More on Related Themes
2015-05-21 China: A Great Wall of Worry by Milton Ezrati of Lord Abbett
Beijing likely will find a way to mitigate the effects of a slowing economy and soaring debt levels—but the risks are high.
2015-05-21 Global Review and Equity Commentary: April 2015 by Team of Thomas White International
As expected, the global economy slowed during the first quarter but should gain momentum in the coming months. The U.S. economy almost came to a standstill during the first three months of the year as adverse winter weather limited activity. Consumer spending moderated and construction activity slowed, while lower oil prices discouraged businesses in that sector from capital investments. The stronger dollar and labor disputes at some of the seaports limited export gains, and led to a widening of the U.S. trade deficit.
2015-05-21 Quality on Sale by Adam Peck of Heartland Advisors
Investor indifference toward strong balance sheets and cash flow has created opportunities in today’s market.
2015-05-20 China is Choking on its Own Debt by Joseph Taylor of Loomis Sayles
We have it on good authority. And in this case that authority is an unlikely source – the People’s Bank of China (PBoC). It’s difficult to remember the last time so many paid so little attention to something so vitally important. The revelation came in the bank’s release of its 1Q 2015 Monetary Policy Report on 8 May 2015.
2015-05-19 Devil Inside: Dissecting the Most Popular Valuation Metrics by Liz Ann Sonders of Charles Schwab
Given that first quarter earnings season is largely in the books—and since it’s been a couple of years since I wrote comprehensively about valuation—I am tackling it again this week.
2015-05-19 U.S. Economy: A Variable-Speed Recovery by Milton Ezrati of Lord Abbett
A flat first quarter likely will be followed by one or two quarters of accelerated growth. Then it’s back to the muddle.
2015-05-18 The "New Era" is an Old Story by John Hussman of Hussman Funds
It’s not monetary easing, but the attitude of investors toward risk that distinguishes an overvalued market that continues higher from an overvalued market that is vulnerable to vertical losses. That window of vulnerability has been open for several months now, and the immediacy of our downside concerns would ease (despite obscene valuations) only if market internals and credit spreads were to shift back toward evidence of investor risk-seeking. Meanwhile, there’s no evidence to suggest that historically reliable valuation measures have somehow become irrelevant.
2015-05-17 US Equity and Economic Review For the Week of May 11-15; A Really Unimpressive New High, Edition by Hale Stewart of Hale Stewart
Last week’s economic news continued to disappoint. Retail sales were weak, industrial production was flat and capacity utilization decreased. As we near the end of the earnings season, the S&P 500 revenue numbers show a decline. While the SPYs made a new high, the mid-caps, small caps and transports failed to confirm, indicating the large cap move higher stands little chance of meaningful follow-through.
2015-05-16 Explaining the Rise in Long-Term Interest Rates by Carl Tannenbaum of Northern Trust
Explaining the Rise in Long-Term Interest Rates; Consumers Should Overcome Higher Gas Prices; OPEC and the U.S. Face Off in the Oil Markets
2015-05-11 Recognizing the Risks to Financial Stability by John Hussman of Hussman Funds
Our hope is that Chair Yellen’s growing recognition of speculative risks will continue, and for the sake of the U.S. economy, that the rather baseless hope of manipulating a “Phillips Curve” or a “wealth effect” will fade. If one believes in these things, it is tempting to think that more monetary easing could be “good” for the economy. If the FOMC recognizes how weak those empirical relationships actually are, and how extreme the financial distortions have become, we might still avoid another financial crisis.
2015-05-11 Corporate Earnings and Inflation by Clyde Kendzierski of Financial Solutions Group
A few months ago our 2015 forecast emphasized several points we began making late last year. Taken together, those points differed dramatically from the prevailing wisdom of the time. As we begin May, they are falling into place.
2015-04-07 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).
2015-03-30 Eating Our Seed Corn: The Causes of U.S. Economic Stagnation, and the Way Forward by John Hussman of Hussman Funds
The U.S. has become a nation preoccupied with eating its seed corn; placing consumption over investment, outsourcing its jobs, hollowing out its middle class, and accumulating increasing debt burdens to do so. What our nation needs most is to adopt fiscal policies that direct those seeds to productive soil, and to reject increasingly arbitrary monetary policies that encourage the nation to focus on what is paper instead of what is real.
2015-03-29 Weighing the Week Ahead: Time for an Economic Spring Thaw? by Jeff Miller of New Arc Investments
In the absence of real data it is easy and tempting to speculate. Unlike last week, the week ahead features an avalanche of data – more in both quantity and importance than we have seen in a month. With some recent significant reports showing economic improvement we expect a change of focus.
2015-03-27 The Monetary Illusion by Scott Minerd of Guggenheim Partners
The long-term consequences of global QE are likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity.
2015-03-26 OFR: Assessing The Risk Of Overvalued Markets by Lance Roberts of Streettalk Live
A Review Of The Office Of Financial Research report on valuation risks and consequences.
2015-03-26 Global Economic Overview: February 2015 by Team of Thomas White International
The global economic outlook improved in February, helped by encouraging data from some of the largest countries as well as supportive monetary policy measures. Monthly job additions in the U.S. exceeded expectations in February, continuing the robust trend from last year. Though wages are yet to see meaningful growth, the strengthening labor market should help the U.S. economy sustain the current pace of expansion.
2015-03-25 Can ECB Policy Heal Europe’s Ills? by Mike Amey, Andrew Bosomworth, Lorenzo Pagani of PIMCO
In this interview, Managing Directors Mike Amey, Andrew Bosomworth and Lorenzo Pagani discuss the conclusions from PIMCO’s quarterly Cyclical Forum in March 2015 and how they influence our European investment strategy. They also delve into the impact of the European Central Bank’s (ECB) balance sheet expansion on growth and inflation and reflect on Europe’s improving economic health.
2015-03-24 The Economic Outlook by George Mokrzan of Huntington National Bank
The United States forecast is for solid average annual economic growth of 3.1% in 2015 -- fastest in the economic recovery to date overall, although areas of the economy with high energy or international exposure will likely encounter headwinds. Strengthening employment conditions, continual improvements in consumer finances and steadily rising housing markets are likely to reestablish the consumer’s lead role in the U.S. economy in 2015.
2015-03-24 Don't Fret Student Debt by Brian Wesbury, Robert Stein of First Trust Advisors
For the past six years, investors have faced one fear after another. One of those fears has been the more than $1 trillion of student loan debt outstanding. This debt is up 160% since the start of 2006 (and growing) while the share of student loans with payments 90 days late, or longer, has risen from 6.4% to 11.3%.
2015-03-24 The New World Order: Part II by Bill O'Grady of Confluence Investment Management
In the second installment of our four-part series we focus on two themes. First, we examine the global public goods the superpower provides, and second, we analyze how the U.S. has done so. The global hegemon often faces tensions between the desires of domestic constituencies and its foreign obligations. Every superpower negotiates these pressures and each tends to have its own ways of meeting both objectives. However, no superpower can subjugate the goals and aspirations of its citizens indefinitely. If the cost of hegemony becomes too high, a nation may be unable to maintain the position.
2015-03-24 U.S. Trade: Shortchanged by a Strong Dollar? by Milton Ezrati of Lord Abbett
Worries that the elevated value of the greenback will crimp U.S. exports—and hurt corporate profits—are overstated.
2015-03-23 Dividend Value Investing: No Time for Suspension of Disbelief by Meggan Walsh of Invesco Blog
When Hollywood tells a story, the expectation is that viewers are willing to suspend disbelief to fully immerse themselves in the plot. But when the market tells a story, suspending disbelief may result in overly complacent investors who blithely ignore the potential downside risk of a profit cycle in its later stages, which we see today through the lens of our full-cycle perspective.
2015-03-21 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
What Is Full Employment, and Are We There Yet?; Negative Interest Rates Are Spreading Across Europe; The Return of the U.S. Debt Ceiling
2015-03-21 Stuck in Neutral by Rob Isbitts of Sungarden Investment Research
We see emphasis on “neutrality” in outlook in several of the indicators we follow at Sungarden, including our Sungarden® Stock Scoring System. From a fundamental and technical standpoint, we see fewer screaming long-term buys than we have in some time, yet we also don’t see too many situations that signal pending disaster.
2015-03-21 The Fat Pitch Weekly Market Summary by Urban Carmel of The Fat Pitch
Strong price and breadth suggest the uptrend from the March low has further to go. A dip early in the week is a high probability buy set up. But gains from here are likely to be short lived; nibble traders may want to sell into strong gains on the expectation of weakness over the next month.
2015-03-20 Northern Trust Perspective by Team of Northern Trust
The long-telegraphed launch of quantitative easing by the European Central Bank (ECB) has added some accelerant to financial market trends in place so far this year. European stocks, which had been strong performers in local currencies, have continued their strong performance while European bond yields have declined even further.
2015-03-19 Cabela’s: Little Room for Error by Jenny Hubbard of Diamond Hill Capital Management, Inc.
Through our research process, we attempt to identify actionable investment ideas, but we often conclude that a company does not present an immediate long or short investment opportunity. A decision not to invest in a company is valued just as much as a decision to invest in one, but we are always expected to stay current on our area of coverage in case conditions change.
2015-03-18 Alpha Matters More in Muted Equity Markets by Chris Marx of AllianceBernstein
In a Wall Street Journal article last week, financial advisors described how exuberant investors had unrealistic expectations for stock market returns after a six-year rally. We think a more pragmatic approach should aim to beat a slower-paced market in an effort to capture compounding returns.
2015-03-18 Global Economic Perspective: March by Franklin Templeton Fixed Income Group® of Franklin Templeton Investments
IN THIS ISSUE: United States Prepares for Interest-Rate Hikes; But Much of the World Is Still in Monetary Easing Mode; European Outlook
2015-03-14 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
China Moves Cautiously Toward a New Normal; Deleveraging Is Unfinished in the Industrialized World; Will Lower Borrowing Costs in Europe Be a Boon for U.S Firms?
2015-03-14 The Airline Industry Ascended to New Records in 2014 by Frank Holmes of U.S. Global Investors
Just as the U.S. economy is in full-recovery mode, so too is the airline industry. It’s lately made an impressive about-face from only a decade ago and, in 2014, soared to several new benchmarks. This industry is flying high again.
2015-03-14 Will Dipping Data Lead To Dramatic Drop? by Liz Ann Sonders, Brad Sorensen & Jeffrey Kleintop of Charles Schwab
US stocks have been resilient, although there has been an uptick in volatility. Economic data has shown some softening, but we believe it is temporary in nature. However, the risk of a correction is elevated in our view and investors should be prepared for such a possibility by having a diversified portfolio and keeping a close eye on rebalancing opportunities after pullbacks. Meanwhile, investors should also look overseas for global diversification opportunities as monetary policy easing should help to bolster asset values.
2015-03-11 The Expansion Settles, but Its Foundation Is Strong by Team of Northern Trust
Growth in the U.S. economy tapered a bit in the fourth quarter, but the outlook ahead remains very positive. Real gross domestic product (GDP) grew 2.2% in the fourth quarter after a 5.0% increase in the third quarter, but some special factors were at play that should ease as the first quarter of 2015 winds down.
2015-03-10 President Obama's 2016 Federal Budget Proposal by Tim Steffen (Article)
Both parties are focused on passing some type of tax reform this year, and in order to do that Republicans will likely have to concede on at least some of the president's wishes. Which of those may survive remains to be seen, but it's now up to the Republicans in Congress to respond with a proposal of their own.
2015-03-10 Happy Birthday Bull Market by Burt White of LPL Financial
The current bull market celebrates its sixth birthday today (March 9, 2015). Bull markets do not die of old age, they die of excesses, and we do not see evidence of excesses emerging today. Some of our favorite leading indicators suggest the economic expansion and bull market may continue through the end of 2015.
2015-03-07 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
Quantitative easing comes to the eurozone; U.S. job growth is strong, but wage growth is not; The California port strike has troubled trade... and economists
2015-03-06 Market Fragility and Opportunity by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup Advisors
Investing is a funny business. It is usually wise to invest the opposite of how the market feels to you. Six years ago stocks had fallen by 50%, the financial institutions that underlie our global economy were buckling, and the economy was in shambles. Investors were running from the stock market in droves. But because prices and expectations were low and because all the major central banks flooded the world with liquidity it was actually a great time to invest.
2015-03-06 Opportunities in Global Financial Disintermediation by Dave Gallagher of Calamos Investments
Increasing financial disintermediation is a strong secular theme providing tailwinds in several financial industries, but a likely arduous and complicated process warrants the need for a disciplined focus on both risk and reward. The financial system essentially performs one basic function—the direct or indirect movement of funds from savers to borrowers or investors. Although financial disintermediation is formally defined as the shifting of funds from indirect to direct financing, the term is more commonly used to describe the increasing role of non-bank intermediaries.
2015-03-06 The Great Monetary Expansion by Scott Minerd of Guggenheim Partners
While winter weather will likely distort first-quarter economic data, accommodative monetary policy around the world means the long-term outlook remains positive.
2015-03-05 Positioning U.S. Community Bank Investment Portfolios for 2015 by Chitrang Purani, Thomas Luciano of PIMCO
When market uncertainty is elevated and bank profitability is an ongoing concern, taking an extreme view toward investing cash or harvesting liquidity is not optimal. Currently, we do not see as much value in interest rate or duration risk for bank portfolios as yields imply a moderate path for future policy rates. We believe there are opportunities for banks to earn income without taking excess interest rate risk or limiting flexibility against the need to fund future opportunities.
2015-03-04 The Misery Index by John Canally of LPL Financial
Reports on the CPI and unemployment rate for January 2015 sent the Misery Index down to 5.6%, its lowest level in 56 years. Despite the low reading of the index, headlines and polls indicate the index may not be capturing the nation’s mood. Wage growth may be the key to improving consumer sentiment about the state of the U.S. economy.
2015-03-04 Tigers in Africa by Niels Jensen of Absolute Return Partners
This month's Absolute Return Letter is about unrealistic expectations which is something we are all guilty of from time to time. We look at why it is unrealistic to expect equity returns to be in the double digit range over the next several years, why central banks are not printing money like many believe, plus a few other topics.
2015-03-03 Buffett on the Value of Patient Optimism by William Smead of Smead Capital Management
Like picking up the Good Book, a read of Berkshire Hathaway’s Annual Shareholder Letter yields insight, wisdom, and encouragement for the long-duration common stock investor in a world of short-term thinking and 30-second sound bites.
2015-03-02 States Feel Impact of Oil Price Collapse by Joseph Rosenblum of AllianceBernstein
Crude oil prices have fallen sharply since last summer, a bright spot for American consumers. Major oil-producing states aren’t as happy, because the loss in tax revenue is impacting budgets and economies. Some states will face real hardship; others will emerge relatively unscathed.
2015-03-02 On My Radar: Equity Valuations, Recessions and Market Declines by Steve Blumenthal of CMG Capital Management Group
Today let’s take a look at the hard evidence signaling slowdown. My personal view is that slowdown would not be as much of a problem if valuation measures were low. They’re not: by just about every measure the market is overpriced, overbought and over believed. What can you do? I share a simple and disciplined rules based way for you to stay invested in the market’s primary trend.
2015-03-01 Weighing the Week Ahead: Will the Economic News Alter Fed Policy? by Jeff Miller of New Arc Investments
The exact timing of the first Fed rate increase does not matter. There is a difference between tight monetary policy and slightly less accommodative policy. Markets do quite well in the early stages of rising rates, especially when starting from a low initial point. This will be ignored by many who will invoke “Don’t fight the Fed.” This will be the fundamental battleground between traders and investors, bears and bulls, and various political types – perhaps lasting for years. The end of the business or stock market cycle is not imminent. Bull markets do not die of old age.
2015-02-27 Are Expectations Too High? by Burt White of LPL Financial
The market’s continued ascent has caused some to ask if the stock market reflects excessive optimism. The pace of economic surprises as measured by the Citigroup Economic Surprise Index suggests expectations remain reasonable. We view recent economic disappointments as largely temporary, and would expect the surprise index may reverse recent declines as expectations have come down, providing support for cyclical sectors.
2015-02-27 Could Apple Buy a Third of the World’s Gold? by Frank Holmes of U.S. Global Investors
So what’s Apple’s next trick? How about moving the world’s gold market?
2015-02-27 Focusing on the Three Ds by Byron Wien of Blackstone
Looking forward several years, there will be three important factors that will determine the economic and investment outlook. They are decoupling, deflation and demand.
2015-02-27 On the Long Bond and Why the Widow Maker is Alive and Well by Team of GaveKal
Perhaps one of the most important questions investors need to answer today is whether we've seen the low in the long bonds yields or whether the trend lower is firmly intact. The recent spike in the 10-year bond yields from 1.65% at the end of January to 2.14% just two weeks later has no doubt complicated the situation. In this piece we'll try to layout one case for lower yields still.
2015-02-27 Rhyming…but not Repeating. by Liz Ann Sonders, Brad Sorensen & Jeffrey Kleintop of Charles Schwab
Stocks have recovered their January losses and have continued to move higher. While economic growth remains solid and we remain secular bulls, investors should be prepared for increased volatility and the potential for a near-term correction. Also, European stocks may be due for at least a pause and we suggest looking to add exposure to emerging market positions if needed. Staying well diversified and keeping an eye on rebalancing is the recommended strategy.
2015-02-26 Equity Valuations, Recessions and Stock Market Declines by Doug Short of Advisor Perspectives (dshort.com)
When I initiated the dshort web page in late 2005, one of my routine topics was equity valuations, initially inspired by Nobel laureate Robert Shiller's book, Irrational Exuberance, the second edition of which was published earlier that year. I gradually expanded my focus from his cyclically adjusted price-to-earnings ratio (CAPE) to include Ed Easterling's Crestmont P/E, Nobel laureate James Tobin's Q Ratio and my own monthly regression analysis of the S&P 500.
2015-02-26 Family-Owned Businesses: One More Reason Not to Neglect Emerging Markets by David Ruff of Forward Investing
At the end of a year in which the U.S. handily led the world’s equity markets, many dividend investors find it hard to rouse any interest in emerging markets at all. “Why even bother?” seems to be the prevailing sentiment.
2015-02-26 Monetary Policy Matters by Mark Mobius of Franklin Templeton Investments
This year we expect the divergence in monetary policy among the world’s central banks to be a key theme and a likely driver of asset flows. For now, the scorecard seems to be tilted toward monetary easing since in the first month of 2015 alone, 14 central banks engaged in some form of monetary policy loosening, generally in the form of interest rate cuts or asset purchases.
2015-02-26 Rate Hike Rally by Scott Minerd of Guggenheim Partners
The lead-up to the first rate hike by the Federal Reserve is historically a favorable environment for U.S. equities and credit.
2015-02-25 At a Standstill? - The Debate Over "Secular Stagnation" by Team of Northern Trust
During one particularly stormy day recently, I asked my daughter to unearth herself from the couch and help me clear the snow from the driveway. Unfortunately, the prospective reward of industry was no competition for the television remote, and I was left to fend for myself.
2015-02-25 The Strange World of Negative Interest Rates by Lowell Yura of BMO Global Asset Management
This article examines explanations for negative bond yields. The article argues that central bank policies may be one of the causes. The article also suggests that to make sense of low Treasury yields, investors should be mindful of global yield correlations.
2015-02-24 U.S. Economy: Will Growth Be Roaring, or Boring? by Milton Ezrati of Lord Abbett
Here’s a look at key indicators—and what they signal for the pace of U.S. economic activity.
2015-02-24 Debt Be Not Proud by John Mauldin of Mauldin Economics
Some things never change. Here is Eugen von Böhm-Bawerk, one of the founding intellectuals of the Austrian school of economics, writing in January 1914, lambasting politicians for their complicity in the corruption of monetary policy.
2015-02-22 Weekly Economic Commentary by Team of Northern Trust
The dramatic retreat in the price of oil and other commodities has muddied the waters for those trying to assess inflation. The world’s central banks, most of which are charged with meeting an inflation target, are among those struggling to gain adequate visibility.
2015-02-21 Emerging Markets Equity Commentary: January 2015 by Team of Thomas White International
Emerging market equity prices outperformed in January on expectations that economic conditions in large Asian countries such as China and India could brighten this year. Fourth quarter GDP growth in China met expectations, helped by higher industrial production and consumer spending.
2015-02-20 Forward Estimates, Valuations vs. Returns, Told You So by Lance Roberts of Streettalk Live
I got into a debate recently with a gentleman who was adamant that current valuation levels in the market did not suggest trouble ahead. The problem is that his valuation argument was based on the use of forward operating earnings estimates. Let me explain why this is a faulty assumption.
2015-02-20 The Glass Ceiling on Rates by Scott Minerd of Guggenheim Partners
With the debt-to-GDP ratio at historic highs, the Fed doesn’t have much room to maneuver on the federal funds rate.
2015-02-19 Hub Group: A Long-Term Investment Thesis by Jason Downey of Diamond Hill Capital Management, Inc.
In September 2013, we outlined our favorable view of the domestic intermodal transportation industry driven by cost advantages, continued market share growth opportunities, and improving pricing power. At that time, we viewed Hub Group, Inc. (HUB) and Pacer International, Inc. as the most attractive investment opportunities within the industry. During the last seventeen months there have been material developments in each of these areas, some positive and some negative.
2015-02-19 Energy Sector Outlook: What We Are Watching by Burt White of LPL Financial
No sector is getting more attention right now than energy. Market participants are attracted to the potential upside after both oil and the energy sector suffered substantial declines in recent months. Many see the sector as cheap, something that is not easy to find these days in the U.S. equity market. We drive by gas stations every day where we see prices have been cut in half, serving as a constant reminder of how cheap oil is. In this commentary, we discuss what we are watching to assess the opportunity in energy.
2015-02-19 2015 Annual Forecast by Clyde Kendzierski of Financial Solutions Group
It’s already February, but for many readers this is the first communication of 2015 so, Happy New Year! It’s been a great 6 weeks so far and we’re looking forward to many more to come. Let’s get into it…
2015-02-19 Great Expectations for Small-Cap Active Management by Chuck Royce, Chris Clark, and Francis Gannon of The Royce Funds
Widening credit spreads, increasing volatility, and decreasing stock correlation should allow stock pickers the chance to emerge as performance leaders. We continue to see good times ahead for active managers who focus on business fundamentals.
2015-02-19 February 2015 Economic Update by John Richards of Bronfman E.L. Rothschild
Consumers in the U.S. are showing their optimism by pushing a key consumer sentiment indicator to its highest level in over a decade. Despite a drop-off in Q4 GDP to a 2.6% annualized growth rate and three consecutive months of slowing manufacturing expansion, the U.S. economy still seems to be on strong footing.
2015-02-19 Brighter Days Ahead for the Global Economy? by Team of Thomas White International
After seven years of uneven growth trends following the 2008 financial crisis, we believe the global economy is likely to see a moderate acceleration in 2015. While several risks remain, we are reasonably confident that there are now enough growth drivers in place to help most major economies advance.
2015-02-18 On My Radar: Schumpeter’s Creative Destruction by Steve Blumenthal of CMG Capital Management Group
This week let’s take a look at debt around the globe. I share a great piece from McKinsey & Company that shows just how much more debt, county by country, has been piled on since the 2007 debt induced financial crisis. Evidence is apparent in the commodity market and I also share a few ideas how you may risk manage those allocations.
2015-02-17 Gary Shilling - Why You Should Own Bonds by Robert Huebscher (Article)
If you followed Gary Shilling's advice for the last 30 years, you would be very wealthy. Since 1981, Shilling has consistently advocated owning long-dated Treasury securities. In a talk last week, he reiterated that advice as one piece of his three-part asset-allocation strategy for the coming year.
2015-02-17 Robo-Advisors Are Not New But They Foretell the Future of Financial Advice by Joe Tomlinson (Article)
So-called robo-advisors have been heralded as the next generation of technology that will transform the financial advice industry. Underneath the considerable debate that has emerged over their potential impact, an obvious fact has been overlooked: Much of what they offer is distinctively "old school."
2015-02-17 What Does the Current Low Interest Rate Environment Mean for Agency MBS? by Mike Cudzil, Daniel Hyman of PIMCO
After the agency MBS market in 2014 was dominated by low volatility, limited prepayment risk and strong performance, the strong rally in U.S. Treasuries in January resulted in just the opposite. With the Fed ending net purchases of MBS in October 2014, it seems unlikely for the private investment community to take the Fed’s place in the MBS market at this level of interest rates and spreads. PIMCO expects the environment for MBS in 2015 to be quite the opposite of 2014, resulting in higher volatility, cheaper valuations and more attractive excess return opportunities for the active manager.
2015-02-15 Self-Sustaining US Economy…So What Now? by Liz Ann Sonders, Brad Sorensen & Jeffrey Kleintop of Charles Schwab
The US economy appears to be in a self-sustaining phase of the expansion, which could mean more volatility as the Fed embarks on a tightening cycle. We remain confident the secular bull market is intact, but volatility has risen and we suggest investors who are over-exposed to US equities consider global diversification, with a preference for emerging markets. Europe appears to be stealthily improving, but Greece remains a flash point and Eurozone equity markets may have gotten ahead of themselves a bit.
2015-02-13 Global Airline Stocks Soaring, and Not Just Because of Low Oil Prices by Frank Holmes of U.S. Global Investors
The airline industry is notoriously competitive. There’s even an old joke: If you want to make a million dollars in the airline business, you need to start with two million.
2015-02-12 Scott Mather Discusses PIMCO’s Total Return Strategy by Scott Mather of PIMCO
Bonds have continued to rally so far this year, even as the Federal Reserve contemplates raising interest rates. In the following interview, Scott Mather, CIO U.S. Core Strategies, discusses recent developments in the bond markets, the outlook for the year ahead and the investment implications for PIMCO’s Total Return Strategy. Mather co-manages the strategy with Mark Kiesel, CIO Global Credit, and Mihir Worah, CIO Real Return and Asset Allocation.
2015-02-11 China Just Crossed a Landmark Threshold by Frank Holmes of U.S. Global Investors
Back in July 2013, the think tank Heritage Foundation predicted that China’s outbound investment “could very well exceed $80 billion [by the end of the year] and is on course to breach $100 billion by about 2016.”
2015-02-10 Weighing the Week Ahead: Time for “Risk On?” by Jeff Miller of New Arc Investments
With a modest schedule of data releases, we can expect more analysis of last week’s news. Trading in several markets changed course rather abruptly. With traders poised to spot any change in trend, the question will be whether this shift is for real.
2015-02-09 Bonds or Jeter? by Richard Bernstein of Richard Bernstein Advisors
In baseball, batters choose to either swing for the fences in hopes of a home run or go for more consistent base hits. These same principles are highly relevant to the current market environment and long-term investment success. So, see if you really want home run hitters in your portfolio?
2015-02-09 The International Ramifications of ECB QE by Andrew Bosomworth of PIMCO
By engaging in quantitative easing, the European Central Bank is pursuing its inflation mandate with a vengeance. Overall, we think the combination of quantitative easing, investment and lower oil prices will help eurozone growth reach approximately 1.3% in 2015. Global central bank balance sheets continue to expand: Although the Federal Reserve stopped purchasing assets in 2014, the Bank of Japan and now the ECB have stepped up buying bonds where the Fed left off.
2015-02-07 The Power of Lower Oil Prices by Byron Wien of Blackstone
The Ten Surprises of 2015 have two prevailing themes. The more dominant is that the decline in the price of oil is generally a positive for the world. It puts money in the pockets of consumers everywhere and it is likely to force Iran and Russia to be more conciliatory in geopolitical negotiations because both countries are suffering not only from the drop in the oil price, but also from the sanctions imposed on them. The second theme is that in spite of notable economic problems in Europe, China and Japan, the United States equity market will have another good year.
2015-02-06 Global Opportunities: The Next Leap Forward for Defined Contribution Investment Menus by Charles Roth of Thornburg Investment Management
Under ERISA, fiduciaries are obligated to ensure plan menus provide diverse investment options to help minimize the risk of long-term losses in account values. Global, non-traditional equity and fixed income options are sorely lacking in Defined Contribution (DC) plan menus. These op-tions can offer both lower correlation to U.S. markets and potentially strong returns, which par-ticipants increasingly need given the uncertainty surrounding Social Security’s future benefit levels.
2015-02-05 Macro View: Good Company, Bad Stock by Team of Guggenheim Partners
The U.S. economy is strong relative to other countries, but its equity valuations mean less upside potential for long-term investors than other areas of the world.
2015-02-05 Commercial Mortgage-Backed Securities: Approaching the Later Innings of a Recovery by Bryan Tsu of PIMCO
With the U.S. recovery as a supportive backdrop, PIMCO expects commercial real estate prices to rise 4%-6% in 2015. Commercial mortgage-backed securities issuance has increased for five years, and projections for 2015 are for growth of 20%-30%, driven largely by an increase in maturing loans on the supply side and the continued search for yield on the demand side. The growth in issuance does not come without concern: CMBS underwriting standards will likely continue to slip.
2015-02-03 Diving Into the ISM: What's It All Mean? by Mike "Mish" Shedlock of Sitka Pacific Capital
This morning the Institute for Supply Management released its much followed Manufacturing ISM® Report On Business®.
2015-02-02 Market Action Suggests Abrupt Slowing in Global Economic Activity by John Hussman of Hussman Funds
The combination of widening credit spreads, deteriorating market internals, plunging commodity prices, and collapsing yields on Treasury debt continues to be most consistent with an abrupt slowing in global economic activity.
2015-02-02 Fooled By Extrapolation by Brian Wesbury, Robert Stein of First Trust Advisors
Pundits have a bottomless reservoir of pessimism and also a magnified ability to extrapolate the most recent trends. So, when Q1-2014 real GDP fell at an annual rate of 2.1%, fear turned rampant.
2015-01-31 Diverging Policies…Converging Economies? by Liz Ann Sonders, Brad Sorensen & Jeffrey Kleintop of Charles Schwab
The US economy should continue to expand but faces headwinds with weak global growth and a strengthening dollar leading to diverging central bank policies. Volatility has risen and the potential for a correction in the near term appears more likely. Nonetheless, timing the market in the shorter-term is dangerous, while the longer-term picture still looks positive for US equities. Across the pond, we remain skeptical much can be accomplished with the ECB’s QE program and continue to favor emerging markets over developed internationally. We also believe global diversification is becomin
2015-01-29 A Year to Think Small by Ted Baszler of Heartland Advisors
The current economic environment here and abroad could be setting up to benefit small-cap equities.
2015-01-29 Fed in Wait-and-See Mode by Team of Northern Trust
The Federal Open Market Committee (FOMC) concluded its meeting on an optimistic note. There were no dissents, following three at the December 2014 meeting.
2015-01-28 The Road Back, and Ahead by Scott Brown of Raymond James
The U.S. economy data are likely to be mixed in the near term, but there is little doubt that we are gathering steam. The plunge in gasoline prices is an enormous tailwind. However, this isn?t just an energy story. The fundamentals are getting better.
2015-01-09 A Tale of Two Earnings Seasons by Burt White of LPL Financial
The fourth quarter of 2014 will be a tale of two earnings seasons: the best of times and the worst of times. Despite a substantial drag from the energy sector, we expect another good earnings season overall. We expect more winners from cheap oil than losers, although the energy sector faces significant challenges.
2015-01-02 2015 Investment Outlook: EuropeThe Saga Continues by David Zahn of Franklin Templeton Investments
David Zahn, head of European Fixed Income and portfolio manager, Franklin Templeton Fixed Income Group, gives his perspective on what he thinks may lie ahead as the eurozones drama continues into 2015.
2014-12-30 U.S. Consumers: Spend More? Bah, Humbug by Milton Ezrati of Lord Abbett
Despite an improving labor market and lower oil prices, consumer outlays should continue to expand at a slow pace. Heres why.
2014-12-24 10 Stock Market Questions for 2015? by Burt White of LPL Financial
With 2015 almost here, this week we pose and respond to 10 key stock market questions for 2015. Look for more on these and other topics throughout the year.
2014-12-23 Growth Headwinds Continue to Blow Through Asia in 2015 by Adam Bowe, Tomoya Masanao, Robert Mead of PIMCO
This commentary discusses the conclusions from PIMCOs quarterly Cyclical Forum in December 2014 and how they influence our Asian outlook and investment strategy.
2014-12-12 5 Things To Ponder: Crude Oppositeness by Lance Roberts of Streettalk Live
This past week I have been inundated with questions regarding the dive in crude oil prices and the energy sector in general. Is this a fantastic buying opportunity, or is the bigger of something bigger? The answer depends on your time frame.
2014-12-12 5 Things To Ponder: Crude Oppositeness by Lance Roberts of Streettalk Live
This past week I have been inundated with questions regarding the dive in crude oil prices and the energy sector in general. Is this a fantastic buying opportunity, or is the bigger of something bigger? The answer depends on your time frame.
2014-12-08 Inflection Points by Guy Scott of Janus Capital Group
U.S. equities surged over the last six years as the economy regained its footing after the financial crisis, and companies underwent substantial cost cuts to improve profitability. Today, many international companies and regional economies are early in the process of making similar positive, transformative changes.
2014-12-04 U.S. Economic Growth Picks Up by Team of LPL Financial
We believe the U.S. economy will continue its transition from the slow gross domestic product (GDP) growth of 2011 - 2013 to more sustained, broad-based growth. We expect the U.S. economy will expand at a rate of 3% or slightly higher in 2015, which matches the average growth rate over the past 50 years.
2014-12-02 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.
2014-11-25 Real Estate is Having a Moment by Christopher Gannatti of WisdomTree
Looking at equity market, one theme this year is that the U.S. has been outperforming global markets, both developed international and emerging markets. However, looking within the U.S., real estate has performed particularly well.
2014-11-25 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 When 'Buy and Hold' Works, And When It Doesn't by Urban Carmel of The Fat Pitch
Imagine if you had invested in the S&P 500 in 1984 and held through the tech bubble and crash and then through the financial crisis and its recovery. How would you have done over those 30 years? As it turns out, very well. On a real basis (meaning, inflation-adjusted), your holdings would have appreciated by over 400%. A $100,000 investment in 1984 would now be worth more than $500,000.
2014-11-24 International Equity Commentary: October 2014 by Team of Thomas White International
International equity prices saw large price swings during the month of October as fears about slower global growth led to an appreciable decline during the first two weeks. Equity prices recovered subsequently as better than expected U.S. economic data helped allay global growth fears.
2014-11-20 Will $2.50 Gasoline Catalyze U.S. Consumer Stocks? by William Smead of Smead Capital Management
A great deal has been written about how lower gasoline prices could stimulate discretionary purchases in the United States. RBOB gasoline futures peaked on June 20, 2014 at $3.12 per gallon and closed on November the 14th at $2.04. Those in the bearish camp like Randall Forsyth at Barrons argue that lower oil and gas prices will negate and ruin the economic benefit of the oil boom.
2014-11-17 When Will Value Come Back Into Favor? by Will Nasgovitz, Ted Baszler, Dave Fondrie of Heartland Advisors
An investment style may be inherently biased toward one part of a market cycle. Understanding that fact can help investors stay the course when faced with superficially inferior results during an unfavorable portion of the cycle.
2014-11-10 Change Is In The Air by Brian Wesbury, Robert Stein of First Trust Advisors
While many flay away, trying to figure out the meaning of last weeks GOP wave election, it seems simple. The government has tried for more than five years to turn a Plow Horse economy into a Race Horse, and failed. Yes, the economy is growing and creating jobs, but living standards are growing slowly, or not at all, for many.
2014-11-04 Martin Wolf on the Financial Crisis: The Fire Next Time by Michael Edesess (Article)
If you think the global financial crisis of 2007-2009 was a one-time event caused by lax regulation and a financial industry run riot, then Financial Times chief economics commentator Martin Wolf has some bad news for you. Wolf, one of the world's most respected economists, says these circumstances were only part of its proximate cause and that the financial crisis was the inevitable product of the global economic system. If that system does not undergo radical change, says Wolf, financial crises may keep on recurring until the world economic order collapses.
2014-11-03 Losing Velocity: QE and the Massive Speculative Carry Trade by John Hussman of Hussman Funds
What central banks around the world seem to overlook is that by changing the mix of government liabilities that the public is forced to hold, away from bonds and toward currency and bank reserves, the only material outcome of QE is the distortion of financial markets, turning the global economy into one massive speculative carry trade. The monetary base, interest rates, and velocity are jointly determined, and absent some exogenous shock to velocity or interest rates, creating more base money simply results in that base money being turned over at a slower rate.
2014-11-03 Economy, Earnings and Policy Push Equities to New Heights by Robert Doll of Nuveen Asset Management
A combination of receding global growth fears, strong corporate earnings results and continued monetary policy support helped U.S. equities rise for a second week, with the S&P 500 Index climbing 2.7%.
2014-10-30 Recovery Reality by John Canally of LPL Financial
The U.S. economy is improving, and in many cases is back to normal, but it remains stubbornly weak in some areas. Real world indicators that point to the health of the economy include crane rental rates and customer traffic in restaurants. Economic uncertainty -- likely a drag on economic growth in 2011, 2012, and 2013 -- has faded as a concern in 2014, consistent with the Feds most recent Beige Book.
2014-10-30 Stay the Course in Small Caps by Jonathan Coleman of Janus Capital Group
Small-cap stocks sold off in the third quarter, but now is not the time to abandon the market cap segment. In this article, Jonathan Coleman, Co-Portfolio Manager of the Janus Venture Fund, gives his perspective on current small-cap valuations, and why an allocation to small caps is beneficial in an environment where the U.S. economy is on stronger footing than the rest of the world.
2014-10-26 Plot Twistor a Different Book? by Liz Ann Sonders, Brad Sorensen & Jeffrey Kleintop of Charles Schwab
Volatility could continue but equity investors should keep the longer-term picture in mind, which we believe is positive. The U.S. economy is improving and monetary policy remains quite loose. The international picture is more concerning but diversification is important across asset classes. We currently favor emerging markets within a diversified international portfolio.
2014-10-15 Dilma or No Dilma? by Bill O'Grady, Kaisa Stucke of Confluence Investment Management
During the first round of Brazilian presidential elections on October 5, the incumbent Dilma Rousseff received 42% of the votes while Aecio Neves received 34%. Since neither candidate received more than 50% of the vote, the second round of runoff elections will be held on October 26. This week, we will look at the Brazilian presidential elections along with the countrys current political and economic environment. We will briefly describe the recent political history of the country and look at the specifics of Brazils economic development. As usual, we will conclude with market ra
2014-10-14 High Quality Mid Caps Enjoy Performance Advantage by Sponsored Content from ClearBridge Investments (Article)
Since 1965, high-quality midcap stocks have outperformed their low-quality peers by a meaningful margin-a premium that has been most pronounced during periods of market transition. As we approach an inflection point in the current market and economy, investors should consider high-quality mid-cap stocks, which appear poised to thrive.
2014-10-01 Looking Back, Looking Ahead by Scott Brown of Raymond James
Real GDP is now estimated to have risen at a 4.6% annual rate in 2Q14. However, the second quarters strength must be balanced against the first quarters weakness (a -2.1% pace). As the third quarter ends, we still dont have a complete picture. However, figures are likely to suggest a moderately strong pace of growth and a gradual taking up of economic slack.
2014-09-30 How Might Stocks Take a Hike? by Milton Ezrati of Lord Abbett
Here's a look at what happened to equities during past periods when the Fed raised rates.
2014-09-27 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The Federal Reserve begins looking toward the door; China's policymakers should be clearer about their intentions; Dissents at central banks are rising
2014-09-23 Why "Healthspan" Trumps "Lifespan" for Clients by Dan Richards (Article)
Advisors spend a great deal of their time with clients who ask, "Will I run out of money?" As a result, few issues get more attention than the sustainable withdrawal rate in today's environment. But new research shows that an equally pressing question is, "How can I enjoy life in my 60s, before health issues creep in?"
2014-09-22 It’s Time for Your Portfolio to Break from Tradition by Kathleen Gaffney, Kevin Dachille of Eaton Vance
Given the current low-yield environment and with rising interest rates looming, now may be the right time to consider new strategies for generating favorable returns in your fixed-income portfolio.
2014-09-18 Room to Run by Marie Schofield of Columbia Management
The U.S. economy passed a milestone of sorts in August, in that the current business cycle has now surpassed the last one in length. The prior business cycle started in 2001 and continued until the December 2007 peak, lasting 6.8 years. This is longer than the post-war average of 5.6 years, but shorter than the business cycles in the 1980s and 1990s which lasted 9 to 10 years.
2014-09-17 America in the Driver’s Seat – Enjoy the Ride by Doug MacKay, Bill Hoover of Broadleaf Partners
Like clockwork, earnings season has drawn to a close, creating an information vacuum for the stock market, one in which the media spends more time "making" the news than perhaps reporting it. The marginal dollar at trade - or the price maker in a high frequency dominated trading world - is one more likely to be concerned about the Fed's words over the next two days than the stream of earnings produced by corporate America over the next few quarters.
2014-09-15 The U.S. Is Diverging From Other Developed Markets by Robert Doll of Nuveen Asset Management
U.S. equities fell amid a relatively quiet week, with the S&P 500 Index dropping 1.1%. The upcoming Federal Open Market Committee (FOMC) meeting drew quite a bit of attention amid increased speculation that the Federal Reserve may start signaling its long-awaited move to increase rates.
2014-09-13 Will the Russia-Ukraine Crisis Chill Europe’s Recovery? by Philippe Brugere-Trelat of Franklin Templeton Investments
As the crisis in Ukraine and resulting geopolitical tensions between Russia and the West continues with no durable solution yet, many investors have responded by exiting European companies with exposure to the Russian economy. But even as evidence mounts that the Ukraine crisis is taking a toll on many European economies, it would be imprudent for long-term investors to give up on investing in Europe. Strong corporate earnings momentum, high dividend yields and the possibility of additional support from the European Central Bank (ECB) are just some of the reasons why he remains confident that,
2014-09-12 U.S. rates The Draghi floor by Zach Pandl of Columbia Management
In typical fashion, last weeks European Central Bank (ECB) announcements found a way to bury the lede. The deposit rate cut to -20 basis points from -10 basis points was characterized as a technical adjustment, and the asset purchase program, while important, lacked a specific quantitative targetforcing investors to infer a rough figure from Mario Draghis comments in the press conference.
2014-09-12 Schwab Market Perspective: Diverging Paths…Growing Risks? by Liz Ann Sonders of Charles Schwab
The U.S. stock market continues to reach new highs but sentiment is extended and we are entering a period that has historically seen weakness. We believe the ultimate trend is higher, but bumps could get more pronounced in the near future. The U.S. economy is improving, with data suggesting self-supporting expansion is taking hold. Whether this means accelerated Fed interest rate hikes is being closely watched, while midterm elections often inject some more uncertainty into the market. The European Central Bank (ECB) finally acted, but structural issues and lack of demand remain problems.
2014-09-11 Why Growth Stocks Now? by John Calamos of Calamos Investments
After five years of a strong bull market, I believe theres still room for stocks to advance. Growth stocks look especially attractive. At 1.23, the premium for growth over value remains lower than the historical average of 1.44. Even when we omit the tech bubble from the long-term average, the 1.23 premium for growth is lower than that 1.37 average.
2014-09-10 Labor Force Participation Lowest in 36 Years - Why? by Gary Halbert of Halbert Wealth Management
Last Fridays unemployment report for August was significantly weaker than expected. While the headline unemployment rate dipped back to 6.1% (same as it was for June), the number of new jobs created last month was substantially below expectations and marked the lowest number of the year.
2014-09-09 Divergence by Kristina Hooper of Allianz Global Investors
A widening gap in monetary policy in the United States and Europe reveals the disparity in economic growth that exists. Kristina Hooper explains the implications for investors and what history reveals about periods of Fed tightening.
2014-09-09 Back to School With the Three Rs: Revenues, Reinvestment, and Renaissance by Burt White, Jeffrey Buchbinder of LPL Financial
We believe the three Rs are keys to the outlook for the stock market: revenues (and profits), reinvestment, and the renaissance in manufacturing. We expect stocks to garner support from these three Rs in the form of continued growth in revenues and profits, more corporate reinvestment, and continued steady gains for the U.S. manufacturing sector.
2014-09-04 International Equity Commentary: July, 2014 by Team of Thomas White International
International equity prices saw a modest correction in July as geopolitical tensions worsened in Ukraine and the Middle East. The risk of these conflicts spreading to wider areas and pulling in more countries unnerved the markets.
2014-09-02 Stronger Growth Should Push Equities Higher by Robert Doll of Nuveen Asset Management
A rash of positive news propelled stock prices higher for the fourth consecutive week, marking the longest winning streak for equities since last November. The S&P 500 Index pushed above the 2,000 level for the first time as it gained 0.8% for the week.
2014-08-27 EM Growth Provides Tailwind for Automation Companies by Nick Niziolek, Paul Ryndak of Calamos Investments
The pullback in Japanese equities earlier this year brought the valuations of select automation companies to attractive levels that do not fully reflect the long-term growth potential we see. The days of Henry Ford's assembly line are long gone, replaced by automated conveyor systems and robots that do much of the heavy lifting. Chinese labor costs are rising quickly, providing incentive for manufacturers to be more productive and contain costs. Also, the technical and quality requirements for manufacturing cars, phones and other electronics is increasing, requiring more precision.
2014-08-23 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The View from Jackson Hole; U.S. Auto Sales: Tailwinds Will Prevail; The Mystery of Long-Term Bond Yields
2014-08-22 Our Take on the Fed Minutes by Doug MacKay, Bill Hoover of Broadleaf Partners
Usually, I don't have anything intelligent to say more than once every month or so and since I'm not a journalist, I'm never forced to make stuff up just to sell papers. I do believe, however, that the release of the Fed Minutes was worth a few of my minutes and perhaps yours. Even if you're yawning right now, please know that putting my thoughts in writing helps me to better manage your investments. As a money manager, we pick your investments, not your money managers. The buck starts and stops with us.
2014-08-21 A Roadmap, Not a Timetable by Scott Brown of Raymond James
On Friday morning, Fed Chair Janet Yellen will deliver the keynote address at the Kansas City Feds annual monetary policy symposium in Jackson Hole, Wyoming. Those looking for clues on the timing of the first Fed rate hike are likely to be disappointed.
2014-08-06 Consumer Confidence Hits 7-Year High - Really? by Gary Halbert of Halbert Wealth Management
Today well look at several key economic reports over the last week or so. Most have been better than expected. The Conference Board reported that its Consumer Confidence Index surged to the highest level in seven years in July. However, a couple of other reports well look at below paint a very different picture.
2014-07-31 Are You Concerned about Small-Cap Valuations? by Tripp Zimmerman of WisdomTree
Stocks often move more than is justified by changes in their underlying fundamentals, and as a result, investors run the risk of paying too much for stocks that have become more expensive relative to their fundamentals.
2014-07-30 Fed's Janet Yellen To Continue Punishing Savers by Gary Halbert of Halbert Wealth Management
New revelations have suggested that our new Fed Chair, Janet Yellen, may be the most liberal person to ever hold the highest monetary office in the world. This news comes after a recent extended interview Ms. Yellen did with The New Yorker Magazine and her testimony before Congress earlier this month.
2014-07-23 It’s Not Time to Pull the Portfolio Ripcord… Yet by Rick Vollaro of Pinnacle Advisory Group
The second quarter started in somewhat choppy fashion as small cap and other high flying momentum stocks continued to face pressure as investors decided to shed stocks with swollen valuation multiples. The major averages fared better than their risky counterparts, and after a brief dip stocks began their ascent towards record breaking highs on the back on improving economic data, decent earnings growth, and continuing liquidity support from global central banks.
2014-07-18 Reaching Escape Velocity? by Scott Brown of Raymond James
The strong pace of growth in nonfarm payrolls suggests much more than a rebound from bad weather. While recent economic figures have been generally mixed, the job market is clearly improving, led by increased hiring at small and medium-sized firms. The hope is that good news will feed on itself, lifting the pace of growth in the second half of the year. However, there are a few concerns in the outlook.
2014-07-17 Trading Secrets: The Feds Maginot Line by Tad Rivelle of TCW Asset Management
It has been six years since the Fed zeroed out rates and still we wait for assisted growth to become real growth. Beginning with the recovery summer of 2010, the Fed has proclaimed that cheap money would rocket the economy to escape velocity, launching an organic, self-sustaining economic recovery. Instead, central bank policy has vaulted asset prices into the stratosphere even as wages wait their turn on the launch pad. Low rates have failed to deliver the goodies, but the Fed has its story and is sticking to it.
2014-07-14 Col. Jessup and Rufus T. Firefly by Michael Kayes of Willingdon Wealth Management
There is a tried and true methodology for dealing with disconcerting trends in the equity market. Read on to find out what it is.
2014-07-10 The End of Quantitative Easing by Gregory Hahn of Winthrop Capital Management
During the Financial Crisis, as the capital markets seized up and interbank lending froze, traditional tools of monetary policy proved ineffective. The Federal Reserve implemented a series of initiatives called Quantitative Easing that essentially used the central banks balance sheet to purchase bonds in the open market and directly manipulate interest rates lower. This tool proved extremely powerful and allowed the Fed to manipulate interest rates across the yield curve which, in turn, allowed for a wave of refinancing activity that helped to lower borrowing costs.
2014-07-08 Why Free Trade Hurts Economic Growth by Marianne Brunet (Article)
Free trade, deregulation and limiting the federal government's powers form what Columbia professors Joseph Stiglitz and Bruce Greenwald call the Washington Consensus - the core precepts that have dominated policymaking for the last 50 years. But those ideas are misguided, they contend. Tariffs and trade restrictions, for example, are fine, especially if they are part of a broad framework that stimulates learning throughout a society.
2014-06-28 Weekly Economic Commentary by Team of Northern Trust
The recovery which began in 2009 has been weak and uneven. Some have blamed scarring from the financial crisis: wounds to the balance sheets of households, banks, and governments are taking a long time to heal. Under this school of thought, returning to pre-crisis normalcy is simply a matter of time, with the mending promoted by accommodative monetary policy. If the strategy works, well eventually return to the 3% real growth that weve averaged over the past generation.
2014-06-14 Stealthy, Silent…Sustainable? by Liz Ann Sonders, Brad Sorensen & Michelle Gibley of Charles Schwab
US stocks should continue to move generally higher although activity may remain sluggish through the summer and the possibility of a correction is elevated as per both seasonal/election cycle tendencies and elevated optimistic sentiment. The U.S. economy should help support the market as signs are increasing that we may be entering the long-waited for self-sustaining expansion. The ECB's actions weren't game changing but are helpful and European equities look attractive, while we believe the worries over a Chinese slowdown are overblown.
2014-06-12 Many Moving Parts by Scott Brown of Raymond James
The U.S. economy contracted in the first quarter, but it appears very unlikely that weve entered a recession. Weather disruptions and the late Easter have made it difficult to gauge the underlying trends in the economic data, but a significant second quarter rebound appears to be baked in. Still, taking the first two quarters together, growth in the first half of the year is likely to be disappointing relative to earlier expectations.
2014-06-09 Bright Signs for the Economy and Equity Markets by Bob Doll of Nuveen Asset Management
The macro backdrop last week was positive for the markets. As expected, the ECB cut interest rates, highlighting the favorable global monetary policy backdrop. Closer to home, solid vehicle sales and a good May labor market report gave investors additional reasons to bid up stock prices. The S&P 500 Index advanced 1.4%, marking a third straight week of gains above 1% the longest such streak since last September. Looking ahead, we believe the combination of an improving world economy, low levels of volatility and easy global monetary policy should continue to provide support for equ
2014-06-09 And That's The Week That Was... by Ron Brounes of Brounes & Associates
Let the summer partying begin. With the ECB alerting its Fed counterparts (and investors everywhere) that its policymakers will take whatever measures necessary to aid its economy and combat deflation, stocks again moved to record levels on key indexes and even the small-cappers recovered from the perpetual April slide and turned "in the black" for the year. The manufacturing and labor sectors appears to have put the winter storms behind them and even the consumer has shown signs of thawing out in time for the summer. Vacation anyone?
2014-06-02 Equities and Bonds Diverge Amid Low Volatility by Robert Doll of Nuveen Asset Management
Another week brought another record close for equities. The S&P 500 Index increased 1.2% for the week, notching a new high, but investor attention appeared to be focused elsewhere. Low levels of market volatility, a pickup in M&A activity, a difficult revenue environment for banks and improving housing data all gathered headlines, yet the bond market garnered the most focus.
2014-05-22 Why We're Often Bullish When the Market Turns Bearish by Francis Gannon of The Royce Funds
While economic anxiety has hit the market prior to the often bearish summer months, we continue to concentrate on matters less publicized: a shift in equity market leadership in favor of quality driven by rising interest rates.
2014-05-20 A Revised Bond Market Outlook? by Scott Brown of Raymond James
A year ago, as Fed Chairman Bernanke spoke of the possibility of tapering the Feds Large-Scale Asset Purchase program (QE3), bond yields moved higher. Theyve been range-bound over the last year, but have more recently dipped to the lower end of that range. Whats driving the bond market?
2014-05-14 Has Dividend Investing Lost its Luster? by Paul Stocking and Dean Ramos of Columbia Management
With interest rates rising in 2013 and after a number of years of outperformance from high-yield dividend paying equities, investors want to know if dividend investing remains an attractive strategy. With corporate balance sheets looking healthy and dividend payout ratios remaining low by historical standards, we believe dividend growth will continue to be strong. In our view, high-yielding equities will continue to provide strong total returns especially relative to fixed income alternatives.
2014-05-13 Is Rising Consumer Credit a Good Thing? by Kristina Hooper of Allianz Global Investors
When gauging whether a rise in consumer credit is a sign of progress or cause for concern, investors should look beyond debt levels to assess whos taking on more debt and why, as well as the pace of economic activity, writes Kristina Hooper.
2014-05-08 And That's The Week That Was by Ron Brounes of Brounes & Associates
Yes, spring has officially sprung. After months of hearing that "poor winter weather" excuse, investors seem ready to turn the page (and the calendar) as the 1st quarter GDP is now in the books. With that said, the numbers are expected to be stronger in the coming days and the markets are already reacting accordingly as the Dow Jones even pushed into record territory. Manufacturing and labor have shown signs of thawing out, though housing still lags behind. Earnings season has been better than expected and must of the over-analyses focuses on the outlooks these days.
2014-05-06 Optimists and Pessimists Find Fuel in Jobs Data by Kristina Hooper of Allianz Global Investors
Last week?s batch of hot and cold jobs numbers pointed to a conflict that the Fed saw coming months ago, writes Kristina Hooper: The unemployment rate is a flawed metric for gauging the health of the economic recovery.
2014-05-06 The Risk Trilogy by W. Ben Hunt of Salient Partners
Gregg Greenberg at TheStreet.com was kind enough the other week to give me a few minutes (2:30 to be exact) in a video interview to enumerate the three biggest risks I saw facing markets today. At first I rolled my eyes at the request and the format. 150 seconds? Really? I mean, have you heard my Alabama drawl? It can take me 150 seconds just to order a cup of coffee.
2014-05-03 Housing may be returning to a bad neighborhood by Team of Northern Trust
The head of financial stability at the Bank of England recently called rising property prices ?the very brightest [hazard] light on its dashboard.? But he may have a difficult time getting his colleagues who are charged with promoting full employment to agree with him. And if they do, it is far from clear what they might do about the issue. Some favor supervisory curbs; others prefer the more-traditional method of raising rates. The recovery in global real estate has been pronounced. While it beats the alternative, one wonders whether the hard lessons learned in recent corrections have been su
2014-04-29 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?
2014-04-29 Will a Rise in Rates See a More Lasting Shift to Quality? by Charlie Dreifus of The Royce Funds
Late March saw signs of a re-emergence and shift back to the kind of quality names that we like. Portfolio Manager and Principal Charlie Dreifus discusses the recent Fed policies and their effects on the market, his outlook on the U.S. and global economy, current valuations, small-cap quality, and more.
2014-04-25 A Strong Balance Sheet by William Smead of Smead Capital Management
In his book, Great by Choice, Jim Collins points out that companies he defines as great have good luck and bad luck just like all the other companies do. The great companies handle difficult circumstances better than good companies and take the most advantage of the breaks they get in business.
2014-04-15 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.
2014-04-15 5 Things You Need to Know About the Selloff by Kristina Hooper of Allianz Global Investors
Kristina Hooper puts the sharp pullback in the stock market in perspective for investors who may be wondering about a correction.
2014-04-09 Reasons To Remain Optimistic In 2014 by Sandra Martin of Martin Investment Management
The equity markets have taken a respite in 2014 after returning more than 32% in 2013. Margin expansion has been the largest influence on profit growth and should continue with present low inflation expectations. We believe that mergers and share buybacks may continue to increase shareholder value for large capitalization stocks.
2014-04-08 How to Avoid the Coming Crunch on Advisor Compensation by Dan Richards (Article)
Here are the two key ways that life will look very different for financial advisors in 10 years: a change in the structure of advisor practices and downward pressure on compensation.
2014-04-04 A New Machine: Is a Capital Spending Cycle Imminent? by Liz Ann Sonders of Charles Schwab
Activist investors have helped highlight companies bias toward stock buybacks/dividends vs. longer-term capital investments. Preconditions for a pickup in capital spending appear to be lining up. The technology and industrial sectors are likely the biggest beneficiaries.
2014-03-29 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
Using energy as a pawn may work to Russias disadvantage in the long run. Chinas 2014 economic outlook is hazy. Lessons from the 2014 stress test.
2014-03-25 Why I Sold - Part 4 by Jim Whiddon (Article)
The months I spent considering whether to sell my successful independent RIA were difficult personally and professionally. But once my decision was made, it felt good to focus on the positive aspects of a merger that would benefit my staff and my clients.
2014-03-25 Stocks: "Aging Bull" Could Still Pack a Punch by Milton Ezrati of Lord Abbett
Bearish market observers fret that earnings growth will falter and that current equity valuations are unsustainable. Their worries are misplaced.
2014-03-22 We See Opportunities in Commodities by Bob Greer, Ronit M. Walny, Klaus Thuerbach of PIMCO
Fundamentals and some recent data suggest that challenging trends for commodity investing may be coming to an end. Commodities may increase their role as an important and unique source of returns, diversification and protection from unanticipated inflation. As commodity sectors are each dominated by unique factors, we see even more opportunities to add value through active management.
2014-03-21 A Second Leg to Our Economic Outlook by Will Nasgovitz of Heartland Advisors
In our heavily consumer?driven economy, it can be easy to overlook the importance of corporate capital spending. We?ve seen a number of data points suggesting such expenditures are due for an uptick.
2014-03-19 Is the Fed's Monetary Mojo Working at Last? by Milton Ezrati of Lord Abbett
It just might be. Data suggest that the central bank?s massive liquidity boost may be starting to flow into the broader economy.
2014-03-19 Objects in the Rear View Mirror May Appear Closer Than They Are: A Look Back at the 1990s by Liz Ann Sonders of Charles Schwab
Human nature tells us to look back to help divine the future. Today's environment looks strikingly similar to the mid-1990s, which has pros and cons.
2014-03-11 Thirsty for Income? Try Dividend Growth by Frank Caruso of AllianceBernstein
Chasing yield has become a challenging mission for investors in recent years. As yields collapsed in fixed income, investors flocked to bond-like substitutes such as high dividend-yielding stocks. Now that these stocks have become a bit pricey, we think companies with strong dividend-growth potential offer a better way to source equity income.
2014-03-10 Positive Payroll Report Offsets Geopolitical Concerns by Bob Doll of Nuveen Asset Management
U.S. equities increased 1.1% last week after somewhat volatile trading due to heightened tension in Ukraine. Although the crisis dominated headlines, the market relegated the major geopolitical issue to the back burner. The broader macro narrative did not change, as concerns about dampened growth momentum continued to be pacified by the distortion from adverse weather.
2014-03-09 The Problem with Keynesianism by John Mauldin of Millennium Wave Advisors
Keynes himself would appreciate the irony that he has become the defunct economist under whose influence the academic and bureaucratic classes now toil, slaves to what has become as much a religious belief system as it is an economic theory. Men and women who display an appropriate amount of skepticism on all manner of other topics indiscriminately funnel a wide assortment of facts and data through the filter of Keynesianism without ever questioning its basic assumptions. And then some of them go on to prescribe government policies that have profound effects upon the citizens of their nations.
2014-03-03 The Long Road Back by Scott Brown of Raymond James
Five years ago, the economy appeared to be in freefall. Monetary policy and fiscal stimulus helped to halt the downslide, but a full economic recovery was still expected to take years. This wasn?t your father?s recession that we went through; it was your grandfather?s depression. We have made progress, but we still has very long way to go.
2014-03-03 Equities Rise Despite Mixed Fundamental News by Bob Doll of Nuveen Asset Management
U.S. equities increased 1.3% last week as the S&P surpassed the key 1850 level and pushed to new record highs. One favorable dynamic of the rally was the upside leadership from retail stocks, as earnings were largely ahead of expectations. Fed Chair Janet Yellen suggested concern about softerthan-expected spending in a number of recent data releases, but the bar for adjusting the tapering process has not been lowered.
2014-02-26 Market Perspective by CCR Wealth Management Investment Committee of CCR Wealth Management
It cost $0.32 to mail a letter, unemployment was 4.9%, O.J. Simpson was found liable in a civil suit, Hong Kong was returned to Chinese rule, Timothy McVeigh was sentenced to Death, Green Bay defeated the Patriots in the Super Bowl, Titanic came crashing into movie theatres, and Dolly, the first genetically engineered lamb was unveiled to the public; the year was 1997.
2014-02-25 U.S. Economy: Curb Your Enthusiasm by Milton Ezrati of Lord Abbett
Amid optimistic projections of an acceleration in growth, the factors that have restrained GDP remain firmly in place.
2014-02-24 Confusing Crosscurrents Result in Trendless Market by Bob Doll of Nuveen Asset Management
U.S. equities finished mixed after the shortened holiday week.1 The broad market narrative did not change, as additional disappointing economic data was largely attributed to the impact of adverse weather. Comfort that the recovery may be gaining traction was evidenced through Fed discussions and the January FOMC minutes, with consensus expectations for tapering to continue at a measured pace. Some renewed concerns about a growth slowdown in China surfaced but had little impact.
2014-02-18 Global Growth Expectations Push Stocks Forward Despite Weather by Bob Doll of Nuveen Asset Management
U.S. equities finished sharply higher last week with the S&P 500 increasing 2.3% and all major U.S. averages up more than 2%.1 The rapid market recovery from the January pullback is a bigger surprise than the pullback that preceded it.
2014-02-10 Market Outlook by Scotty C. George of Alexander Capital
Despite the inverted gyrations of the stock market during the past three weeks, my market overview continues to be moderately bullish, of course with specific reservations about investors unbridled carryover of unrealistic expectations borne out of last years performance.
2014-02-06 Beyond the Mall: Why Consumers Matter by Ted Baszler of Heartland Advisors
The bottom line is, more people are working now than were a few years ago, pumping income into the economy. At the same time that employment and real wages have been staging a moderate comeback, the housing market has continued to hold firm, and equity markets have posted impressive returns. Record-high levels of personal net worth have prompted more discretionary spending. Periods of greater spending also are associated with higher levels of equity ownership, which can push P/Es higher.
2014-02-04 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 Crisis in Ukraine by Bill O'Grady of Confluence Investment Management
Since November, Ukraine has experienced widespread civil unrest. In late November, Ukrainian President Yanukovych decided not to join an EU-sponsored trade pact. This led to protests from Ukrainians who desired closer relations with Europe. In this report, we will begin by discussing the geopolitics of the nations involved, examining how nations have adjusted their policies over time to changing conditions. We will analyze the risks to the region from current unrest, including a look at the impact on emerging markets. As always, we will conclude with potential market ramifications.
2014-02-03 Market Outlook by Scotty George of Alexander Capital
Despite the inverted gyrations of the stock market during the past three weeks, my market overview continues to be moderately bullish, of course with specific reservations about investors unbridled carryover of unrealistic expectations borne out of last years performance.
2014-02-01 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.
2014-01-29 A Few Concerns by Scott Brown of Raymond James
Weve begun 2014 with widespread expectations that economic growth will pick up. Growth last year was restrained by tighter fiscal policy. With that out of the way and the housing sector recovering, the pace of expansion is poised to improve. However, there are a number of concerns. Weak growth in real wages may limit consumer spending, which accounts for 70% of Gross Domestic Product. Long-term interest rates could rise too rapidly, choking off the recovery in the housing sector. A continued low trend in inflation, a major concern for some Fed officials, could weaken growth.
2014-01-29 Middle East/Africa: Regional Economic Review - 4Q 2013 by Team of Thomas White International
The International Monetary Fund (IMF) anticipates weak growth in the Middle East and North Africa (MENA) region mainly due to heightened political instability. Whats more, after years of healthy performance, growth in the oil exporting nations is expected to lose pace due to lower international demand and local oil supply disruptions. Given that these countries are witnessing a population boom, the IMF emphasized the need for economic diversification by the oil exporters and job creation in private non-oil sectors.
2014-01-22 4 Simple Truths About US Consumers by Kristina Hooper of Allianz Global Investors
The December employment report called into question the momentum of the jobs recovery, which has clear implications for consumers. While further clarity on jobs is needed, here are some key observations that help frame the consumer-sentiment discussion.
2014-01-22 Market Share: The Next Secular Investment Theme by Richard Bernstein of Richard Bernstein Advisors
It is well known that corporate profit margins are at record highs. US margings, developed market margings, and even emerging market margins are generally either at or close to record highs. A myopic focus on profit margins may miss an important investment consideration. Whereas most investors remain fearful of margin compression, we prefer to search for an investment theme that could emerge if margins do indeed compress. Accordingly, our investment focus has shifted toward themes based on companies who might gain market share.
2014-01-18 Forecast 2014: 'Mark Twain!' by John Mauldin of Millennium Wave Advisors
The surface of the market waters looks smooth, but the data above suggest caution as we proceed. Perhaps slowing the engine and taking more frequent soundings (or putting in closer stops!) might be in order. The cry should be "Mark twain!" Let’s steam ahead but take more frequent readings and know that a course correction may soon be necessary.
2014-01-14 Market Outlook by Scotty George of Alexander Capital
The stock markets valuation expansion has left a bittersweet taste in the mouths of some who believe that this historic sequence of "new highs" is simply smoke and mirrors and accelerated expectations. Indeed, while the wealth effect is improving the lot of many, it is also exacerbating the gap between "reality" and "perceived-reality".
2014-01-09 The U.S. Begins an (Un)employment Experiment by Sam Wardwell of Pioneer Investments
Extended unemployment benefits stopped for 1.3 million people at year-end. This doesnt change their employment status...they just stop getting unemployment compensation. Extended benefits (of up to 99 weeks) was part of the recession-fighting fiscal stimulus package. A question was: did this create a dis-incentive to find a job (aka "funemployment").
2014-01-08 Ready For Lift-Off? by Scott Brown of Raymond James
While some had expected a quick recovery from the recession, that was never likely to be the case. Recessions that are caused by financial crises are different from the usual downturns - they are more severe, they last longer, and the recoveries take a long time. The economy has been in recovery mode for the last four and a half years, but finally appears to be poised for an acceleration in 2014.
2014-01-04 Forecast 2014: The Human Transformation Revolution by John Mauldin of Millennium Wave Advisors
It is that time of the year when we peer into our darkened crystal balls in hopes of seeing portents of the future in the shadowy mists. This year I see three distinct wisps of vapor coalescing in the coming years. Each deserves its own treatment, so this year the annual forecast issue will in fact be three separate weekly pieces.
2014-01-03 2014 Outlook: The Emergence of a Global Expansion by Team of Loomis Sayles
After years of a global recovery characterized by fits and starts, we expect more synchronized global growth in 2014. Global GDP growth will accelerate modestly from 2.7% in 2013 to approximately 3.4% in 2014, primarily driven by larger advanced economies. In particular, we are optimistic that US growth will be sustainable. The fading economic drag from government policy and the ongoing housing recovery should help boost US GDP growth toward 3% as the year progresses. The UK is poised for a similar rate of expansion in 2014, and Europe will likely post positive growth in the coming year.
2013-12-26 Does the CAPE Still Work? by William Hester of Hussman Funds
We feel no particular obligation defend the CAPE ratio. It has a strong long-term relationship to subsequent 10-year market returns. And its only one of numerous valuation indicators that we use in our work - many which are considerably more reliable.
2013-12-23 China's Consumer Stocks: Opportunities Despite Slower Growth by Richard Flax of PIMCO
A weaker macro environment and curbs on spending by government bureaucrats have hit a range of consumer businesses and, in some cases, forced a reassessment of expansion plans. While Chinese consumption may be challenged in the near term, we think the impact will be felt most in the retail sector where slowing demand is compounded by oversupply. We see opportunity in other sectors that benefit from secular demand growth and constrained supply or strong brands, notably casinos and luxury sectors.
2013-12-21 What Has QE Wrought? by John Mauldin of Millennium Wave Advisors
Now that we have begun tapering, we will soon see lots of analysis about whether QE has been effective. What will the stock market do? The US economy seems to be moving in the right direction, but the Fed has forecast Nirvana (seriously) - do we dare hope they can finally get a forecast right? Or have they jinxed us?
2013-12-20 The Mundane Truth Behind Margins by Doug Ramsey of Leuthold Weeden Capital Management
The margin expansion story of the last 20 years is a financial one, not an operating one. Investors routinely attribute todays near-record margins to operating efficiencies like factory automation and the outsourcing of labor to lower-wage foreign locales. This is certainly an attractive story, but the reality is that competition demands these actions, and many more, to merely maintain margins. We dont understand why economists who seem to be perfectly good capitalists in every other way think these innovations should result in a permanent jump in profitability.
2013-12-16 The Power of the Platform: The Promise and Peril of Technology Investing by Ryan Jacob of Jacob Asset Management
Without question, technologys rapid development during the past 20 years has played an incredibly powerful and largely positive role in furthering the progress and productivity of modern economies throughout the world. Technologys track record as a profitable investment theme, however, is a bit cloudier.
2013-12-16 2014 Investment Outlook: Economic Growth Should Broaden by Bob Doll of Nuveen Asset Management
For the first time in several years, we approach the new year without big clouds on the horizon. In the United States, accommodative monetary policy has healed many of the wounds from the 2008-2009 crisis.
2013-12-10 Macro Factors Distract Wealth Creation by Bill Smead of Smead Capital Management
What do Obamacare, Federal Government debt/budget deals, Quantitative Easing and jobs data have in common? To us they are all types of macroeconomic factors on which most investors focus. We believe the reason most investors focus on these types of news stories is because they can influence the US stock market over the next six to twelve months instead of the next 10 to 20 years. In this missive, we would like to challenge everyones thinking about their ultimate goal for investing in the stock market and the behaviors which lead to wealth creation.
2013-12-03 Why Does the U.S. Have High-Cost Low-Quality Healthcare? by Michael Edesess and Kwok L. Tsui (Article)
The U.S. has worse mortality rates than virtually all other developed nations, and yet it spends twice as much per capita on health care. How on earth has the U.S. racked up such an appallingly bad health-care record, and what is the solution? A recent edition of the Journal of the American Medical Association identified many of the problems but was not persuasive in prescribing a cure.
2013-12-03 Philly Fed, the Geo Score and A Housing Stat Making Some Blue by Gregg Bienstock of Lumesis
Following a wonderful Thanksgiving holiday that involved way too much food, I found myself doing all I could to avoid the Black Friday masses and succeeded until I took to the highway for a journey to Albany, NY - they were leaving the malls and, perhaps it was exhaustion from their day of shopping, but the traffic and driving skills left something to be desired. Those weary shoppers amassed along I-87 brought to mind the question of how healthy (or not so healthy) is the economy?
2013-12-02 Economic Cycle Update: Evidence Suggesting Slow Growth Reigns by Team of Manning & Napier
Since the start of the current recovery, we have made the case that the economy would grow at a slower pace compared to most other expansions in recent memory. The consumer factored prominently in this outlook as they embarked on a long overdue period of balance sheet repair. Corporations would have little reason to invest if consumer growth was weak and large fiscal deficits would limit the ability of the federal government to contribute to growth.
2013-12-02 China's Great Leap by Equity Investment Team of Janus Capital Group
Chinas government just announced it would take a big step back...and let its economy take a giant leap forward. We believe Chinas proposed economic reforms will transform the economy and should allay investors main concerns about Chinese markets. In Janus latest Equity Monthly, our equity team offers its perspective on Chinas Great Leap.
2013-11-25 Equities Extend Gains for the Seventh Consecutive Week by Bob Doll of Nuveen Asset Management
U.S. equities finished higher again last week as the S&P 500 increased 0.4%. The Fed continued to dominate headlines, with heightened emphasis on the distinction between tapering and tightening. Bubble speculation continued to receive attention in the press, while many articles refuted such concerns. The financial sector performed well, led by banks.
2013-11-25 Permanently Depressed? by Scott Brown of Raymond James
One of the main economic debates of the last few years has been whether weakness is cyclical or structural. If the downturn is due to a temporary (albeit, severe) shortfall in domestic demand, then growth should pick up sharply at some point as the economy returns to its potential. If its structural, fiscal and monetary policy can do little to help. Opinions differ, but while the consensus may see the sluggish economy as reflecting mostly cyclical forces, cyclical weakness is more likely to become structural the longer it lasts.
2013-11-22 Shifting Global Fortunes by Mark Mobius of Franklin Templeton
Most investors, particularly those who live in developed markets, probably arent aware of the influence emerging markets have on the global economy. Im not just talking about China or just about governments. More and more large corporations are headquartered in emerging markets, a trend that I expect to continue. In addition, more of those companies that are located in emerging markets are also joining the ranks of the top companies in the world. In fact, some might be surprised to hear that some of the worlds largest initial public offerings (IPOs) have been in emerging m
2013-11-21 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Some weekly commentaries are chock full of information, editorial content, market swings, economic data, and the like. Others, like today, reveal nothing magical about the preceding week or the outlook ahead.
2013-11-20 Setting Sail on the QE Express by Dawn Bennett of Bennett Group Financial Services
Ive been managing money for over 25 years and rarely have I seen the level of craziness and insanity in both our politics and financial markets in the U.S. Im frightened of this deepening manmade disaster thats unfolding in front of us right now in both the financial markets and the economy. Too much faith is being placed in untested theories and that quantitative easing is going to cure all of our ills.
2013-11-20 Yellen's Testimony Not Surprising: Fed Has More Work to Do by Sam Wardwell of Pioneer Investments
Janet Yellens Senate testimony in last weeks confirmation hearings was very dovish and offered no real surprises. She did not signal or hint at any change in Fed policy (it was a confirmation hearing), but suggested that the best way to achieve an exit from unconventional policy is to deliver a stronger recovery . . . and the Fed has "more work to do" to support that recovery. The risk that she will not be confirmed is considered negligible.
2013-11-18 The Muddle-Through Economy and Grind-Higher Equity Market Continue by Bob Doll of Nuveen Asset Management
U.S. equities finished higher last week as the S&P 500 and Dow Jones Industrial Average closed at record highs, marking the sixth straight week of advances.1 Several macroeconomic themes are important as third quarter earnings season comes to an end. Fed Chairman nominee Janet Yellen spoke before the Senate in support of current monetary policy and suggested a similar path under her leadership. Economic data was mixed for the week, and any economic weakness continues to be perceived as supporting a delay in tapering. In turn, this can be seen as positive for equities.
2013-11-17 The Unintended Consequences of ZIRP by John Mauldin of Millennium Wave Advisors
Two recently released papers make an intellectual and theoretical case for an extended period of very low interest rates and, in combination with other papers from both inside and outside the Fed from heavyweight economists, make a strong case for beginning to taper sooner rather than later, but for accompanying that tapering with a commitment to an even more protracted period of ZIRP. We are going analyze these papers, as they are critical to understanding the future direction of Federal Reserve policy. Secondly, we’ll look at some of the unintended consequences of long-term ZIRP.
2013-11-13 When Flexibility Meets Opportunity in the European Commercial Real Estate Market by Laurent Luccioni of PIMCO
The pace of asset sales by European banks has been slower than many anticipated due to the fragile economic, political and regulatory environment across the continent. A complex CRE landscape and the pervasive effects of cognitive bias, capital rigidity and the unintended consequences of regulation mean mispricing can occur frequently. Unlocking value in this environment requires a flexible approach to investing across the capital structure and the resources to source, underwrite, structure, service and operate commercial real estate assets.
2013-11-01 Korea Raises Voice for Shareholders by Soo Chang Lee of Matthews Asia
Corporate governance practices in South Koreas family-controlled conglomerates, known as chaebol, find their roots in a social contract that was implicit in the process of the countrys economic development under military dictatorship, which began in the early 1960s. Koreas previously autocratic government initiated economic plans and wielded power in the private sector by assigning different areas of development to each of several chosen corporate families.
2013-10-29 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 Equities Reach All-Time HighsYet Again! by Bob Doll of Nuveen Asset Management
U.S. equities marked another all-time high last week as the S&P 500 increased 0.9%. (1) Global equities reached new cycle highs for the second week in a row. Many investors have concerns that the gains will not last since the world economy remains lackluster and the liquidity driving the current rally will eventually stop.
2013-10-26 A Code Red World by John Mauldin of Millennium Wave Advisors
The heart of this week’s letter is the introduction of my just-released new book, Code Red. It is my own take (along with co-author Jonathan Tepper) on the problems that have grown out of an unrelenting assault on monetary norms by central banks around the world.
2013-10-23 The Right Investment Vehicle by Craig French of WBI Investments
Remember your first car? You probably had some good times in it passing your drivers license exam, going to the prom, driving to your first job. You most likely have a different car now that youre older one more suited to your current lifestyle and needs. Ill bet your current car is a lot safer and more reliable than that first one. A car is a motor vehicle you use to reach your destination. Like a car, an investment portfolio is a vehicle you use to reach your clients investment goals.
2013-10-22 A by Milton Ezrati of Lord Abbett
State and local government revenues have finally started growing again. The resultant boost to spending and hiring should aid the economy.
2013-10-22 Middle East/Africa: Regional Economic Review - 3Q 2013 by Team of Thomas White International
Economic activity in the Middle-East and North Africa (MENA) has been hindered by prolonged political unrest and civil strife. The regions vulnerability has increased over the last two years due to mounting structural challenges. Whats more, widening fiscal deficits due to the economic slowdown and dwindling foreign currency reserves remain sources of concern, as noted by a World Bank report.
2013-10-18 In Other News by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
It will take some time to gauge the full impact of the government shutdown and data is likely to be somewhat skewed over the next couple of months. However, sitting on the sidelines isnt a great option and stocks still appear to us to be the best place to invest money for the longer term. International growth, although not robust, appears to be more supportive as we head into 2014 than it has since the financial crisis, and we favor developed over emerging markets for the time being.
2013-10-16 Equity Outlook by Team of Osterweis Capital Management
As we write this outlook, our political leaders once again have succeeded in holding the U.S. government budget, and by extension the financial markets and the broader economy, hostage to their respective political agendas. We believe it is important to avoid getting caught up in the drama on Capitol Hill and remain focused on the slow but continued healing taking place in the U.S. economy.
2013-10-09 Taper Time - Mining, That Is by Adam Bowe, Robert Mead of PIMCO
Recent data suggest that mining investment is tapering, with the sector detracting from real growth in the first half of 2013. We see three possible growth scenarios: a handoff to the corporate sector; no handoff, with demand continuing to slow; or a handoff to the highly levered household sector, which would create long-term risks. Until we see meaningful signs of a growth handoff from the mining sector to a new balance sheet that has the capacity to expand, our base case calls for sub-trend growth and low interest rates, supporting bond prices over the cyclical horizon.
2013-10-08 And That's The Week That Was by Ron Brounes of Brounes & Associates
The gov is closed for business. Nuff said. Coming up in the week ahead: ISM Fed Minutes (Wednesday) Retail Sales (Friday), PPI (Friday)or maybe not.
2013-09-30 Government Shutdown Could Lead to a Buying Opportunity by Matt Lloyd of Advisors Asset Management
As we approach yet another self-induced the sky is falling and the other guy is to blame environment, recall that this situation is not uncommon. We have had 17 of these budget debt ceiling deadlines and yet we have unbelievably (said with extreme rolling of the eyes) been able to overcome our elected officials calls for the end of the world. The most recent time when the U.S. government shutdown was in November 1995 concluding in January 1996,when arguably the animosity and polarization was as pronounced as it is today.
2013-09-28 The Renminbi: Soon to Be a Reserve Currency? by John Mauldin of Millennium Wave Advisors
Contrary to the thinking of fretful dollar skeptics, my firm belief is that the US dollar is going to become even stronger and will at some point actually deserve to be the reserve currency of choice rather than merely the prettiest girl in the ugly contest the last currency standing, so to speak. But whether the Chinese RMB will become a reserve currency is an entirely different question.
2013-09-24 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
2013-09-24 Michael Aronsteins Warning to Fund Investors by Robert Huebscher (Article)
Fixed-income investors may think rising interest rates are their biggest worry. But bond funds face a new risk, driven by their need for liquidity to service investors daily redemptions, according to Michael Aronstein.
2013-09-24 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
The Federal Reserve kept its word last week: until they see an improvement in jobs growth and wages they simply wont budge on their mission to keep interest rates low to stimulate borrowing and economic expansion. What this means to the markets, however, is more ambiguous.
2013-09-23 Seeking Global Growth: Our Outlook for Credit by James Balfour of Loomis Sayles
Global business and credit cycles are nothing new to investors. The familiar sequence of recession, recovery, expansion and slowdown plays out over time, influencing interest rates, credit availability, business climate and capital markets. Its a time-honored process, but in practice, no two business and credit cycle pairings are exactly alike. Business and credit cycles tend to be driven by specific but varying factors that accumulate until an economic tipping point is reached, after which the business and credit climates deteriorate.
2013-09-23 Fed Inaction Lengthens Reflationary Economy by Bob Doll of Nuveen Asset Management
U.S. equities advanced last week as the S&P 500 increased 1.32%.1 The Federal Reserve (Fed) delivered a big surprise by leaving intact the current $85 billion monthly purchase program. The Committee appears nervous about the resiliency of the economy. Chairman Bernanke pointed to three factors for postponing tapering: 1) the need for more labor market data to be confident in the outlook, 2) a desire to assess the degree to which tighter financial conditions, particularly mortgage rates, are affecting the real economy and 3) an interest in gaining clarity on upcoming fiscal debates.̶
2013-09-21 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
Global deleveraging has a long way to go. Fiscal drama and the economy. Funding for economic statistics needs to be enhanced
2013-09-19 A Closer Look at Earnings by Ted Baszler of Heartland Advisors
To get a sense of whether forward estimates currently in place for the S&P 500 may be excessiveparticularly in light of an economic recovery that has at times moved in fits and startswe took a look at how earnings have historically related to weekly jobless claims figures.
2013-09-17 “Risk-On” Resumes as Uncertainty Subsides by Bob Doll of Nuveen Asset Management
Equity markets rallied last week with the hope of a diplomatic solution to the crisis between Syria and the United States. The S&P 500 advanced 2.03% for the week.1 Broadly, the S&P 500 is in a churning phase after witnessing an all-time high of 1709 on August 2 and then stalling.1 We believe the market has been on hold while waiting for lower oil prices, progress on Syria, further global growth and successful Federal Reserve tapering.
2013-09-10 Letters to the Editor by Various (Article)
Several readers responded to Michael Edesess article, Did Steve Jobs Really Build That?, which appeared last week. A reader responded to Stephen Roachs commentary, The Global QE Exit Crisis, which appeared on August 26.
2013-09-09 And That's the Week That Was by Ron Brounes of Brounes & Associates
A couple of holidays during the week prompted some light volume and volatility as investors were forced to digest a slew of key economic releases and some potentially concerning geopolitical developments on a limited work schedule. In the end, investors took advantage of bargains leftover from a poor August, but many still maintain the same uncertainties that caused the pullback in the first place. Syria and the Fedthe headlines should be around for the foreseeable future.
2013-09-06 Four Interest Rate Scenarios We Could Face by Mike Temple of Pioneer Investments
Ive written a lot lately on the subject of duration and its potential impact on investor portfolios, now that the initial goals of the Federal Reserves Great Monetary Experiment appear largely accomplished and tapering of its monthly purchase of Treasuries to keep rates low is on the table. The era of lowering interest rates and rising bond prices looks finally at an end, with no place for rates to go but up. Its vital, then, that investors think about the impact that rising bond yields could have on their portfolios. Here are a few scenarios w
2013-09-04 The Bond Bear is Waking Up by Brian Wesbury, Bob Stein of First Trust Advisors
Weve been bond bears for quite some time, and we still are. The good news is that the violent part of the bear market has passed. We expect a slower, but still painful and consistent, move higher in interest rates during the quarters ahead. The 30-year bull market in bonds is over.
2013-09-03 Momentum in Europe by Janus Equity Investment Team of Janus Capital Group
We think now is a good time to be investing in Europe. European equity valuations are at the lowest level in more than 40 years, by some measures, and we are seeing green shoots in the regions downtrodden economy. Meanwhile, European companies in several industries have right-sized their cost structures or refocused their businesses, setting them up to be more competitive on a global scale.
2013-09-03 As Uncertainty Abounds in September, Sideways Consolidation Continues by Bob Doll of Nuveen Asset Management
Global equities struggled last week, with the S&P 500 declining -1.39%.1 Volatility rose from geopolitical uncertainty over the military strike in Syria.2 Oil prices spiked with concerns about escalation and tension but retreated due to dampened international support and expectations that a military campaign would be short-lived. The U.S. Treasury announced its borrowing capacity will be exhausted by mid-October, exposing contentious fiscal battles. Reports mentioned former Treasury Secretary Larry Summers may be leading the succession race for Fed Chairman.
2013-08-30 The Unfriendly Skies by Peter Schiff of Euro Pacific Capital
As if the federal government were not already doing enough to kill the U.S. airline industry with restrictive workplace rules, over-regulation, and a monetary policy that supports higher fuel prices, earlier this month anti-trust authorities at the Justice Department blocked the merger between American Airlines and US Air.
2013-08-26 Summers For Fed Chair by Brian Wesbury, Bob Stein of First Trust Advisors
In the next month or two, President Obama will pick someone to succeed Ben Bernanke at the Federal Reserve. At this point, we think the odds-on favorite is Larry Summers.
2013-08-26 Chicago Post Script, Reported Data Errors (Really) and What is a “Geo Score”? by Gregg Bienstock of Lumesis
Regular readers know I periodically suggest looking at alternative data points to gain a broader perspective. In this instance, something a little different. At the core of the DIVER platform is our database and we take data integrity very seriously. So much so that we periodically find errors in reported data. Many times, the source will correct the data as we notify them. Typically, when we find an error in a CAFR, the source will defer the correction until the next CAFR is released. In DIVER however, we will display the accurate values.
2013-08-25 France: On the Edge of the Periphery by John Mauldin of Millennium Wave Advisors
Charles de Gaulle said that "France cannot be France without greatness." The current path that France is on will not take it to renewed greatness but rather to insolvency and turmoil. Is France destined to be grouped with its Mediterranean peripheral cousins, or to be seen as part of the solid North Atlantic core? The world is far better off with a great France, but France can achieve greatness only by its own actions.
2013-08-20 August Monthly Investment Bulletins by Team of Bedlam Asset Management
For the first seven months of the year the portfolio rose by 25.2% vs. 19.3% for the index. During the month, the 6.4% gain was 150 basis points ahead. Three trends continued: the gradual increase in fund flows into equity markets relative to other asset classes, slightly improving economic data across most developed countries, and a mild deterioration in many developing nations.
2013-08-19 Consumers: Wallets Open, but Not Too Wide by Milton Ezrati of Lord Abbett
U.S. consumer spending is likely to remain on a slow, but steady, growth trajectory, boosting overall economic growth.
2013-08-16 Using Equities to Hedge Inflation? Tread With Care by Bob Greer, Raji Manasseh of PIMCO
Historically, broad equity returns have not intrinsically provided a good hedge against inflation. Three key attributes may help companies withstand inflationary environments - pricing power, supply side advantages and a willingness and ability to sustain dividend hikes at a rate faster than inflation. To realize equities long-term potential as a key source of portfolio returns, investors should consider enlisting active managers who select stocks with a view on inflation and its effect on specific companies.
2013-08-06 Is China the New France? by Marianne Brunet (Article)
Imagine a country that grows its economy by greatly devaluing against the reserve currency to develop a strong export sector. As the country becomes a major world power, it accumulates massive amounts of the reserve currency, and fears grow that its actions could destabilize global markets. If you think that description sounds like China today, youre right. But it also describes France in the 1920s. Lessons from that era are instructive for those seeking to forecast Chinas long-term position in the world.
2013-08-06 Europe's Fake Normal by Mohamed El-Erian of Project Syndicate
This summers sense of economic normality in Europe is neither natural nor necessarily tenable in the long term, because it reflects temporary and potentially reversible factors. If Europe does not return to addressing its economic challenges in a more comprehensive manner, the current calm may quickly give way to renewed turmoil.
2013-08-02 Fed Shows Its Dovish Side by Brian Wesbury, Bob Stein of First Trust Advisors
The Federal Reserve made several small changes to the text of its statement, which, combined, suggest a slightly more dovish posture at this meeting than at the last one in June.
2013-08-01 Fed in Watch-and-Wait Mode by Team of Northern Trust
The Federal Open Market Committee (FOMC) today held unchanged its current asset purchase program of $85 billion per month. The Federal Reserve avoided providing new nuances to existing forward guidance and re-issued the June policy statement with minor modifications to reflect recent economic developments.
2013-07-30 Conflicting Crosscurrents Move Equities Sideways by Bob Doll of Nuveen Asset Management
U.S. equities finished last week narrowly mixed, with the S&P 500 falling -0.02%.1 While the second quarter earnings per share growth continues to move higher, revenue growth remains below trend. The economic calendar is focused on this weeks release of the July employment report. Global macro headlines generated more uncertainty than direction for the markets.
2013-07-25 A Midyear Update: Getting Back to Normal by Douglas Cote of ING Investment Management
Though markets were whipsawed by the announcement, the Feds plan to step aside and allow normalization is a good thing. Today, the primary risk for investors to hedge is economic growth and the strong equity returns it tends to produce not financial Armageddon. While risks in Europe and China persist, U.S. fundamentals look relatively strong. Two consecutive quarters of S&P 500 earnings growth prompts a forecast update.
2013-07-11 Prepare for the 1-2 Punch of Declining Earnings and Multiple Contraction by JJ Abodeely of Sitka Pacific Capital Management
The market today is counting on continued earnings growth driven in large part by ongoing quantitative easing without inflationary consequences. In a recent strategy letter, we show that the markets expectation for future earnings growth is overly optimistic based on the fact that earnings are currently more than 40% above the long-term trend and mean-reversion and history suggests that real earnings are likely to decline over the next 5 years.
2013-07-09 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.
2013-07-09 Jobs, the Fed, and Long-Term Interest Rates by Scott Brown of Raymond James
The June Employment report showed a labor market that is far from fully recovered, but appears to be well on its way. Federal Reserve policymakers are not going to react to any one report, but the trend in nonfarm payrolls has remained strong. Is that enough to ease up on the gas pedal? Perhaps. However, it should still be some time before the Fed has to hit the brakes.
2013-07-08 Obamacare and Stocks by Brian Wesbury, Bob Stein of First Trust Advisors
For much of the past four years, we have felt like psychologists who constantly must help hypochondriacs over their fear of one thing after another. There is no reason to remind everyone of the list its been endless, but the stock market and the economy have moved consistently higher despite these fears.
2013-07-01 The Golden Cycle by Peter Schiff of Euro Pacific Capital
The New York Times had the definitive take on the vicious sell off in gold. To summarize one of their articles: Two years ago gold bugs ran wild as the price of gold rose nearly six times. But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight. The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.
2013-06-28 China's Near-Term Macro Outlook by Team of Nomura Asset Management
The key message from the recent Shibor volatility is that the Chinese government is now willing to tolerate slower near-term growth while carrying out reform to rebalance the economy for long term sustainable growth. The diminishing demographic dividend as a result of the aging population and One-Child Policy will result in slower potential growth for the economy.
2013-06-27 Commodities: Still Worried About Supply by Doug Ramsey of Leuthold Weeden Capital Management
Golds 2013 fall has been the lone development in the two-year commodities decline that seems to have captured much attention. The CRB Raw Industrialsa spot index of 13 commodities exhibiting a much tighter linkage to the global economy than goldpeaked in mid-April 2011, coinciding with the bull market relative strength highs in the both S&P 500 Energy and Materials sectors and the absolute price highs in the MSCI stock market indexes of commodity exporters Brazil, Canada and Russia.
2013-06-27 Currency Wars: A Case for the U.S. Dollar by Gibson Smith, Chris Diaz of Janus Capital Group
In recent years, the U.S. dollar has tended to lose value when the global economy improves, as investors are more willing to take risks. We believe that pattern has changed and that the U.S. dollar will outperform the Japanese yen, the euro and the British pound over the medium term, even if the global economy continues to improve. In our view, current conditions justify a material deviation in currency exposure compared with certain global fixed income benchmarks, such as the Barclays Global Aggregate Bond Index.
2013-06-26 Trampled By the Crowd? Logic Briefly Abandoned Creates Opportunity by Scott Colyer of Advisors Asset Management
The past two week slide in asset prices has caused a resurgence of doomsday pundits warning of impending calamity. The negative interpretation of Fed Chairman Bernankes comments regarding the U.S.economys future upgraded prospects is simply not logical. A careful review of what Bernanke said at his press conference was entirely consistent with what the Fed has said and done in the past.
2013-06-26 2 Ways to Play the US Energy Boom by Russ Koesterich of iShares Blog
Russ offers two ideas one perhaps obvious and one perhaps not for investors looking to potentially benefit from the US energy renaissance.
2013-06-18 Three Time Bombs that Threaten Retirement Plans by Dan Richards (Article)
Three poorly understood developments threaten secure retirements ? without wishing to be alarmist, I will call them time bombs. These developments will change the retirement dynamic for many Americans: increasing lifespans, escalating medical costs as people age and safe withdrawal rates on savings dropping from historical levels.
2013-06-12 Who Is Your Daddy and What Does He Do? by Cole Smead of Smead Capital Management
In the 1990 movie Kindergarten Cop, Arnold Schwarzenegger portrayed a police officer who goes undercover as John Kimble, a kindergarten teacher in Astoria, OR. Early in the movie, Mr. Kimble tells his class they are going to play a game called Who is your daddy and what does he do? After a myriad of answers, one of the children asks him if his ensuing headache is a tumor. Kimble replies Its not a tumor. We at Smead Capital Management believe this was not only one of the more comical moments of Kindergarten Cop, but also a great question to ponder in today&rs
2013-06-11 Gundlach ? Dont Sell Your Bonds by Robert Huebscher (Article)
Dont sell your bonds just yet, according to Jeffrey Gundlach. Global economic growth is slowing, he said, and the U.S. will be competing for a larger slice of a shrinking worldwide pie. A weaker economy dims the prospects for higher interest rates. The benchmark 10-year Treasury yield ? currently 2.08% ? will be 1.70% by the end of the year, according to Gundlach, providing profits for holders of long-term bonds.
2013-06-11 How Asia's Growth Transitions and Policy Experiments Are Shaping the Global Outlook by Ramin Toloui, Tomoya Masanao, Robert Mead of PIMCO
Our view is that Chinese GDP growth will downshift, averaging 6%-7.5% for the next five years as net exports and investment are reaching their limits. In Asia, Japan is perhaps the economy closest to the T-junction described in PIMCOs global secular outlook: The destination of Japans journey looks increasingly uncertain, with multiple potential outcomes that could stabilize or destabilize the global economy and markets.
2013-06-04 Woody Brocks Challenge to Krugman and the Keynesians by Bob Veres (Article)
A polarizing choice confronts policymakers. Either they side with Paul Krugman and the Keynesians, and advocate for aggressive fiscal measures to stimulate Americas economic growth rate, or they align themselves with the so-called austerians, who argue that budget cutbacks are necessary to eliminate deficits. A third option is rarely discussed. Its most outspoken proponent, Horace Woody Brock, says that America should continue to borrow, but spend wisely ? and develop new policy instruments that would eliminate asset bubbles and stimulate economic activity.
2013-06-04 Vincent Reinhart on Debt and Growth in the U.S. and Japan by Robert Huebscher (Article)
High debt levels translate to slower growth, according to Vincent Reinhart. That conclusion will be disheartening to those who jumped on the errors several University of Massachusetts scholars found last month in Carmen Reinhart (Vincent’s wife) and Ken Rogoff’s research. But Vincent Reinhart is the author, along with his wife and Rogoff, of a study published in 2012 that documented the degree to which high debt-to-GDP levels correlate with slower economic growth in developed countries.
2013-06-04 Finding Healthy Stocks in Europe's Troubled Landscape by Tawhid Ali of AllianceBernstein
European equity markets continue to face severe stress as the continent struggles to contain fallout from the sovereign-debt crisis. Yet this seemingly toxic environment is creating some exceptional investment opportunities in relatively healthy companies that can control their own destinies.
2013-06-03 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Recent history has shown us that when investors feel prosperous their spending habits become more robust. Sometimes they even throw caution to the wind and splurge on discretionary purchases they previously sought to avoid or postpone. Such is the nature of a rapidly changing landscape that what previously had been a vulnerability now becomes a necessity. The impact of financial decision-making can have a manic effect upon virtually any part of the world. This is why crises become epidemics, and cures become panacea.
2013-06-01 Central Bankers Gone Wild by John Mauldin of Millennium Wave Advisors
For the last two weeks we have focused on the problems facing Japan, and such is the importance of Japan to the world economy that this week we will once again turn to the Land of the Rising Sun. I will try to summarize the situation facing the Japanese. This is critical to understand, because they are determined to share their problems with the world, and we will have no choice but to deal with them. Japan is going to affect your economy and your investments, no matter where you live; Japan is that important.
2013-05-30 Reflation in the Balance by Richard Clarida of PIMCO
Four of the worlds major central banks are now all in when it comes to ballooning their balance sheets in correlated, if not coordinated, efforts to achieve escape velocity in their economies. In accounting for the impact of quantitative easing on two key balance sheets, we are able to interpret, monitor and calibrate the programs currently in place. This in turn can help us prepare portfolios if or when sentiments and inflation expectations shift.
2013-05-28 Is Austerity a Bad Idea? by Michael Edesess (Article)
There are strong arguments for and against both austerity and Keynesianism. However, some recent writings should make us remember to question the terms of the argument itself. While evidence-based economics is important, it can also mislead.
2013-05-28 Europe's Crossroads: The End of the Muddle Through? by Andrew Balls of PIMCO
The eurozone may be nearing a critical junction, owing to its weak growth, weak institutions, debt dynamics and domestic and cross-border political challenges. The German government may take a more active leadership role after its national election, but it is more likely it will continue with piecemeal measures. Considering the current low yield environment and ample central bank liquidity, it is important to focus on absolute yield levels and returns, and consider global alternatives such as emerging market securities and currency exposure.
2013-05-28 Watching Risk-Reward Ratios: Economic Data Still PositiveBut Rate Is Slowing by Rob Stein of Astor Asset Management
Risk-reward ratios are on our radar screen these days as we review the most recent economic data against the backdrop of recent market movement. This is not to say that we are in any way suggesting a top, a bear market, or even that a correction is on the horizon, even taking into account this past weeks movement and volatilityalthough each of these scenarios remains a possibility. At this point, though, we do have some minor concerns about risk-reward in the markets going forward, suggesting that a slight adjustment in beta or equity exposure from current levels is prudent.
2013-05-25 The Mother of All Painted-In Corners by John Mauldin of Millennium Wave Advisors
Japan has painted itself into the mother all corners. There will be no clean or easy exit. There is going to be massive economic pain as they the Japanese try and find a way out of their problems, and sadly, the pain will not be confined to Japan. This will be the true test of the theories of neo-Keynesianism writ large. Japan is going to print and monetize and spend more than almost any observer can currently imagine. You like what Paul Krugman prescribes? You think he makes sense? You (we all!) are going to be participants in a real-world experiment on how that works out.
2013-05-21 Are Equity Investors Pushing the Gas Pedal Too Hard? by Norman Boersma of Franklin Templeton Investments
Whatever previous reticence investors may have had about equities last year seems to have evaporated and, with remarkable speed, turned into fear over having missed the equity rally. Some major market averages have accelerated at a pace some say is reckless, so as we head toward the mid-point of the year, Norm Boersma, CFA, chief investment officer of Templeton Global Equity Group, takes a look at reasons investors might continue to push the gas pedalor tap the brakes.
2013-05-16 Hold Your Houses: The Housing Recovery May Take Longer Than You Think To Reach Consumers by Joshua Anderson, Emmanuel S. Sharef, Grover Burthey of PIMCO
New residential construction needs to double from 2012 levels to meet long-run stable demand, and the pace of that increase is critical. Consumer credit growth is hindered by strict lending standards, continued deleveraging and limits to mortgage equity withdrawal. As a result, the balance of mortgage debt is unlikely to meaningfully increase in the next 12-18 months, delaying a return of the virtuous consumer cycle.
2013-05-15 Consumers: The Great Sobriety by Milton Ezrati of Lord Abbett
Americans have cut debt, boosted savings, and held spending in checkall of which should aid the economy.
2013-05-14 Is Kyle Bass Wrong About Japan? by Robert Huebscher (Article)
Its standard practice for short sellers to kick dirt on their targets, and Kyle Bass is doing just that by asserting that Japans economy is on the verge of a financial crisis. In a talk on May 3, he said that Japans demise is imminent. So far, though, Bass has been wrong ? and he has his detractors, who are far less certain of Japans destiny.
2013-05-08 Deflation Is OverPlease Come Out by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
A blooper reel of 20th century history would likely include a feature on Japanese soldier Hiro Onoda. Posted to a small island in the Philippines during the waning days of World War II, when Onodas mission proved unsuccessful he was ultimately forced to flee into the woods, where he survived on a steady diet of coconuts and bananasfor almost 30 years after the end of the war.
2013-05-08 Are Investors Breathing a Sigh of Relief? by Bob Doll of Nuveen Asset Management
Last week U.S. equities delivered another gain as the S&P 500 increased by 2.0%.1 On Friday, the U.S. jobs report offered relief from fears of an accelerating weakness caused by prior softness during this time in each of the last three years. However, the full set of economic data for the week supports our view of a slower second quarter in a post-sequestration environment.
2013-05-08 Absolute Return Letter: In the Long Run We Are All in Trouble by Niels Jensen, Nick Rees,Tricia Ward of Absolute Return Partners
In the long run we are all dead, said Keynes. Maybe so, but we could be in trouble long before then. Investors appear preoccupied with central bank policy. We argue that investors are quite right in keeping their eye on the ball but, to us, it looks as if they are focusing on the wrong ball. The real worries for the long term are demographics and negative real interest rates and the effect these factors may have on equity returns.
2013-05-07 Niall Ferguson: Four Reasons Why the U.S. is Failing by Robert Huebscher (Article)
Niall Ferguson is the champion of anti-Keynesian economists. Last week, he explained why America’s pursuit of Keynesian policies is leading to disastrous consequences.
2013-05-07 Mutual Fund Companies Need to Prepare for a Changing Environment Fund Industry Turbulence Ahead by Paul Franchi (Article)
The mutual fund industry grew explosively from the 1980s on a rare tonic of a low-inflation credit expansion powered indirectly by international trade flows. That run reached a peak in 2008 when the application of quantitative easing (QE) served to prevent industry collapse with a softer form of transition, which continues today but must end when inflation returns.
2013-05-07 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Financial markets got the news they wanted last week as Europe cut interest rates, while here at home the Federal Reserve hinted they might do even more when it comes to money printing. To top it off, Fridays employment report showed improvement from March although the details caused most to discount the excitement.
2013-05-06 That Was the Week That Was by Jeffrey Saut of Raymond James
Informally the TV show, That Was The Week That Was, is referred to as TW3and was a satirical comedy program first aired in the early 1960s. The program was considered a lampooning of the establishment. At the time it was considered a radical departure from legitimate television, but it set the stage for many more such radical departures. I revisit TW3 this morning because I have had so many requests for a formal repartee of a number of last weeks Morning Tacks woven into a more formal strategy letter.
2013-05-03 Job Creation May Be More Robust Than Official Statistics Suggest. by Team of Northern Trust
Job creation may be more robust than official statistics suggest; U.S. employment situation; Central bank meetings
2013-05-01 May 2013 Commentary by Team of Sadoff Investment Management
The slow growing economy will cause the Federal Reserve to stay the course with continued stimulus via low interest rates and Quantitative Easing (QE) for some time. This environment continues to be bullish for stocks.
2013-04-30 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 Economic Slowdown Has Not Weakened Share Prices by Bob Doll of Nuveen Asset Management
U.S. equities rebounded last week as the S&P 500 increased by nearly 1.8%,1 despite continued weak economic data. We believe recent data is not yet weak enough to change forecasts. The relative stability of data and forecasts - supported by stimulative monetary policies, an improving U.S. housing market and fading political polarization in the U.S. and Europe - sends a message of reasonably low volatility and manageable downside risks.
2013-04-24 What's Behind China's Economic Slowdown? by Weili Huang of Columbia Management
Chinas economy grew by 7.7% year over year (yoy) in the first quarter of 2013, against the market expectation of 8.0% yoy and a prior quarters 7.9% yoy. Gross domestic product (GDP) expanded 1.6% quarter on quarter (qoq), with an annualized growth rate of 6.6%, a step down from the 2.0% qoq and 8.2% annualized growth seen in 4Q 2012.
2013-04-23 The New Challenges to Reinhart and Rogoff by Robert Huebscher (Article)
Advocates for debt reduction and austerity have had no more authoritative sources than Carmen Reinhart and Ken Rogoff. But last week, these two professors had to defend claims that errors in their research ? ranging from a typo in a spreadsheet to the failure to include data from New Zealand ? invalidated their much-acclaimed findings.
2013-04-23 Looking Back at Peak Oil: The Coming Crisis in Energy Supplies by Richard E Vodra, JD, CFP (Article)
Peak Oil ? the maximum sustainable rate of global oil production ? happened in 2012. Thats one of the main conclusions of a new report, Fossil and Nuclear Fuels ? The Supply Outlook, released in March 2013 by the Energy Watch Group. This event will have profound long-term implications for how advisors should manage clients portfolios, and how clients should plan their future expenses.
2013-04-22 Weekly Commentary & Outlook by Scotty George of du Pasquier Asset Management
Despite recent gains in portfolio valuations, I question whether we are really profiting from the upward surge. To be sure, there is more money in your account, according to your last three monthly statements. And whos to argue that doesnt translate to real dollars, real well-being.
2013-04-16 Will Germany Lead the World’s Energy Revolution? by Michael Edesess (Article)
Germany’s energy plans lie between Scylla and Charybdis: fossil fuel-generated carbon dioxide emissions on the one hand and potentially catastrophic nuclear energy on the other. With strong motivation to avoid both, Germany has been left with only one alternative. The direction of energy policy in the U.S. ? and the rest of the world ? may rest on whether Germany succeeds in its ambitious plan to embrace renewable sources.
2013-04-12 Soft Patch - Part Four? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Stocks continue to trade at all-time highs, but concerns are rising over a possible pullback and downturn in economic growth. A consolidation of gains is likely, but trying to trade around a pullback can be quite difficult. A potential tapering of Fed asset purchases continues to be discussed, but the Fed also appears nervous over the potential for a spring downturn. Cooler heads appear to be gaining traction in Washington and at least some marginal progress is being made. Economic improvement is gaining traction in Japan, raising hopes of sustainable change, while Europe continues to suffer.
2013-04-09 MLPs: Winning Streak Broken, Growth Story Intact by Sponsored Content from Legg Mason ClearBridge
by Chris Eades, Portfolio Manager (Article)
After an off year clouded by investors concerns about future tax policy, ClearBridges outlook for MLPs is again brightening. Oil and natural gas production are both ahead of estimates and the resulting infrastructure build-out is continuing.
2013-04-09 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles
The first quarter of 2013 turned out pretty much as expected: a low volatility environment with the level of bond yields and credit spreads relatively stable. At some point, we have to be happy with earning a yield on our fixed income investments. The last several years have been a major bond bull market, particularly 2012, but with yields at low levels, there is not much room left for bond price appreciation and we should be comfortable with earning our yield and carry.
2013-04-09 John Hussman ? Why Prospective Returns Are Low by Robert Huebscher (Article)
Monetary and fiscal policies have driven our economy into an unstable equilibrium, pushing investors into higher-yielding securities, according to John Hussman. But those higher yields are illusory, he said, because corporate profit margins are too high to be sustainable.
2013-04-03 Surprise! 2013 Rally Pales in Comparison to 2012 “Stealth” Rally by Douglas Cote of ING Investment Management
Despite the hoopla over first quarter market performance, it paled in comparison to the first three months of 2012. Driven in part by an extremely accommodative Fed, the U.S. economy is gaining traction, but Europe continues to flounder. After their first negative print in three years during the third quarter, S&P 500 companies returned to positive earnings growth in the fourth. A broad, globally diversified portfolio is the best way to balance the desire for wealth accumulation with an appreciation of volatility.
2013-04-02 Bernanke’s Motives Behind Quantitative Easing by Paul Franchi (Article)
We are at a turning point: away from one global monetary standard, to a yet-to-be-determined new form.
2013-03-25 Cyprus Reminds Us of Threats and Improving Global Economy by Bob Doll of Nuveen Asset Management
Equity averages sagged slightly last week. Strength later in the week made up for earlier weakness as the equity rally paused for the Cyprus crisis. We (and the consensus) perceive Cyprus as mainly a local problem and believe it supports our view to remain cautious with Eurozone weightings.
2013-03-21 Goldilocks Roars by Team of Bedlam Asset Management
Equity markets are producing supra-normal returns. To March 18th, the portfolio is up over 15% year-to-date, over 100 basis points ahead of the index. Many investors would be happy with such a gain over a full year rather than a mere twelve weeks, so are puzzled, the more so as respected pundits agree that the data makes for easy stories of rampant inflation, collapsing government credit and a prolonged global recession. Equity markets, however, are stubbornly refusing to follow the script.
2013-03-20 US Equities: Does Valuation Matter? by Mark Ungewitter of Charter Trust Company
With growing talk of a new secular bull market, its time to take a look at valuation history. While its true that anything can happen in financial markets, it seems unlikely that a new secular bull market will lift off from a P/E multiple of 17x.
2013-03-18 Finding the Sweet Spot by Mark Kiesel of PIMCO
Where is the investment sweet spot in todays global financial markets? The uneven global growth outlook means there are opportunities and risks for both credit and equity investors.
2013-03-18 Outlook for the Yen by Team of Nomura Asset Management
For several quarters ahead, we estimate that the Yen will remain range bound near the level of PPP (purchasing power parity), which is estimated to be between 90 to 95 Yen/USD. Though currency movements will be affected by various factors, we think the monetary policies of both Japan and the U.S. are the most important.
2013-03-18 UK Budget: No Fiscal Consolidation, but Looser Money Ahead by Darren Williams of AllianceBernstein
We expect little change in UK fiscal policy in Wednesdays budget. Instead the Chancellor George Osborne may try to nudge the Bank of England towards more aggressive monetary easing, putting further pressure on the pound.
2013-03-12 Gundlach: Investors are asking the Wrong Question by Robert Huebscher (Article)
If you're trying to assess the Federal Reserve's so-called exit strategy from quantitative easing, then you're asking the wrong question, according to Doubleline's Jeffrey Gundlach. Quantitative easing is a permanent policy tool, he said, and investors should be asking what that means for their investment strategy.
2013-03-12 After Last Week's US Rally: Proceed with Caution by Russ Koesterich of iShares Blog
While last week's rally was supported by better-than-expected economic data and improving investor sentiment, the magnitude of US stocks' advance is starting to cause some indicators to flash yellow. Russ explains.
2013-03-07 Capex Revival by Francis Gannon of The Royce Funds
For some time now, we have been noting the defensive nature of the investment environment, one in which fear and uncertainty continue to be the major forces driving markets. Interestingly, this trend has held true for both investors and corporations alike of late. Even after a powerful move from the low of last November, for example, investors remain fearful about cyclical or economically sensitive sectors while at the same time embracing those very sectors that benefit from easy money, are defensive by nature, and are supposedly riskless.
2013-03-04 And That's the Week That Was by Ron Brounes of Brounes & Associates
The sky is falling. The sky is falling. It's the millennium all over again. (How did those fears work out?) With politicos unable to reach any agreement on the budget (taxes), the "dumb, arbitrary" spending cuts began to take effect to the tune of $85 billion this year. (So much for a military preparedness.) Though the impact on the economy will not be felt overnight, some areas will begin to suffer sooner than others and biz/consumer confidence could become an issue in the near future.
2013-02-26 Looking For A Reason To Sell-Off by Christian W. Thwaites of Sentinel Investments
Markets were looking for a reason to correct. Risk assets had outpaced themselves since mid November and in the first seven weeks the S&P had outperformed the US Treasury 10-year note by 12% and the 30-year bond by 15%. The markets will lumber through the sequester and face the next test on the debt ceiling and first quarter results. Below the surface, the outlook is mildly optimistic. Why the qualifier? Because everything, in Europe, US and Japan, must be set in the context of the asset deflation and deleveraging going on and that will go on for some years.
2013-02-26 Sudden Discomfort by Scott J. Brown of Raymond James
Minutes of the January 29-30 meeting of the Federal Open Market Committee showed a growing discomfort with the Feds Large-Scale Asset Purchase program (QE3). Thats not all that surprising. Even those who strongly favor the program arent exactly happy with it. However, thats a far cry from wanting to end the program anytime soon. We should learn more this week as Fed Chairman Bernanke delivers his semiannual monetary policy testimony (Tuesday and Wednesday).
2013-02-21 Gold Miners- Back in the Abyss- An Update by JJ Abodeely of Value Restoration Project
Back on May 18th, 2012 I wrote a piece titled Jumping Into The Abyss: A Bull Case for Gold Mining Stocks. The miners had declined 40% from their August 2011 highs and for a variety of fundamental reasons like valuation and the relationship between mining costs and the price of gold and technical reasons, like sentiment, I felt the case to buy was compelling. The stocks subsequently rallied more than 30% over the following 4-5 months.
2013-02-19 Alan Greenspan on the Market and the Global Economy by Adam Jared Apt (Article)
During his six-decade-long career in financial services, Alan Greenspan was a central figure in seminal events that drove investment markets, from the savings-and-loan crisis to the dot-com bubble to the housing crisis. Now, nearing 87, he rarely speaks in public. But he did so last week, offering his forecasts for the U.S. and European economies.
2013-02-16 In the Year of the Snake, Where Will Copper Head? by Frank Holmes of U.S. Global Investors
With an improving global economy and Chinas new leadership ramping up projects, will base metals, such as copper, head higher?
2013-02-13 Concerned by Recent Economic Data? Look Closer by Marco Pirondini of Pioneer Investments
We've seen a lot of GDP data recently that, at first look, may seem a bit concerning. But if we take a moment for analysis, much of the news is actually good for the economy and the markets.
2013-02-12 The Milton Friedman Centenary: One Hundred Years of Surprisingly Little Solitude by Laurence B. Siegel (Article)
Milton Friedman was once a lonely voice for capitalism in a collectivist era, and seemed doomed to a hundred years of solitude. Instead, he arguably became the preeminent public intellectual of the hundred years that followed his 1912 birth.
2013-02-11 And That's the Week That Was by Ron Brounes of Brounes & Associates
With folks in the Northeast finally returning to normalcy following Superstorm Sandy's impact in October, a "potentially historic" blizzard threatened the region with predicted disruptions to businesses, schools, travel, etc. Though New England is expected to catch the brunt of the damage, forecasters are calling for up to 20 inches of snow in New York City. For now, NYSE Euronext does not anticipate anything but "business as usual" at the NY Stock Exchange as contingency plans are well in place.
2013-02-05 Letters to the Editor by Various (Article)
A reader responds to Joe Tomlinson's article, Predicting Asset Class Returns: Recommendations for Financial Planners, which appeared last week, and another reader responds to Dan Richards' articles.
2013-01-25 Housing Is Off the Floor, But Faces Ceilings. by Team of Northern Trust
Housing is off the floor, but faces ceilings. The cost of housing could be a source of increased inflation. January's FOMC meeting should not break any new ground.
2013-01-16 UK Economic Quagmire Adds Pressure for Monetary Policy Change by Darren Williams of AllianceBernstein
Bank of England governor-elect, Mark Carney, has raised hopes that the central bank may soon switch to a nominal GDP target. In our view, the costs outweigh the benefits, but the attractions of a radical new approach will grow if the economy remains stuck in the doldrums.
2013-01-15 Demographics and the Decline of Equity Mutual Funds by Paul Franchi (Article)
Until the last few years, mutual fund flows followed performance. Recently, however, money has flowed disproportionately into bond funds and out of US equity funds despite a strong rally in the equity markets. Changing demographics explain this shift, which has important implications for advisors and the mutual fund industry.
2013-01-15 What's Behind the Buyback Binge? by Milton Ezrati of Lord Abbett
The pace of stock repurchases says much about equity valuationsand companies' expectations for economic growth.
2013-01-11 Abe's Return May Prod Japan Forward by Kenichi Amaki of Matthews Asia
Japan's politics have entered 2013 with a mixed freshness. Former Prime Minister Shinzo Abe has clinched a rare second shot at the prime minister's post. His first term, which began in late 2006, lasted only about a year and ended with his sudden resignation. But following its landslide victory last month, his Liberal Democratic Party (LDP) has secured a two-thirds majority in the 480-seat Lower House, giving it the constitutional power to override Upper House opposition, where no single party holds a majority, on almost all issues.
2013-01-11 Fed Policy Update: Waiting for Clearer Criteria for Open-Ended Asset Purchases by Alan Levenson of T. Rowe Price
The FOMC's shift from dates to economic conditions as the basis for policy rate guidance clarified the criteria for beginning rate hikes. The criteria for ceasing open-ended asset purchases are not clear, and may reflect not only the evolution of the labor market recovery but also concerns about financial stability and the size of the Fed's balance sheet. We expect the Fed to try to clarify these criteria in the months ahead. Asset purchases will end a "considerable time" before policy rate hikes commence, and rate hikes will commence before asset sales.
2013-01-10 Will Emerging Market Earnings Rebound in 2013? by Morgan Harting of AllianceBernstein
For two years, emerging markets companies have delivered inferior earnings growth and investment returns compared to peers in sluggish developed market economies. Now, the consensus is that earnings growth will catapult from near-zero in 2012 to 13 per cent in 2013. Hopes were high at the end of 2010 and 2011, too, yet analysts were then forced to revise down their earnings estimates. Will 2013 represent another triumph of hope over experience? To answer that question, let's look at what investors got wrong about emerging markets in recent years.
2013-01-06 And That's the Week That Was by Ron Brounes of Brounes & Associates
Welcome to a new beginning, a new yeara new optimistic investor, a new bipartisan Congress, (well, maybe not). The more things change, the more they stay the same. While investors embraced the budget deal (that is less of a deal than a procrastination), the pragmatists realize that very little has changed other than the "fiscal can" has been kicked down the road for two months. Stocks skyrocketed; bonds plunged; politicos bickered. Welcome to 2013.
2013-01-03 Another Look at Small-Cap Myths by Francis Gannon of The Royce Funds
A few years ago we wrote about several small-cap myths. As we begin the New Year, we thought it might be helpful to revisit some of the more prominent misconceptions about our chosen asset class and to examine how they have factored into recent performance.
2013-01-03 A Year on the Brink by Joseph Stiglitz of Project Syndicate
The two main surprises in 2012 were the slowdown in emerging markets, which was slightly sharper and more widespread than anticipated, and Europe's embrace of some truly remarkable reforms though still far short of what is needed. Looking to 2013, the biggest global economic risks are there and in the US.
2012-12-26 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 Jeremy Siegel on 'Dow 15,000' by Robert Huebscher (Article)
Jeremy Siegel was one of very few individuals to have correctly predicted the strong performance of the equity markets over the last year. The Wharton professor and author of the renowned book, Stocks for the Long Run, forecasts continued strong performance for the year ahead.
2012-12-11 Shared Sacrifice by David Rosenberg (Article)
Now that everyone is focused like a laser beam on Fiscal Armageddon, it may be more appropriate to look at what is happening on Main Street rather than Washington. Looking ahead, it is going to be more about the economy, and taking it a step further, at times like these, it is important to understand where the real economic power resides, and this is with the people.
2012-12-11 Loomis Sayles' Matt Eagan on the Macro and Fixed Income Outlook by David Schawel, CFA (Article)
In this interview, Loomis Sayles' Matt Eagan discusses the fixed income universe, Fed policy and issues facing the global macro economy. Eagan is the co-manager, along with Dan Fuss, of the Loomis Sayles Bond Fund and he manages the Loomis Sayles Strategic Alpha Bond Fund.
2012-12-04 The Big Picture by David Rosenberg (Article)
Our crystal ball says to stick with what works in an uncertain financial and economic climate - in other words, maintain a defensive and income-oriented investment strategy.
2012-11-13 Bank Loans: Looking Beyond Interest Rate Expectations by John Bell and Kevin Perry (Article)
Portfolio managers of Bank Loan Strategies, John Bell and Kevin Perry, outline the major advantages and risks of bank loan investing and the roles that a bank loan allocation can play in a fixed income portfolio.
2012-10-16 Will Bonds Be ?Burnt to a Crisp?? by David Schawel, CFA (Article)
Bill Gross's recent monthly commentary painted a disturbing picture for investors - he foresees bonds being ?burnt to a crisp.? This isn't just hot air. Such a conflagration is possible, and investors in bond funds, especially those that are constructed similar to the widely followed Barclays bond index, need to heed risks inherent in today''s market.
2012-09-18 Still Broken After All These Years by Martin Weil (Article)
Four years ago this week, the financial crisis took the world's economies to the brink of collapse. September 15, 2008, the day Lehman Brothers failed and sent global financial markets into cardiac arrest, was my wedding anniversary. My wife and I were celebrating at the time on the Mediterranean coast of Turkey ? a memorable trip, to be sure. Reflecting back on that moment now, I?m struck by how little distance our nation has traveled since.
2012-09-18 Campaign Rhetoric and Our Energy Future by Michael Edesess (Article)
At their respective conventions, both President Obama and Mitt Romney spoke to a centrally important topic for America and the world: energy. Their positions ? political posturing aside ? are broadly similar. But rather than a coherent, sustainable vision for the energy future of the United States, both men's rhetoric reflected the usual exercise in political base-touching, apple pie-polishing, and third-rail avoidance. And two important, perhaps crucial, pieces of the energy puzzle were hardly mentioned at all.
2012-07-31 Expect Headwinds for Stocks If Hoisington is Right about Bonds by Keith C. Goddard, CFA (Article)
Might today's historically low interest rates in the U.S. persist for years to come? The latest Quarterly Review and Outlook from Hoisington Investment Management forces readers to consider that possibility, refuting the reversion-to-the-mean mindset that causes many people to expect higher interest rates in the not-too-distant future. If the Hoisington model for the economy turns out to be right, the implications for the stock market are unfavorable.
2012-07-10 Recession is Not Imminent by Dwaine van Vuuren (Article)
Perma-bears are bombarding us with alarm bells, sounding the doom of the US economy. We find ourselves in yet another 'summer slowdown scare,' for the third year running. In 2010 and 2011, the purported slowdowns turned out to be soft landings. Investors who ran to the sidelines stared in disbelief as the stock market roared ahead, leaving them behind. We are likely in the same position now.
2012-06-12 Kingdoms of the Blind by Michael Lewitt (Article)
Recent events offer a rare illustration of the combined effects of the failure of monetary, fiscal and regulatory policy to coordinate a meaningful response. Rising budget deficits, record low interest rates, J.P. Morgan's proprietary trading blunder and the botched Facebook IPO process speak to abject policy failures in virtually every aspect of finance. It's not even a question of not having learned our lessons; our collective policy intelligence actually appears to have diminished.
2012-06-05 Letters to the Editor by Various (Article)
A number of readers respond to our article, Can Krugman Fix Our Economy?, which appeared last week.
2012-05-15 Ponzi's Children by Michael Lewitt (Article)
Europe, whose economic condition is nothing less than terminal, is about to receive what physicians refer to as a 'zetz' of morphine in the form of M. Hollande. A 'zetz' is the final dose that doctors give to dying patients to hasten their passage to the afterlife. In Europe's case, however, the medicine is not going to be painless, and its administration is not based on mercy but on resentment and stupidity.
2012-05-08 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.
2012-05-08 Mohamed El-Erian and David McWilliams: The Key to Resolving Europe's Crisis by Robert Huebscher (Article)
Dealing with a crisis requires three things, according to Jack Welch, General Electric's former CEO. Define your reality - not as you would like it to be, but as it is. Do something about it. Then, third, acknowledge that the crisis wasn't half as difficult as you thought it was. Germany is the key player in Europe's crisis today, and it is still struggling to accurately define its reality.
2012-05-01 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 Bruce Greenwald on Structural Imbalances in the Economy by Eric Uhlfelder (Article)
Bruce Greenwald likes to say that he is constituted to disagree with everybody about everything, and he was true to his word at the recent Hyman P. Minksy Conference in New York. Taking immediate exception with the virtually unanimous characterization of the economic crisis as a balance-sheet recession, Greenwald, a professor of finance at Columbia University, argued that, far from being unusual, balance-sheet recessions can in fact be found at the heart of almost all business cycles.
2012-04-17 Muppet Capers by Michael Lewitt (Article)
Investors enjoyed strong stock market and credit market gains during the first quarter of the year, but storm clouds may be forming on the horizon. Corporate profits have likely peaked. Stocks may be the best house in a bad neighborhood, but houses in that neighborhood appear to be fully priced for now. There are also some troubling signs in the bond markets, particularly the long end.
2012-04-10 Super Macro - A Fundamental Timing Model by Theodore Wong (Article)
Rather than endure losses in bear markets - as passive investors must - I have shown that a simple trend-following model dramatically improves results, most recently in an Advisor Perspectives article last month. Now it's time to extend my approach by showing how this methodology can be applied to fundamental indicators to further improve performance.
2012-04-03 Fewer, Richer, Greener: Why Jeremy Grantham is (Partly) Wrong by Laurence B. Siegel (Article)
Is the human experience getting better or worse? This is a big question investors are rarely asked to confront, yet its answer has profound consequences for market returns.
2012-03-20 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.
2012-03-20 The Wages of Denial by Michael Lewitt (Article)
Europe is insolvent, and hopelessly so. Her procurer - the European Central Bank (ECB) - can front her some money for a while, but in the end she is either going to have to repay him or suffer a very rough consequence. In the meantime, however, she can continue to entertain her customers, in this case those willing to extend her credit in one form or another. Sooner rather than later, however, these creditors are going to grow tired of her tricks and turn their attention otherwise. At that point, she will be left to deal with the ECB because nobody else will have her.
2012-03-13 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.
2012-03-13 The Gutenberg Economy by Michael Lewitt (Article)
As commentators near and far speculate on what 2012 will bring to the global economy and markets, there is little question that one factor will be decisive: the central banks' printing presses. Both the Federal Reserve and the European Central Bank (ECB) will keep printing dollars and euros around the clock until their presses run out of ink.
2012-02-21 Woody Brock on Solving America's Fiscal Problems by Robert Huebscher (Article)
Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions, an economic research and consulting service. In this interview, he discusses his recently published book, American Gridlock, and how America can grow its economy through 'good' deficit spending.
2012-02-14 Recession: Just How Much Warning is Useful Anyway? by Dwaine van Vuuren (Article)
In December 2011, ECRI dialled down the urgency of the timing of their call to 'within six months.' That raised the question of just how much recession warning is useful when it comes to forecasting equity market performance.
2012-01-17 Martin Wolf on the Eurozone and Beyond by Robert Huebscher (Article)
Martin Wolf is widely considered to be one of the world's most influential writers on economics. Since joining the Financial Times in 1987, where he is chief economics commentator, he has received numerous awards for excellence in financial journalism. In this interview, he discusses the Eurozone crisis and prospects for global economic growth.
2012-01-17 GMO: Something's Fishy in China by Robert Huebscher (Article)
A wide gulf separates the two most prominent views regarding China's future. Faced with slowing economic growth, one side says its leaders will deftly navigate a soft landing, while the other claims it will face an implosion similar to those that befell Japan 20 years ago and the US in 2008. Count GMO, a firm that has built its reputation on its ability to identify a bubble about to pop, in the latter camp.
2012-01-17 An Essential Client Conversation ?Will I be able to pay for my hip replacement at age 85?? by Dan Richards (Article)
Advisors face a big challenge in planning for boomers. Your assumptions about how long they'll live and the nature and cost of their lifestyle as they age will dramatically impact your planning decisions. Conversations with boomers about those topics and about the implications of funding health care are difficult but important.
2012-01-17 A Nobel Laureate?s View on the US A Debt Problem, but an Unemployment Crisis by Dan Richards (Article)
Peter Diamond is a professor emeritus at MIT and the winner of the 2010 Nobel Prize in Economics for his work on unemployment and labor market policy. In this interview, he discusses the degree to which US unemployment is a structural problem and whether it can be reduced through fiscal stimulus. This is the transcript of the interview.
2012-01-10 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 Using the ECRI WLI to Flag Recessions by Dwaine van Vuuren (Article)
In September 2011, the ECRI proclaimed a new U.S recession would begin sometime in the coming year. It based its prediction on a host of its own internal long-leading indexes, together with its widely followed weekly leading index (WLI). I want to focus on the proper use of the WLI and examine its accuracy in recession dating, in order to put this current recession call into context.
2012-01-03 US Recession - An Opposing View by Dwaine van Vuuren (Article)
A large number of reputable analysts and companies are forecasting a new U.S recession on the immediate horizon. Attracting the most attention is ECRI, which made a public recession call on September 30th and several television reaffirmations since. But an examination of a broader range of other composite economic indicators shows that sole reliance on ECRI's forecast would be misplaced.
2011-12-20 Dennis Gartman Explains His Call on Gold by Robert Huebscher (Article)
Dennis Gartman has been publishing his daily commentary, The Gartman Letter, since 1987. He's been in the news lately because of a call he made last week on the price of gold. In this interview, he discusses the reasons behind that forecast.
2011-11-08 Bill Gross' Revised Paradigm: The New Normal Minus by Robert Huebscher (Article)
Following the financial crisis of 2008, PIMCO articulated its 'new normal' forecast of slow growth and mediocre capital market returns. Appending the even drearier modifier 'minus' to that outlook, Bill Gross said that expectations now appear worse than even he previously feared. Gross was pessimistic in both the near and long terms, and he startled the audience with his premonition that 'capitalism is at risk.'
2011-10-18 Bob Doll: Why the US is Positioned Strongly by BlackRock (Article)
Investor unease has risen dramatically over the past quarter in the face of growing concerns about the world's economic and financial health. The focal point has been the intensifying debt crisis in Europe. The issues facing Europe are highly complex, but essentially are underscored by a single question: Is Europe facing a solvency crisis or a liquidity crisis?
2011-10-11 A Critical Look at Obama?s Economic Team by Laurence B. Siegel (Article)
Confidence Men is an exposé, by the reporter Ron Suskind, of what he claims is incompetence, infighting, and insubordination at the highest levels of economic leadership in the Obama administration during the global financial crisis. Those accusations are largely misdirected. After all, there was no playbook for the administration's economic thinkers to work from - the rapidly unfolding crisis forced them to improvise.
2011-10-11 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.
2011-09-13 The Handicap of Experienced Investors by J.J. Abodeely, CFA, CAIA (Article)
In the investment business, assets under management are concentrated with the largest and most established firms. Understandably, investors tend to allocate capital to managers after they've established a good track record. Unfortunately, for many, the analysis stops there. By failing to separate good results from identification of what makes a great investment manager, investors are primed for disappointment.
2011-09-13 The Risks of Exchange-Traded Products by Dennis Gibb (Article)
Every major financial crisis has been foretold by timely but ultimately ignored warnings. At the end of mania, the rush to secure more fees, investment performance and status trumps common sense. In the last few months, the drumbeats of warnings from financial journals and regulators about exchange-traded funds have been sounding. Few seem to be listening.
2011-09-13 A Response to 'A Winning Endgame' by Guy Cumbie (Article)
A Winning Endgame, Robert Huebscher's review of John Mauldin's book Endgame, made some highly problematic claims about our energy usage. Moreover, Huebscher's claim is unfounded that an energy policy, such as the cap-and-trade policy he recommended, is the right step toward solving our economic crisis.
2011-08-30 Scenarios for a Stock Market Bottom by Keith C. Goddard, CFA (Article)
A probability-based forecast for the U.S. stock market between now and 2013 can be constructed using historical relationships between stock prices, earnings and dividends. This yields a matrix of possible outcomes for the S&P 500 Index over the next two years.
2011-08-23 A Fundamental Investment Strategy for Today's Environment by Robert Huebscher (Article)
We spoke with Tim Hartch and Michael Keller, who are co-managers of the Morningstar 5-star BBH Core Select Fund (BBTEX) from Brown Brothers Harriman. The fund's strategy is strictly bottom-up, with investments in established, cash-generative businesses that are leading providers of essential products and services with strong management teams and loyal customers.
2011-08-16 A Commentary on the Correction by Michael Nairne (Article)
Market corrections are always painful and this one particularly so because of the lingering anxiety from memories of the 2008-2009 market crash. I explore the history of stock market corrections and examines the dynamics of the recent downturn as well as actions that may be warranted, depending on individual circumstances.
2011-08-09 Does Government Intervention in Financial Markets Slow Economic Growth? by Michael Edesess (Article)
As we saw with the Dodd-Frank legislation and the Consumer Financial Protection Bureau, the question underlying the debate over financial regulation is whether it stifles economic growth. Leo F. Goodstadt's book, Reluctant Regulators, provides useful insights from the experiences of Hong Kong and China. It also causes us to ponder whether our measurement of economic growth is fundamentally flawed.
2011-06-14 Bruce Berkowitz - Ignoring the Crowd on Financials by Sam Parl (Article)
Bruce Berkowitz has said that his deep value and contrarian investing style will not guarantee short-term results, but he promises his shareholders will be rewarded for their patience over the long term. Last week, he explained why some of his positions - especially those in the financial services sector - are among the best opportunities in the market.
2011-05-31 Our Four-Year Anniversary by Robert Huebscher (Article)
This month Advisor Perspectives marks four years of publication, and I?d like to share with you some of our accomplishments over the last year and our goals for the future.
2011-05-03 P/E: Future on the Horizon by Ed Easterling (Article)
Most people expect P/E to measure current valuation and to show historical patterns. But more features are available from some versions of P/E. The methodology behind the Crestmont P/E enables investors to anticipate the future. It may not precisely predict the market ten years away, but it frames within a relatively tight range the likely outcome. One component from determining the Crestmont P/E is a means to assess the future trend line for EPS using estimates of future economic growth (GDP).
2011-04-26 Why Demographics will Drive Global Growth by Sam Parl (Article)
When economic pundits trade heated predictions about the massive economic shifts we see internationally, it is easy to forget the subtleties that shade their forecasts. One such shadow overhanging any intelligent debate about our global economic future is global age demographics, according to Harvard Professor Richard Cooper.
2011-04-05 A Trading System that Disproves Efficient Markets by Erik McCurdy (Article)
Efficient market adherents claim it is impossible to outperform the stock market over the long term. Although their principles are the foundation of modern investment theory, other compelling models, including the one I propose here, reveal that precisely the opposite is true, supporting the thesis that markets are highly inefficient.
2011-03-15 Running on Empty by Michael Lewitt (Article)
Despite the increasing undercurrent of negative news creeping into the financial markets, the stock market remains strong. HCM expects equities to continue to perform well for the foreseeable future (i.e. through the end of June) although most of this letter will discuss the reasons why it shouldn't. In some ways, this market is a lot like Charlie Sheen. It pretends to have tiger blood and the powers of a warlock, but deep inside it is suffering from an addiction to a substance (i.e. debt) that will ultimately kill it.
2011-03-15 Margin Shrinkage - It Can Happen to You by Vitaliy Katsenelson (Article)
Profit margins are a tick away from all-time highs and are creating the impression of cheap equity valuations. But that impression is a mirage, because today's generous margins are destined to shrink.
2011-02-08 Undoing Meredith Whitney's Damage by Hildy Richelson, Ph.D. (Article)
Meredith Whitney did the municipal bond market an immense disservice with her misguided comments on 60 Minutes when she predicted massive defaults. Two recent articles in this publication provided accurate rebuttals to her analysis, but they failed to clarify important reasons why muni bond investors do not face the imminent peril that Whitney predicted.
2011-02-01 Can Economics Save the Economy? by Robert Huebscher (Article)
Christina Romer, Greg Mankiw and Paul Krugman were among a group of thought leaders who spoke at a conference in Cambridge last week. They cited a lack of sufficiently powerful and politically feasible policy options, calling into question whether economists will be able to produce the clear path to the stronger recovery that the Obama administration seeks.
2011-01-11 The Two Elephants Facing the US Economy by Michael Lewitt (Article)
The consensus has reached the conclusion that financial markets will enjoy a strong start to 2011. This is reason enough to approach the markets with caution as the year begins. When everybody is leaning to one side of the boat, the vessel is far more likely to tip over, particularly if it hits an unexpected wave.
2011-01-04 The Coming Decade of Sideways Markets by Robert Huebscher (Article)
'We are in the middle of a sideways market, and we still have another decade to go,' says Vitality Katsenelson. In this interview, Katsenelson shares his insights on the decade ahead and the many factors that may keep China from leading us out of the recession.
2010-12-28 The Squam Lake Report: Reforming the Financial System by Dougal Williams (Article)
Ken French and Robert Shiller were among a group of leading economists who, in the fall of 2008, convened what was to become known as the Squam Lake Group. Their recently released and much-talked about book offers its authors' collective best answer to a defining question of our day.
2010-12-21 Ed Hyman: We Are Not Japan by Katie Southwick (Article)
Despite his worrisome outlook earlier this year, the ISI Group's Ed Hyman provided an upbeat forecast of the US economy, arguing that we are in the midst of an economic recovery that will lead to expansion. We are demonstrating that we are not Japan, he said.
2010-12-14 Looking Back at a Year of Policy Mistakes by Michael Lewitt (Article)
As we approach the end of 2010, the global economy remains captive to a boom-and-bust cycle resulting from years of pro-cyclical monetary, fiscal and regulatory policies. With very limited exceptions, the same policies that contributed to the 2008 financial crisis remain in place. The only difference is that government balance sheets are far more leveraged than they were heading into that crisis.
2010-12-06 Creating a Mirage of Economic Growth by Doug Carey (Article)
Bubble formation is not random. Some may believe it is, but bubbles are in fact a predictable byproduct of the fractional reserve system upon which our economy is built. By stimulating and amplifying lending through its fractional reserve system, the Federal Reserve systematically creates the mirage of growth, from which deception systemic crises inevitably result.
2010-11-30 QE2: Beware the Perils of its Success by Vitaliy Katsenelson (Article)
QE2 is like a drug prescription that comes with a list of side effects that are often worse than the disease it was supposed to cure. It is difficult to know the unintended consequences of QE2, but it may result in a substantial decline in the dollar, stagflation, lower economic growth and much higher interest rates.
2010-11-23 Why Three Top Bond Managers Like Equities by Robert Huebscher (Article)
You'll rarely - perhaps never - hear a fund manager say that market conditions do not favor investing in their chosen asset class. That's why it was so remarkable when several prominent managers recently admitted that they favored equities over their own discipline - fixed income.
2010-11-16 Jeremy Siegel on the Upside for Equities and the Virtues of QE2 by Robert Huebscher (Article)
In our annual interview, Jeremy Siegel, the Russell E. Palmer Professor of Finance at the Wharton School, offers his forecast for equities - a 10% to 20% gain in 2011, along with a continued rally through the end of this year. He also explains why the current round of quantitative easing is exactly what is needed to stimulate the economy.
2010-11-09 New Strategies in Alternative Investments by Robert Huebscher (Article)
Alternative investments, broadly speaking, and hedge funds, more specifically, have performed as intended over the last 20 years, modestly increasing returns and significantly reducing risk when added to a traditional stock-bond portfolio. Selecting the appropriate vehicle is the challenge, and that task has been made easier by the introduction of new exchange-traded strategies.
2010-11-09 Keynesian Confusion by Michael Lewitt (Article)
Keynesian policies are inflicting untold damage on the U.S. and global economies today. Keynes did not have to be misread. The reason that the current recovery is below par is that the economy is experiencing a massive paradox of thrift. We doubt that reducing already low rates is going to stimulate much of anything other than more frustration on the part of savers. Sooner or later, everything being earned on the upside of this liquidity-induced rally will be given back in spades - the only question is when.
2010-11-09 Bogus Numbers by Michael Nairne (Article)
The crux of the difference between the 'cheap' and 'overvalued' market valuation views lies in the selection of earnings numbers, of which there are two basic sets. The broadest traditional measure is 'as reported' earnings which includes all charges except the cumulative impact of accounting changes, discontinued operations and extraordinary items. Is the market cheap by the appropriate measure?
2010-10-29 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.
2010-10-12 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.
2010-09-21 Two Compelling Articles to Send Clients by Dan Richards (Article)
One of the most important roles for advisors is being an emotional anchor for clients ... preventing the highs from being too high and the lows from being too low. Dan Richards offers two recent articles that counteract the sense of pessimism about the economy ... driven in large measure by daunting headlines about housing prices, unemployment, deficits and political discord in Washington.
2010-09-14 The Centre Cannot Hold by Michael Lewitt (Article)
"A refusal to shed discredited monetary and fiscal policies and embrace creative and politically bold solutions is keeping our economy mired in high levels of structural unemployment and below-trend growth," writes Michael Lewitt in the latest edition of the HCM Market Letter. He also believes that "misguided faith in Keynesian solutions to debt crises, a near-religious belief that mild deflation must be avoided... and uninformed media hype about the alleged benefits of mergers and acquisitions" should be added to the list of bad ideas that lead economic policy and markets astray.
2010-08-31 Why Mid-Cap? by RidgeWorth Investments (Article)
RidgeWorth Investments has published research detailing six distinct reasons why investors should consider a specific allocation to mid-caps. Specifically, it explores historical performance, evaluates current conditions that favor mid-caps as well as examines how mid-caps have performed during different points in market and economic cycles. Finally, the research looks at the incremental benefit of adding an allocation of up to 40% of mid-cap stocks to a portfolio of solely large and small cap stocks. We thank RidgeWorth Investments for their sponsorship.
2010-08-17 A Double-Dip Recession Remains Unlikely ? A Mid-Year Update by Bob Doll (Article)
The past couple of months have been difficult for investors, but we are holding to our view that the recovery will continue and stocks will gain ground. Bob Doll, Vice Chairman and Chief Equity Strategist for Fundamental Equities at BlackRock, discusses the current situation, the predictions he made at the beginning of 2010 and opportunity in the financial markets for the second half of the year. We thank BlackRock for their sponsorship.
2010-07-20 The Opportunity in Build America Bonds by Jeff Westergaard (Article)
While the unique aspects of Build America Bonds (BABs) and recent Treasury Department actions are meaningful, the risks to investors have been over-emphasized. BABs remain an attractive vehicle for investors and issuers, and the market for them is likely to grow.
2010-06-29 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.
2010-06-08 Why Wall Street Won't be Reformed by Robert Huebscher (Article)
Michael Lewitt, author of the highly respected HCM Market Letter, has just released a new book, The Death of Capital. In this interview, he identifies the challenges facing those who seek to regulate Wall Street, and why most of the proposed reforms are likely to fail.
2010-06-01 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.
2010-05-18 Letters to the Editor by Various (Article)
In a letter to the Editor, a reader responds to Niall Ferguson's thesis in last week's article, A Historical Perspective on the Slight Depression.
2010-05-11 Predicting Financial Crises by Charlie Curnow (Article)
MIT Sloan School senior finance lecturer Mark Kritzman thinks he has found a warning signal to predict the onset of financial crises in a new statistical model called the absorption ratio. The absorption ratio predicts systemic risk by measuring how tightly markets are coupled, and thus how vulnerable they are to the spread of negative shocks.
2010-04-27 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.
2010-04-09 Employment Situation: Current Recovery vs. Other Jobless Recoveries by Asha Bangalore of Northern Trust
The economic recoveries following the 1990-91 and 2001 recessions have been coined as "jobless recoveries" and it is widely predicted that the current recovery will be "Jobless Recovery 3.0."
2010-04-06 Liz Ann Sonders on the US Economic Recovery by Robert Huebscher (Article)
Liz Ann Sonders is Senior Vice President and Chief Investment Strategist at Charles Schwab & Co. In this interview, she discusses her positive outlook for the US economy, which she believes has been recovering since last summer.
2010-04-05 Labor Market Turnaround by Bob Doll of BlackRock
The March payrolls report likely signaled the start of a long-awaited rebound in the employment picture, which should benefit the broader economy. As fiscal and monetary stimulus begins to fade over the coming months, the economy is going to require some self-sustaining mechanisms to kick in, and growing employment levels would certainly be beneficial. Over the course of the next year, we expect the economy to successfully shift from a recovery to an expansion. Investors should continue overweighting equities and credit-related fixed income assets and underweighting cash and Treasury bonds.
2010-03-30 Stocks May Have Gotten Ahead of Themselves by Bob Doll of BlackRock
The current environment is one of a broadening global economic recovery marked by improving corporate earnings, low interest rates, increasing business and consumer confidence, and a labor market that should soon turn positive. Markets have turned increasingly bullish on the chances for economic growth. Stocks may have gotten ahead of themselves in the short term, however, as some technical indicators now look stretched. Nevertheless, an ample amount of cash remains on the sidelines and the macro backdrop suggests that the long-term path of least resistance for stocks continues to be up.
2010-03-30 Gary Becker's Optimism by Brian S. Wesbury and Robert Stein of First Trust Advisors
The commentary responds to a recent Wall Street Journal interview with Nobel prize-winning economist Gary Becker. Becker is the founder, with Milton Friedman, of the Chicago school of economics. Becker said the financial crisis did not undermine his belief in free markets, and that he remained hopeful that competing interest groups would protect the country in the long run from a systematic bias toward bad policy. While Becker primarily blames new financial instruments for the economic crisis, however, Wesbury and Stein blame mark-to-market accounting rules.
2010-03-09 What's Next for the High Yield Market by Team of Pioneer Investment Management
The economy can achieve 3 to 4 percent growth in 2010. This growth rate, along with low interest rates, should provide a favorable environment for riskier fixed income asset classes such as high yield. Corporate profit margins, cash flows and productivity are all near record levels relative to prior cycles, and balance sheets are relatively healthy. This puts companies in a good position to capitalize on the recovery. A strategy that balances high yield, equity, convertible and bank loan securities is prudent, given the anticipated investment environment.
2010-03-08 Turning Cautious by Scotty George of du Pasquier Asset Management
The current global rallies in stocks seem to be short-cycle upswings within the existing secular bear trend. Low interest rates are leaving no other suitable alternative for investors, and high grade fixed-income opportunities are few and far between. Interest rates may rise, however, before year end as global debt continues to mount. Investors should therefore look for an above-average exposure to cash in the short term while waiting for downward movement in stocks in the long term.
2010-03-05 The Dominoes of Default by John Browne of Euro Pacific Capital
The sovereign debt crisis in Greece has drawn attention to countries with similar fiscal conditions, including the United Kingdom. Fueled by socialist fiscal policies, the debt ratio in Britain is rapidly approaching Greek levels. The pound sterling has lost 25 percent of its value relative to the U.S. dollar since mid-2008. U.S. sovereign debt is in nearly the same proportion relative to GDP as debt in the U.K. If the U.K. defaults on its debt, the U.S. may be the next domino to fall.
2010-03-01 Bank Credit Still Contracting by David A. Rosenberg of Gluskin Sheff
Outstanding bank credit fell $33 billion during the week of February 17, adding to a seven-week cumulative decline of $150 billion. Bank lending to households and businesses fell at a 12 percent annual rate over the past 13 weeks. As long as bank credit is shrinking, the jury will still be out on Fed rate hikes during the second half of this year and the ability of the economy to sustain above-potential growth. In addition, the revised Q4 GDP numbers indicate a lack of pent-up consumer demand with most spending directed to essentials, reinforcing a bearish, deflationary U.S. economic outlook.
2010-02-24 Lacking Confidence by David A. Rosenberg of Gluskin Sheff
U.S. consumer confidence fell 10.5 points in February, to 46.0, the lowest reading since last April. The consensus estimate was 55.0. While some blame a seasonal bias or winter storms for the decline, news about European default risks, a declining stock market and continued employment difficulties may also be at play.
2010-02-23 Letter to the Editor by Various (Article)
In this letter to the Editor, an advisor responds to last week's article, Boom and Bust, by Michael Lewitt of Harch Capital Management.
2010-02-20 And That's the Week That Was... by Ron Brounes of Brounes & Associates
Traders were eager to help the markets regain upward momentum after the President's Day weekend. Favorable news about Europe's future role in helping Greece and other countries with their budgetary issues fueled trader optimism, as did positive earnings reports and signals that manufacturing was leading the economic recovery with no signs of inflation. Equities closed higher on each of four trading days and approached break-even for the year.
2010-02-19 Will Productivity Gains Sustain US Economic Recovery if Employment Remains Subdued? by Joseph G. Carson of Alliance Bernstein
Productivity gains have exceeded real GDP growth by 3 percentage points during the economic recovery as companies have slashed payrolls and other costs. These productivity gains are critical to overall economic performance, including profitability and standard of living improvements, and will offset any risk of weak employment.
2010-02-19 My Take on the Fed by David A. Rosenberg of Gluskin Sheff
The Federal Reserve's decision to increase the discount rate from 0.5 percent to 0.75 percent was only a surprise because of the timing. The rate hike was part of the Fed's long-discussed exit strategy from its emergency stimulus plan. A number of other emergency measures are also scheduled to end this month.
2010-02-19 Fun with Charts by Doug Mackay and Bill Hoover of Broadleaf Partners
Investors need not worry about the Fed's recent increase in the discount rate by 25 basis points, to 75 basis points, even though this rate hike may be the first in a series of many such increases. The last time the Fed started to raise rates, in mid-2004, the S&P 500 climbed from roughly 1100 to 1567 three years later.
2010-02-16 The Federal Reserve's Exit Strategy: Unlegislated Bailout of Fannie and Freddie by John P. Hussman of Hussman Funds
John Hussman of Hussman Funds says the U.S. Treasury and the Federal Reserve circumvented the need for Congressional approval and engineered a tacit government bailout of Fannie Mae and Freddie Mac. More than 60 percent of the U.S. foreclosure market falls under the umbrella of these two government-sponsored enterprises. He also examines other factors affecting the current market climate.
2010-02-16 Boom and Bust by Michael Lewitt (Article)
The US and global economies are "trapped in a cycle of boom and bust as a result of fiscal and monetary policies from which there is no easy escape," says Michael Lewitt of Harch Capital Management. Lewitt believes the S&P will rally to 1,200-1,250, but says the long-term prognosis is "somewhere between grave and terminal." We are privileged to provide this excerpt from Lewitt's monthly newsletter and encourage our readers to subscribe to it directly.
2010-02-13 Winter Quarterly Commentary by Alan T. Beimfohr and John G. Prichard of Knightsbridge Asset Management
Alan T. Beimfohr and John G. Prichard of Knightsbridge Asset Management say in their winter quarterly commentary that the federal government will need to time its balancing of the budget just right in order to avoid either a repeat downturn or accumulating inflation. The Fed, meanwhile, will also need to withdraw monetary stimulus at just the right time.
2010-02-09 China?s Quest for a Shortcut to Greatness by Vitaliy Katsenelson (Article)
The Chinese economy must be getting out of control, because the Chinese government is doing the unthinkable: It is desperately trying to put the brakes on its economy. Author and fund manager Vitaliy Katsenelson looks back at how China got into this trouble and looks forward to China's prospects.
2010-02-09 Near-term Gains for the US Dollar?/Prospects for Japanese Recovery by Asha Bangalore and James Pressler of Northern Trust
In Northern Trust's daily global commentary, Asha Bangalore says speculation against the euro could result in a near term gain for the dollar. The dollar appreciated 5.6 percent against the euro in the four weeks ending February 5. James Pressler looks ahead to Japan's release of fourth quarter GDP data next week. He predicts a growth figure of 0.6 percent, despite the consensus estimate of 0.9 percent.
2010-02-02 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.?
2010-01-25 Invigorated Inventories: Catalyst for Growth? by Milton Ezrati of Lord Abbett
?Now with a turn to accumulation, especially if it occurs in a compressed period of time, inventories could add as much as two percentage points to overall growth. Under such an influence, an otherwis
2010-01-22 Economic Overheating With Chinese Characteristics by James Pressler of Northern Trust
In the two weeks leading to this morning's Q4 GDP announcement, a variety of signals have been emanating from Beijing's policy centers, all suggesting the economy was running a little warmer tha
2010-01-19 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.
2010-01-09 Forecasts by Team of State Street Global Advisors
2010-01-05 The New Normal by David A. Rosenberg of Gluskin Sheff
2010-01-05 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.
2009-12-22 ECRI: Recovery and Jobs Growth are Underway by Robert Huebscher (Article)
Lakshman Achuthan, the managing director of the Economic Cycle Research Institute (ECRI), provides an upbeat forecast in our interview. He says the economic recovery has been underway since the summer and he expects to see jobs growth in the coming quarters. ECRI is a global research firm serving buy- and sell-side institutions and Fortune 500 companies.
2009-12-15 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.
2009-12-15 Investing in Range-bound Markets by Vitaliy Katsenelson (Article)
Vitaliy Katsenelson, a frequent contributor to these pages, reviews his thesis for secular market cycles, why the US markets remain locked in a range-bound state, and what it will take for them to exit from that state.
2009-11-24 Interview: Brian McMahon of Thornburg Investments by Robert Huebscher (Article)
We speak with Brian McMahon, CEO and CIO of Thornburg Investment Management about the Thornburg Income Builder Fund (TIBAX) and the challenges of finding income-producing securities in today's markets.
2009-11-17 Our Steroidally Challenged Economy by Vitaliy Katsenelson (Article)
Vitaliy Katsenelson writes that the US economy is like a marathon runner who, after suffering an injury, takes steroids in order to return to racing. His performance is fine, but what don't see are the risks, just as our economy is now "steroidally challenged."
2009-11-17 Disheartened by Michael Lewitt (Article)
We are again privileged to publish an excerpt from Michael Lewitt's HCM Market Letter. In this issue, titled "Disheartened," Lewitt argues that the powers-that-be are making limited progress addressing the structural problems in the economy, and that the greatest challenge is to achieve budgetary discipline.
2009-10-27 The ?V? Points Downward by Robert Huebscher (Article)
Long-term equity investors face a critical juncture. They can believe a V-shaped economic recovery is imminent, if not underway, and valuations for broad-based equity indexes properly reflect an end to the "decrepit decade" of return-less risk in US markets. Or they can believe true economic recovery - growth, not just stability - is still a long way off and US equity valuations are in bubble territory, not reflective of the rough terrain ahead. We provide our thoughts.
2009-10-20 Letters to the Editor - Fama-French and the Active-Passive Debate by Various (Article)
Last week's article, Luck vs. Skill in Mutual Fund Alpha Estimates, on the latest research from Ken French and Gene Fama drew plenty of responses. We publish two of them, both in support of active management.
2009-09-29 The Case Against Inflation by Robert Huebscher (Article)
Investors should expect extremely low inflation - just slightly above zero - for the indefinite future, according to Connie Everson, the Managing Director and co-founder of the Capital Markets Outlook Group, a Boston-based economic consulting firm that serves institutional investors throughout the world. Everson delivered her remarks to an audience of financial analysts in Boston last Thursday.
2009-09-29 Taste Testing Investment Style Sausages by Ron Surz (Article)
Equity indexes, like those offered by Russell and S&P are the investment-world equivalent of sausages - chopped up pieces of meat in tightly wrapped packages. Most shoppers buy sausages based on brand name, as do investors when they choose their benchmarks. In this guest contribution, Ron Surz dissects these index sausages and explains the real differences in their ingredients.
2009-09-08 Infrastructure Investing by Michael D. Underhill (Article)
With global markets improving, liquidity returning to the credit markets, and valuations improving, the infrastructure market looks promising. In this guest contribution, Michael Underhill argues that infrastructure assets,when chosen correctly, can diversify an investor's portfolio because of their low correlation with other asset groups, their consistent returns coupled with lowered levels of risk, and their potential for inflation-linked returns.
2009-08-25 The Case for Optimism by Dan Richards (Article)
Only a few months ago, economist's doomsday scenarios caused widespread concerns that we were about to revisit the Great Depression. That consensus view on the economy has shifted remarkably quickly, with a much more positive outlook for the immediate period ahead. Dan Richards cites two recent articles making a persuasive case for optimism.
2009-08-04 Paul Krugman on the Prospects for Recovery by Eric Uhlfelder (Article)
Nobel laureate economist Paul Krugman tells Eric Uhlfelder that massive government spending is essential for generating growth, but fears the first stimulus package will not be enough to keep the economy from slipping back into recession nor reducing unemployment.
2009-07-28 Moving Average: Holy Grail or Fairy Tale - Part 3 by Theodore Wang (Article)
Buy-and-hold remains deeply entrenched in the financial planning community, despite many of the flaws Ted Wong's previous articles have illustrated. Although many financial advisors suffer dearly from their buy-and-hold practices, they are reluctant to change their approach. Who dares to challenge investment sages like Bogle, Siegel, and Malkiel who emphatically support this long-standing investment principle? Academic research studies overwhelmingly endorse buy-and-hold. How can they all be wrong?
2009-07-21 SIFMA?s Proposed by Ron Rhoades (Article)
On July 17, 2009, the Securities Industry and Financial Markets Association ("SIFMA") announced that its Private Client Group Steering Committee unanimously supports a new federal fiduciary standard for broker-dealers and investment advisors, embracing a proposal advanced by the Obama administration a week earlier in a draft of the "Investor Protection Act of 2009." Ron Rhoades looks at whether this shift in direction by SIFMA poses a radical change in business models, or whether the "new federal fiduciary standard" is something else in disguise.
2009-07-14 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.
2009-06-23 The Road to Zimbabwe by Robert Huebscher (Article)
John Williams of Shadow Government Statistics is best known for exposing inaccuracies and biases in government reporting of data - most notably the understatement of the CPI index. Williams says the US economy is on the brink of hyperinflation which will render the dollar worthless, as happened recently to Zimbabwe's local currency.
2009-06-09 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.
2009-05-19 Opportunities in TIPS by Robert Huebscher (Article)
TIPS offer a perfect hedge against inflation for US investors, but advisors need to understand their risks. We look at the history of TIPS prices and explain why this asset class is more volatile than you might think.