on it.
2011-05-13 00:00:00 The Institutional Gold Rush by Peter Schiff of Euro Pacific Capital
I've worked on Wall Street my entire life, and one thing I've learned is that large institutional investors, like pension funds and endowments, rarely veer from the herd. They manage too much of other people's money to stick their necks out alone-if their investments go bad, at least they can point to everyone else who fared just as poorly. For this reason, these funds are often lagging in their perception of crucial market changes. While many of us are buying precious metals to hedge against the collapse of the dollar, gold and silver have been taboo investments on Wall Street for years.
2011-02-22 00:00:00 John Campbell on the Proposed Squam Lake Reforms by Dan Richards (Article)
In this interview, John Campbell, chairman of the economics department at Harvard, discusses his research into the underlying drivers of securities prices, and the key recommendations for reforming the financial system, based on his participation in the Squam Lake Group. This is a transcript of the interview.
2011-02-08 00:00:00 The Downside to Venture Investing (like Facebook?) by Dan Richards (Article)
In this interview, Harvard Business School professor Josh Lerner discusses the dangers of venture capital investing and the basis behind Facebook's valuation. This is a transcript of the interview.
2011-01-25 00:00:00 Demand Transparency in an Opaque Mutual Fund World by Andy Rachleff (Article)
Too many investors will end up in actively managed funds that fail in their mission to outperform a passive benchmark. And investors won't know until it's too late because they lack the information to evaluate which funds might consistently outperform the market.
2010-12-28 00:00:00 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don't always get the readership they deserve. Here are 10 articles that you might have missed, but we believe merit reading.
2010-08-17 00:00:00 Cerulli Survey Results: New Themes in Advisors? Portfolio Strategies by Bing Waldert (Article)
New ideas, such as tactical asset allocation and the use of alternatives, have seen some uptake even before the market crisis, particularly within large institutions, but they are receiving increased attention as solutions for risk-averse clients. This article examines some of the evolutions, using data from a Cerulli Associates survey of Advisor Perspectives readers conducted in June and July of 2010.
2010-05-11 00:00:00 Why Some Hedge Funds Made Money in 2008 by Robert Huebscher (Article)
Steven Drobny is the co-founder of Drobny Global, an international macroeconomic research and advisory firm that counts many of the leading global hedge funds and money managers as clients. He is also author of a recently released book that identifies why some hedge funds made money in the 2008 crisis, while the majority did not. In this interview, he discusses the common themes among successful strategies.
2010-04-20 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.
2010-03-23 00:00:00 Game On! by Lance Paddock (Article)
Advisor Lance Paddock comments on the exchange between Wealthcare's Dave Loeper and SCM's Roger Schreiner. Paddock lauds Loeper's focus on managing assets based on client goals, but says Schreiner's challenge is nonetheless fair, and urges Loeper to accept Schreiner's terms.
2010-02-16 00:00:00 How to Squander $170 Billion by Robert Huebscher (Article)
Some of the managers supposed to be among the sharpest have cost their clients $170 billion dollars over the last two decades. These are "plan sponsors" who handle pension funds, endowments, and foundations, and Scott Stewart, a former money manager who now teaches finance at Boston University, has documented their value destruction in a recently published study.
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.
2009-08-18 00:00:00 A Crash Course in Investing Six Lessons from the Market Meltdown by Dougal Williams, CFA (Article)
The market decline from October 2007 to early March 2009 was the worst since the late 1930's. Stocks dropped 60%, investor uncertainty skyrocketed, and trust and confidence were shattered. The age-old rules for personal investing are now being questioned: Is Buy-and-Hold dead? Has Asset Allocation outlived its usefulness? Does Diversification still work? In this guest contribution, Dougal Williams provides answers to these questions that can serve as a guide for long-term investment success.
2009-06-16 00:00:00 Seth Klarman: Why Most Investment Managers Have It Backwards by Robert Huebscher (Article)
In his keynote speech last week to the Boston Security Analysts Society, Seth Klarman discussed how he repositioned his portfolio last fall to capture opportunities created in the wake of the financial crisis. Klarman is the lead editor of the sixth edition of Graham and Dodd's Securities Analysis, and his fund, The Baupost Group, is among the top performing hedge funds over its 27 year history.
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.
2009-05-19 00:00:00 David Swensen's Ascent by Mebane Faber (Article)
Mebane Faber provides an excerpt from his new book, The Ivy Portfolio, on the ascent of David Swensen and the development of the tools employed to manage Yale's endowment. Faber shows the data Swensen used to determine Yale's aggressive allocation to alternative asset classes.