More on Related Themes
2015-06-29 00:00:00 Floating-Rate Loan Investors: Clairvoyant or Missing Out? by Scott Page, Craig Russ, Christopher Remington of Eaton Vance
In a rising rate environment, we put floating-rate loans high on the list of fixed-income investment classes likely to perform well in 2015.
2015-06-24 00:00:00 Handicapping Bubbles and Shocks by Kristina Hooper of Allianz Global Investors
Kristina Hooper, US Investment Strategist for Allianz Global Investors, explains the results of the 2015 Allianz Global Investors RiskMonitor Survey, a global study of prevailing views on portfolio construction, asset allocation and risk among a cross-section of institutional investors.
2015-06-16 00:00:00 How to Use Color to Make an Impact by Daniel Solin (Article)
Most firms have marketing materials available on their websites and in hard copy. And every advisor communicates with clients via email and through periodic performance reports. I have yet, however, to meet an advisor who pays the same attention to these materials as they do to their clothes or the way their office is appointed.
2015-06-11 00:00:00 The Knowledge Effect: Excess Returns of Highly Innovative Companies by Steven Vannelli, Eric Bush of GaveKal Capital
What drives stock returns? Answering this question has been a goal of investors ever since Harry Markowitz introduced his Modern Portfolio Theory in the 1950s. Later, William Sharpe’s Capital Asset Pricing Model illustrated that the market itself is the first and foremost element in explaining a stock’s performance. However, empirical research over the past several decades has identified many other effects beyond simply the market that exhibit a strong explanatory power of stock returns.
2015-05-20 00:00:00 The Idolatry of Interest Rates Part I: Chasing Will-o’-the-Wisp by James Montier of GMO
First is the idolatry of the “equilibrium/natural/neutral” rate of interest displayed by central bankers around the world. The second idolatry is the modern-day belief in the world’s greatest con: that monetary policy matters.
2015-04-30 00:00:00 The Ideology of IS by Bill O’Grady of Confluence Investment Management
Atlantic Magazine recently published an article about Islamic State (IS) that examined its theology and ideology. This article along with a paper from the Brookings Institute form the basis of our report. In our report this week, we examine the intellectual foundations of IS, showing how it evolved from two different sources of thought. We follow with an analysis of the concept of the Caliphate and the critical importance it has in Islamic theology, along with an examination of the eschatology of IS. We discuss the consequences of IS’s ideology and conclude with potential market ramification
2015-03-28 00:00:00 Living in a Free-Lunch World by John Mauldin of Mauldin Economics
I believe the fundamental imbalances we are seeing in the world (highlighted in the two papers mentioned above) are the result of the massive increases in global debt and misunderstandings about the use and consequences of debt. Too much of the wrong kind of debt is going to be the central cause of the next investment crisis.
2015-01-30 00:00:00 Finding Tax-Free Transfer Opportunities in Undervalued Energy Stocks by Carin Pai, Elisa Shevlin Rizzo of Fiduciary Trust Company International
In the past few weeks, crude oil has extended its biggest price slump since the 2007-2009 global financial crisis, dropping to the lowest levels since 2009 amid signs of softer demand growth from major economies, strong output from the US and steady output from the rest of the world.
2014-12-22 00:00:00 This Deal Wont Last: Give to Charity Now! by Tara Thompson Popernik of AllianceBernstein
Philanthropic US taxpayers should greet the Tax Increase Prevention Act of 2014 with holiday cheer. The law extends several expired tax provisions for 2014 onlyincluding qualified charitable IRA distributions. But other giving strategies may make some taxpayers merrier come tax time.
2014-12-17 00:00:00 Where Did The New Middle Class Citizens Go? by William Smead of Smead Capital Management
The "well known fact" with regards to oil over the last decade read like this: because of huge GDP growth in emerging markets like China, there were going to be 400 million new middle class citizens born of uninterrupted prosperity; they were going to want all the autos, consumer goods, $10,000 watches and food that Americans have.
2014-11-18 00:00:00 Is This Purgatory, Or Is It Hell? by Ben Inker of GMO
GMO is often accused of being a glass half empty investor, and I admit that in a year that has seen the S&P 500 rise 8.3%, MSCI All-Country World rise 3.7%, and the Barclays U.S. Aggregate rise 4.1% through the third quarter, the words Purgatory and Hell are unlikely to come to mind to most investors when opening their brokerage statements. It has been a dull year, perhaps, but certainly not a hellish one. So what is bringing Danteesque visions of damnation into our slightly warped minds?
2014-10-30 00:00:00 Got Loans? by Mark R. Kiesel, Elizabeth (Beth) MacLean, Rudy Pimentel of PIMCO
?We believe select investors looking to reposition portfolios may benefit from a move to senior secured floating rate loans. CLOs have been an important source of demand in the market, and even with more strict risk retention rules just announced under Dodd Frank, we think demand will remain strong. While the Fed has criticized some banks for not following their leveraged lending guidelines, Fed members themselves, in our view, do not appear concerned about loans having a major impact on financial stability.
2014-10-28 00:00:00 The Individual Investor's Edge by Patrick O'Shaughnessy (Article)
Even if the sophistication of professional managers makes it seem as though individual investors do not have an edge, they do. Without a job to worry about, individual investors can tolerate short-term underperformance on the path to long-term outperformance.
2014-10-14 00:00:00 You Ain't Seen Nothin Yet by William Smead of Smead Capital Management
Someone recently asked a group of us which band we saw at our first rock concert. My answer was the Canadian band, The Guess Who, in 1975. With hits like No Time, Undun and These Eyes, The Guess Who hit the perfect balance between my 17-year old testosterone driven aggressiveness and my urge to romance the woman of my dreams. The key members of the band in the 1960s and 1970s were Burton Cummings and Randy Bachman.
2014-08-06 00:00:00 Global Dividend Insights by Nathan Fischer, Louie Nguyen of Soledad Investment Management
For many foundations and individual investors, the usefulness of a portfolio lies in its ability to provide cash flow to support charitable activities or to cover living expenses. Like a wise orchard farmer, investors are looking to harvest apples from the branches without damaging the orchard. This article will explore how dividend is the key to managing wealth in terms of sustainable spending and how global dividend paying stocks, in particular, are a great equity investment for a sustainable spending strategy.
2014-08-05 00:00:00 The Wealth-Builder Model by C. Thomas Howard, PhD (Article)
While the math of compounding is straightforward, building wealth is difficult. But if you use an approach based on the principles outlined in this article, the accumulation of real wealth is within reach.
2014-07-25 00:00:00 Market Valuations and the Theory of Relativity by Zachary Karabell of Envestnet
Depending on what metric you use to assess the stock market, equities could be cheap, expensive, or anywhere in between. Try not to be swayed by simplistic arguments based on selective analysis of historical valuations, patterns or averages. Advisors and investors should keep in mind that with so few opportunities today to find yield and appreciation, if long-term gains are to be had, stocks are where such gains are likely to be found.
2014-07-24 00:00:00 Mar Vista Investment Partners Second Quarter 2014 Review by Brian Massey of Mar Vista Investment Partners
Mar Vista Investment Partners second quarter commentary reviews the market and their large cap growth strategies during the most recent period and discusses the opportunities they see for their portfolios in the coming months.
2014-07-23 00:00:00 U.S. Equities Continue to Look Attractive: Equity Investment Outlook by Team of Osterweis Capital Management
As we sit down to write this Outlook we are struck by two trends: the consistency of the economic recovery in the U.S. and the dramatic escalation of geopolitical turmoil. Whether these two trends will collide to derail the bull market is an open question, but usually geopolitical flare-ups have only short-term effects and do not overwhelm long-term economic trends. Thus, they tend to appear as hiccups in stock market progress.
2014-07-08 00:00:00 Slow but Steady Growth by Richard Michaud of New Frontier Advisors
In the second quarter of 2014 major asset class performance was positive. The Dow was up 2.4%, the S&P up 4.7%, and the NASDAQ up 5%. International equities nearly kept pace with US equities; the MSCI ACWI ex US was up 3.8%.
2014-07-05 00:00:00 Central Bank Smackdown by John Mauldin of Mauldin Economics
And so it is that on a beautiful July 4 weekend we will amuse ourselves by contemplating the serious smackdown that central bankers are visiting upon each other. If the ramifications of their antics were not so serious, they would actually be quite amusing. This weeks shorter than usual letter will explore the implications of the contretemps among the worlds central bankers and take a little dive into yesterdays generally positive employment report.
2014-05-27 00:00:00 Six Principles for Smart Tax Management by Tara Thompson Popernik of AllianceBernstein
It is well known that taxes began to take a bigger bite out of income for the well-off in 2013. Top marginal tax rates rose, and some exemptions and deductions were phased out. What is less well known is that investors spending from their portfolioseven those investors whose tax rates didnt risemay be facing higher tax bills, too.
2014-05-14 00:00:00 Worried about the Downside? by Richard Bernstein of Richard Bernstein Advisors
There have been numerous academic studies that suggest investors reactions to market risk are not symmetric. Investors consistently react more negatively to losses than positively to gains. At RBA, we incorporate this asymmetry in our sentiment work. Data clearly show that no group of investors is currently willing to take excessive US equity risk. Pension funds, endowments, foundations, hedge funds, individuals, Wall Street strategists, and even corporations themselves remain more fearful of downside risk than they are willing to accentuate upside potential.
2014-04-29 00:00:00 Putin's Ideologist by Bill O'Grady of Confluence Investment Management
For the past few months, Western leaders have been baffled by Russia?s behavior toward Ukraine and, to a lesser extent, Eastern Europe. To better understand Russia?s actions, we will examine the ideology of Aleksandr Dugin, the man who created the ideology that appears to be behind Putin?s behavior. We will offer a short biography of Dugin, focusing on his intellectual roots and the creation of the Eurasian Concept. Using Dugin?s framework, we will examine Putin?s recent behavior. As usual, we will conclude with market ramifications.
2014-04-23 00:00:00 Trading Secrets: Understanding the Boom and the Bust by Tad Rivelle of TCW Asset Management
It isn?t what you earn ? it is what you keep that matters in investing. While systematically underwriting too little risk may mean that you do not earn all that you might, underwriting too much towards the end of a business cycle can be disastrous. With this in mind, it becomes obvious that timing an investment strategy may be the most important single decision an investor needs to get right. But how is one to know where you are in the cycle?
2014-04-22 00:00:00 Hope Is Not A Strategy by Steven Rubenstein of Arrow Partners
With almost 20 years in the third party marketing (3PM) business, we thought we had seen and experienced it all.
2014-03-25 00:00:00 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.
2014-03-22 00:00:00 China's Minsky Moment? by John Mauldin of Millennium Wave Advisors
In speeches and presentations since the end of last year, I have been saying that I think the biggest macro problem in the world today is China. China has run up a huge debt, and the payments are coming due. They seem to be proactive, but will it be enough? How much risk do they pose for the global system?
2014-03-21 00:00:00 China's Evolving Health Care Landscape by Hayley Chan of Matthews Asia
China has begun a long-term transformation of its health care industry. Much of this industry is still fragmented and in the early stages of consolidation. China?s top 10 pharmaceutical companies, for example, account for a combined market share of approximately 20% versus more than 60% in the U.S.
2014-02-11 00:00:00 Focus on Income: The Illiquidity Premium: Opportunities for Investing in Credit Today by Jack Rivkin of Altegris
At a time when many investors are seeking income for their portfolios, traditional sources of fixed income - principally government bonds and high-grade corporate bonds - look less than compelling. Yields are low and there is an increasing risk that interest rates will rise, which would cause the value of existing bonds to fall.
2014-01-31 00:00:00 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
Chinas shadow banking products are coming under the spotlight. Emerging markets: Be sure to differentiate. The fixed income sectors surprising strength.
2013-12-31 00:00:00 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don’t always get the readership they deserve. We’ve posted the 10 most-widely read articles for the past year. Below are another 10 that you might have missed, but I believe merit reading.
2013-12-13 00:00:00 Saying Goodbye to a Great Peacemaker by Frank Holmes of U.S. Global Investors
Last week, the world lost a hero. There are so few people in this world who have fought for freedom in such a benevolent way as Nelson Mandela.
2013-12-06 00:00:00 Did the Government Shutdown Help the Economy? by Frank Holmes of U.S. Global Investors
Take the government shutdown in October, when the House and Senate fought over the debt ceiling. Economic data wasn?t released, services were halted, national parks were closed, and "non-essential government workers were told to stay home. As a result, GDP was expected to collapse. Yet, data released this week reveal a different, stronger image of the U.S. economy. I think Shakespeare would deem the media?s fear mongering tactics as Much Ado About Nothing.
2013-11-19 00:00:00 Levitate: Dismiss Bubble Talk for Now by Liz Ann Sonders of Charles Schwab
Its premature to be calling this market a bubble. Rolling 10 year returns havent even reached a long-term mean. Valuation still well below prior bull market peaks.
2013-11-18 00:00:00 Doing Well by Doing Good by Tara Thompson Popernik, Paul Robertson of AllianceBernstein
Charitable giving remains one of the few ways that US taxpayers can avoid taxes outright. If youre philanthropically inclined, giving can be a win-win that benefits you and society at the same time.
2013-10-24 00:00:00 Glory Days: Could They Come Back for US Equities? by Liz Ann Sonders of Charles Schwab
A "great rotation" may not be underway by individual investors; even amid record-breaking outflows from bond funds this summer. But fund flow data do show some shift in preferences and highlight the sensitivity of investors to any rise in longer-term interest rates. A more interesting place to look is at the fiduciary community; that has decidedly shifted its attention away from traditional equities (and fixed income) over the past decade.
2013-10-18 00:00:00 Weekly Economic Commentary by Christopher Molumphy of Northern Trust
Closing the books on the U.S. budget... for now; Do we need a debt ceiling?; Study of financial market function earns the Nobel Prize.
2013-10-14 00:00:00 What Uncle Sam Taketh Away, You Can Give Back (and Get a Tax Deduction) by Kathleen Fisher, Tara Thompson Popernik of AllianceBernstein
The government shutdown, now in its second week, has temporarily stopped the flow of government funding for many worthy organizations and may strain the resources of others. Federal grant administration is being delayed. For example, the grant administration staff at the National Institutes of Health has been furloughed; that may stop or slow grants for medical research.
2013-10-09 00:00:00 Getting Serious About Investing Responsibly by Luke Spajic, Josh Olazabal of PIMCO
To date, much of ESG-related investing has focused on negative screening, but we believe there is a better approach. This approach rests on three pillars: identifying and analyzing key ESG issues facing a given investment sector, engaging with the issuers of securities, and supporting the development of markets for ESG investments.
2013-10-08 00:00:00 The Futility of the Endowment Model by Robert Huebscher (Article)
In the past two decades, the so-called endowment model has been adopted by hundreds of endowments, foundations and advisors ? particularly those serving ultra-high-net-worth clients. By aggressively allocating to illiquid alternative asset classes, those investors hoped to duplicate the results of Yale and other top-tier institutions. New research exposes the futility of those efforts.
2013-09-27 00:00:00 The Weekly Speculator by Michael Shaoul, Ranita Ragunathan, Timothy Brackett, Brendan Moynihan of Marketfield Asset Management
We wrote last week on the eve of the FOMC meeting which resulted in the surprising decision not to reduce the current program of treasury and mortgage security purchases. What was to our eyes equally surprising was the volume and strident tone of the commentary that was issued following this release, ranging from the arrogant to the outraged as if anything really meaningful had changed.
2013-09-25 00:00:00 How To Calculate The Intrinsic Value Of Your Common Stocks: Part 1 by Chuck Carnevale of F.A.S.T. Graphs
Every investor in common stocks is faced with the challenge of knowing when to buy, sell or hold. Additionally, this challenge will be approached differently by the true investor than it would by a speculator. But since I know very little about speculation (trading or market timing), this article will be focused on assisting true investors desirous of a sound and reliable method that they can trust and implement when attempting to make these important buy, sell or hold investing decisions.
2013-09-23 00:00:00 Enhanced Dividend for Income by Jim O'Shaugnessy of O'Shaughnessy Asset Management
It is axiomatic in the financial planning canon that investors searching for a steady source of income should rely heavily on bonds. Stocks are for capital appreciation and bonds for income. The practice is so ingrained, that I have not heard of many investors who would make the case for using an equity portfolio to generate income. Bonds also appeal to advisors because of their inherent principal protection advantage. As a bond owner, you are a creditor, not an owner.
2013-09-17 00:00:00 The Debate on DFAs Research by Various (Article)
We received many responses to Michael Edesess article, Why DFAs New Research is Flawed, which appeared last week. We provide the responses from individuals who disagreed with Edesess findings, followed by Edesess response and then by responses in agreement with his findings.
2013-09-16 00:00:00 Investment Reality as Told Through the Most Interesting Man in Baseball by Rob Isbitts of Sungarden Investment Research
You probably havent heard of Greg Dobbs. If you have, you are either a big Major League baseball fan, a casual fan of the Miami Marlins baseball team, or you know Greg Dobbs personally. He is a solid Major League player, but will not be mentioned alongside Ruth, Mays and Ripken. He is a great team player, a great media interview and was briefly featured on a national TV program last year as the most interesting man in baseball, a moniker given to him by one of his teammates.
2013-07-23 00:00:00 You Thought It Was Hot Outside... by Blaine Rollins of 361 Capital
You thought it was hot outside? Wait until you see the weekly cash inflows into U.S. Equities... Funds that hold only U.S. stocks gained $15.58 billion in new cash, the most since June 2008. ETFs that hold domestic equities attracted $12.45 billion of those gains.
2013-07-23 00:00:00 Risk Communicates Signals that Something Important is at Stake by Robert Mark of Castle Investment Management
The equity markets hit new all-time highs again this past quarter. However, we believe this rally is largely due to Ben Bernanke?s policy of Quantitative Easing (QE) which presently equates to the purchase of $85 billion in U.S. government debt every month. Through the Federal Reserve?s policies our government has effectively printed trillions of dollars since the financial crisis began, arguably inflating a host of asset prices including the stock market.
2013-07-17 00:00:00 Men of Steel: How Retail Investors Saved the Muni Market by John Bagley of BondDesk Trading
It looked and felt to screen watchers late last month like the sequel to Man of Steel had arrived prematurely. This time, though, General Zod seemed to set his sights on the bond market, recruiting an army of bond fund managers to annihilate everything from 1-year Treasuries to 30-year corporate and municipal bonds. Over the three trading days following the June Fed meeting, yields on benchmark municipal bonds increased by 60 basis points, the largest move over a 3-day period in more than 25 years.
2013-07-16 00:00:00 Hedge Funds Can Advertise...But Should They? by Chris Maxey, Ryan Davis of Fortigent
In April 2012, the Jumpstart Our Business Startups (JOBS) Act was signed into law. The legislation eased a number of regulatory burdens on small businesses and private industry in a bid to boost job growth. The bill made additional headlines for lifting an 80-year ban on solicitation for private placements, the restriction that prevented hedge funds from advertising their wares to the general public.
2013-07-16 00:00:00 Don't Be Deceived by the Deficit Dip by Milton Ezrati of Lord Abbett
Recent budget reports have been encouraging. Revenues are rising faster than originally expected, and deficits are running lower. Some of this improvement is real, but, sadly, not all of it.
2013-07-10 00:00:00 Market Perspectives Q2 2013: Fed Fears by Richard Michaud of New Frontier Advisors
Investors have been hypersensitive to the inevitable reversal of the Federal Reserves bond purchasing economic stimulus program known as QE3. Signs of sustainable economic recovery have been closely monitored as a harbinger of a likely end of the program.
2013-07-01 00:00:00 Watching Nominal GDP by Brian Wesbury, Bob Stein of First Trust Advisors
One of the most important foundations of modern macroeconomics is something called the equation of exchange. It dates all the way back to John Stuart Mill but, in the past couple of generations, was popularized by free-market icon Milton Friedman.
2013-06-07 00:00:00 Portfolio Comfort in Stock Splits by Bill Smead of Smead Capital Management
We have noticed that there has been a dearth of stock splits among the S&P 500 index companies in the last 5 years. Our observation is that the natural habitat for stock splits is normally a multiple-year market upswing and numerous stocks trading over $60 per share. What does the history of stock splits tell us about where we are in the long-term stock market cycle for the S&P 500 index? Who will the marginal buyer of common stocks be in the near term and what do stock splits teach us about who the marginal buyer is?
2013-05-20 00:00:00 Not in Kansas Anymore by John Hussman of Hussman Funds
Knowing where you are doesnt mean that youre leaving, but you should still know where you are.
2013-04-10 00:00:00 Making It Possible for Investors to Be Secure in Their Later Years by Michael Golub of The Golub Group
Stock investing should be viewed as old-age insurance. Stocks are serious business because, for most of us, how we handle them will determine how we will be able to live in our later years. The challenge of living comfortably for the rest of our lives has become more of a challenge as the Prudential Life Insurance Company has recently pointed out that the first human to live to 150 years old is alive today. The Wall Street Journal reported in its March 19, 2013 issue, that many workers are saving too little to retire.
2013-04-02 00:00:00 Cypriots In The Streets by Peter Schiff of Euro Pacific Precious Metals
The news of the month comes from the large Mediterranean island of Cyprus, where Keynesian economic planning left the economy facing complete bankruptcy. The result was an unprecedented step forward in the financial collapse of the West: direct forfeiture of bank deposits. Despite official protestations to the contrary, this fallout will spread to a bank near you.
2013-03-26 00:00:00 Adapting the Yale Model for Clients by C. Thomas Howard, PhD and Lambert Bunker (Article)
The Yale University endowment fund is one of the most successful in the country, with a 10-year return besting the endowment universe average return by 300 basis points and the Wilshire 5000 return by 400 basis points. David Swensen is the architect of this program, and his guiding principles are widely used to manage large endowments. They are equally useful for client portfolios.
2013-03-22 00:00:00 Power of Positive Screening: Pursuing Strength of Social and Financial Returns by Chat Reynders, Patrick McVeigh of Reynders, McVeigh Capital Management
Market volatility and sweeping changes to mainstream views of investing are catalyzing acceptance of tactics that combine fundamentals with a progressive outlook on social issues. Positive screening brings balanced companies to the fore of the investment landscape: this practice isolates sound equities that demonstrate strength of balance sheet, dependability of management, and a commitment to act as part of a global community focused on positive change.
2013-03-13 00:00:00 What's Your Advantage? by Bill Smead of Smead Capital Management
In the March 9, 2013 issue of Barrons, writer Jonathon Laing wrote an excellent piece about Howard Marks. This article provides the base from which we can discuss the main components of investment portfolio composition. These components are information, analysis of information, and decisions made from information and analysis. In doing so, we will bring to light why we believe todays best opportunity is in long-duration common stock investing.
2013-03-05 00:00:00 You?re The Cream of the Crop: Key Findings from the 2012 Advisor Perspectives Reader Survey by Jeff Briskin (Article)
Experienced. Results oriented. Focused on serving the needs of individuals and families. Confident in your abilities. Eager to expand your knowledge. If this sounds like you, you're not alone. These are the traits that stand out among Advisor Perspectives readers, based on the findings of our 2012 Reader Survey.
2013-02-26 00:00:00 Global Investment Review First Quarter 2013 by Team of Bedlam Asset Management
At the beginning of last year the prospects for capital markets were grim yet the results surprisingly good: positive returns and modest economic growth. The cause was central banks in developed countries acting as a backstop for sovereign and other large debts, through direct purchasing funded by accelerated money printing. This also ensured low interest rates. Subsequently, mountainous debt problems are slowly being tackled, even as they appear to increase.
2013-02-19 00:00:00 Six Recommendations for Working with Widows by Kathleen M. Rehl, Ph.D., CFP (Article)
Widows are a fast-growing segment of the U.S. population, with almost 12 million women currently widowed and another 800,000 joining their ranks each year. Working with a widow, especially in the early stages of her grief, requires a non-traditional approach to financial advising.
2013-02-15 00:00:00 In Defense of Commodity Futures by Seth Masters, Jon Ruff of AllianceBernstein
Several prominent pension funds have slashed their commodity futures investments for delivering poor returns with higher volatility than usual, while failing to diversify equity exposures as expected, The Wall Street Journal recently reported. If inflation rises, they may regret it.
2013-02-13 00:00:00 Trading Secrets: And All Our Yesterdays by Tad Rivelle of TCW Asset Management
Markets work. Not because they are perfect, but because they self-correct. Inherent to their functioning is the ability for buyers and sellers, borrowers and lenders, to freely express their predilection to engage in commercial transactions as proxied by the price mechanism. This is all utterly basic. So, why are the capital markets in general, and the credit markets in particular, not to be trusted to operate without the price and quantity guidance of the Federal Reserve? I
2013-02-07 00:00:00 Investing in a Low-Growth World by Jeremy Grantham of GMO
This quarter I will review any new data that has come out on the topic of likely lower GDP growth. Then I will consider any investment implications that might come with lower GDP growth: counter intuitively, we find that investment returns are likely to be more or less unchanged a little lower only if lower growth brings with it less instability, hence less risk. Finally I will take a look at the reaction to last quarter's letter, specifically about my outlook for lower GDP growth.
2013-02-07 00:00:00 We Have Met the Enemy, and He Is Us by Ben Inker of GMO
If modern portfolio management has a single defining urge, it is almost certainly diversification. We look for diversifying assets, strategies, and managers. A thoughtful investor can argue against almost any asset class stocks, bonds, hedge funds, private equity, commodities, you name it but arguing against diversification is like arguing against indoor plumbing. I dont want to sound like I'm calling for a return to chamber pots and outhouses, so I'm not actually going to argue against diversification.
2013-02-01 00:00:00 Weekly Economic Commentary by Team of Northern Trust
Is the world engaged in a currency war? Januarys job report had some pleasant surprises, but more progress is needed. Purchasing managers surveys suggest growth in the US, retreat for Europe
2012-12-26 00:00:00 The Ten Key Benefits of Investment Committees by Bob Veres (Article)
In this first part of a two-part report, I'll identify ten core purposes that investment committees serve in different types of firms, ranking them in order of the number of responses I received. If your investment committee is serving all ten purposes, based on the survey, you're among a select minority - which means that many advisors may find new ways to use this versatile new tool in their RIA practices.
2012-12-21 00:00:00 To Wait or Not to Wait? That Is the Charitable Gifting Question by Daniel Eagan, Brian Wodar of AllianceBernstein
The tax impact of delaying a charitable gift by just a couple of weeks (until 2013) could be large, but it may not be positive for US taxpayers. The potential tax savings from claiming a charitable income tax deduction for a donation depends on a number of factors.
2012-12-10 00:00:00 Dwelling on a "Cliff" Deal by Milton Ezrati of Lord Abbett
After the brinksmanship runs its course, Congress will jury-rig a fiscal compromise.
2012-12-04 00:00:00 Economics 101: Little Return without Risk by Bill Smead of Smead Capital Management
A tremendous amount of energy and effort has been expended in the US on behalf of wealthy investors to secure returns while reducing risk. Like any useful endeavor, it started out as a wise thing and reached its stride in the late 1990s as a way to deal with a massive asset misallocation. As Warren Buffett always says, What the wise man does at the beginning, the fool does at the end. It appears to us that the efforts to eliminate risk in the US capital markets have reached the foolish point.
2012-11-29 00:00:00 Are E&Fs Jeopardizing Their Missions? by Seth Masters of AllianceBernstein
Many US endowments and foundations (E&Fs) still plan to spend 5% of their assets each year, despite unusually low expected returns. We think few understand how likely it is that this will limit their ability to fulfill their missions in perpetuity.
2012-10-11 00:00:00 Inflation Regime Shifts: Implications for Asset Allocation by Nicholas Johnson, Sebastien Page of PIMCO
Investors who are concerned about inflation should focus on increasing their exposure to asset classes that provide a positive beta to changes in inflation. We believe that asset prices are much more sensitive to inflation surprises than actual inflation levels themselves. Given the current macro environment, investors face the possibility that low growth and high inflation may coexist. Commodities provide a levered response to inflation. Investors can hold a relatively small amount of commodities to hedge a much larger portfolio.
2012-10-02 00:00:00 The Risk in Safety by Greg Nejmeh of HS Management Partners
The "risk on/risk off" sound bite is routinely applied by financial commentators when attempting to explain inexplicable market fluctuations. As the pendulum oscillates between greed (risk on) and fear (risk off), the fulcrum the pivot point where the scale rests in perfect balance can best be characterized as safety. It is from that state of equilibrium that the market begins each trading day...
2012-09-27 00:00:00 Reality Check for Europe by Carl Tannenbaum of Northern Trust
Over the past two years, the markets have gone through cycles of escalating concern about Europe punctuated by brief periods of calm.
2012-09-19 00:00:00 Global Investment Bulletin by Team of Bedlam Asset Management
If America's Federal Reserve Bank were a battleship, it is losing off every available piece of ordnance. The portfolio has been positioned for such an event. The USS Fed does not know who or where the enemy is, or whether its attack will hit anything for several quarters.
2012-09-11 00:00:00 Ponzi Games by Michael Lewitt (Article)
Whatever schemes the European Central Bank may cook up over the next few months will only prove short-term liquidity relief to what are long-term insolvency problems. Like any Ponzi scheme, the last money in is going to be hurt the worst when the charade comes to an end. In the meantime, investors proceed at their own risk.
2012-09-04 00:00:00 The Ultimate Income Strategy - Higher Yield and Lower Volatility by Geoff Considine (Article)
Investors, especially those in the de-accumulation phase of their retirement, count on high income and low volatility. Achieving the best possible tradeoff between yield and risk is a major challenge for advisors. Over the last two years, I've shown how to construct a low-risk portfolio - the ultimate income portfolio (UIP) - that yields over 9.0%. Let's look back at how those portfolios performed and the components of this year's UIP.
2012-08-07 00:00:00 Robert Shiller on the Social Benefits of Finance by Laurence B. Siegel (Article)
It's a bad sign for the finance industry that one of its leading minds - the distinguished Yale economist Robert Shiller - has felt compelled to write a book in order to defend the idea that finance itself is a constructive pursuit, worthwhile to modern society. Have things really gotten that bad?
2012-08-07 00:00:00 A Second Wave of Capital Flight Reaches Eurozone Core by Thomas Kressin of PIMCO
During the first phase of the euro crisis, private capital flowed out of the "peripheral" countries to the core of the eurozone, but this shift had no adverse impact on the euro. Now, investors are taking their capital out of the eurozone altogether. The euro threatens to fall further, possibly leading to serious concerns about a devaluation spiral.
2012-07-27 00:00:00 Secular Outlook: Implications for Investors by William Benz of PIMCO
For investors, the biggest challenge now is moving from a world of normal distributions, with expected occurrences around the mean, to one of bi-modal distributions where more extreme scenarios prevail. Key institutions, including governments and central banks, were previously stabilizing forces but are now helping to accelerate underlying, destabilizing trends in the global economy and financial markets.
2012-06-12 00:00:00 The End of Economics by Michael Edesess (Article)
If Australian economist Steve Keen's book, Debunking Economics, doesn't end, once and for all, the terminally convoluted discourse that afflicts mainstream economics, nothing will. Although the book's purpose is to show that neoclassical economics is all bunk, however, it is also, remarkably, as good an introduction to neoclassical economics as any you're likely to find.
2012-05-23 00:00:00 Global Investment Outlook by Mike Turner of Aberdeen Asset Management
Investors continue to focus on the global macroeconomic backdrop, which is still relatively positive despite slightly disappointing data recently. There are signs that some of the imbalances within the Eurozone are starting to ease as competitiveness is improving in some of the peripheral countries and this is beginning to be reflected in trade figures. Looking further ahead, we feel that global consumption should be supported by falling headline inflation.
2012-05-10 00:00:00 Q112 Portfolio Commentary for the Absolute Strategies Fund by Jay Compson of Absolute Investment Advisers
It is no secret the structural problems and crises throughout the global economy stem from excess debt. This letter attempts to explain why we think the global economy is in this situation, why the process for creating the problems continues to this day, why financial markets are not out of the woods. We are extremely optimistic about the future investing climate, but only after we get through the final stage of the credit bubble. In our view, the root of the problem stems from the willingness of a broad swath of investors and money managers to bid up asset prices to extreme levels.
2012-05-05 00:00:00 A Graphic Presentation by John Mauldin of Millennium Wave Advisors
The job market is still in a deep hole. At April's rate of job gains, it would take well over three years to return to December 2007's employment level, without adjusting for population growth; at the average rate of the last six months, it would take about two years. Earnings are weak, and the strongest sectors aren't those of which economic miracles are spun. QE3 looks like more of a possibility than it did a few days ago.
2012-04-27 00:00:00 Bond Market Reflections Spring 2012 by Bruce A. Weininger of Kovitz Investment Group
Faced with the prospect of loaning money out for eight years knowing that our best case return over that time was 2%, we decided that, for a while anyway, wed rather hold onto to cash in hopes that pricing will become more rational over the coming weeks or months.
2012-03-15 00:00:00 Investment Management with a Conscience by Douglas Hodge of PIMCO
Earlier this year the Financial Times ran a series of editorials under the title Capitalism in Crisis. Contributors ranged from Bill Clinton and Alan Greenspan to FT editors Martin Wolf and John Kay. There was also a submission with the byline, Occupy London. While I am admittedly unable to add much to their collective wisdom, I think a sound analysis of capitalism requires an understanding of the role of the investment management industry within the financial services ecosystem."
2012-03-02 00:00:00 TARGET2: A Channel for Europe's Capital Flight by Andrew Bosomworth of PIMCO
The Eurosystem's TARGET2 transaction system introduces elements of fiscal union via the back door. The large TARGET 2 positions developing among national central banks in the eurozone reflect capital flight from the periphery to the core and de facto introduce transfer and burden sharing elements of a common fiscal policy. Monetary policy ends up substituting for fiscal policy without going through the same democratic channels that governments' expenditure and taxation decisions entail. Taxpayers in the eurozone are contingently liable for losses incurred by monetary policy operations.
2012-02-14 00:00:00 The Safety-first, Goals-based Approach to Financial Planning by Wade Pfau (Article)
Little of what is taught in traditional investment textbooks is of value in personal financial planning. Risk is not standard deviation; it is the probability and consequences of not meeting one's goals. That real-world perspective animates a new book by Zvi Bodie and Rachelle Taqqu that implores advisors and their clients to lock in the funding of their essential expenses before worrying about their discretionary goals.
2012-02-06 00:00:00 Wary Investors Give US Stocks Another Go by John Browne of Euro Pacific Capital
Recently, the stock market has been roaring, with the S&P500 up a stunning 22% from October 3, 2011, which was the low of last year. In fact, the first month of 2012 has been one of the best Januaries on record for US stocks. On top of that, last Fridays jobs report seems to provide further evidence that we're turning a corner. However, there are many reasons to question the bestowal of bona-fide bull status on this market. It's hard to miss the artificial props in place to push up prices. Both the supply and demand sides of the equation are standing on shaky foundations.
2012-01-27 00:00:00 Waist Deep in the Big Muddy by Peter Schiff of Euro Pacific Capital
As long as interest rates remain far below the rate of inflation, the U.S. economy will fail to equitably restructure itself for a lasting recovery. As a secondary effect, U.S. savers will likely continue to suffer from a lack of yield and a weakening currency. In the end, the collapse of the U.S. economy will be that much more spectacular due to the great lengths we have gone to postpone it.
2012-01-21 00:00:00 Staring into the Abyss by John Mauldin of Millennium Wave Advisors
Europe's leaders are committed to keeping both the euro and the eurozone as it is. But for it to do so, everything must change, as the wonderful quote from the 1958 Italian novel suggests. This is no easy task, as no one wants a change that will impact them negatively; and there is no change that will allow things to stay the same that does not impact all severely, as we will see. In the third part of a continuing series, we look at the actual options that are available on the menu of choices, or as one group called it, the menu of pain.
2012-01-12 00:00:00 Nero (Iran) Fiddles While Rome (China) Burns by Bill Smead of Smead Capital Management
What is required for a whopper of a secular bear market is for most market participants to believe the positive side of the story all the way down. We believe that all the pieces are in place for commodities to suffer a multi-year bear market which will wipe out up to 70% of peak prices on most major commodities. We want to make sure everyone sees the potential for a massive reversion to the mean. In our opinion, the recession coming in Chinas economy will break the back of oil prices for decades. Lower oil prices could strip the economic relevance of Iran, Saudi Arabia, Syria and Yemen.
2011-12-06 00:00:00 Small-Cap ETFs: Tail or Dog? by Mariko Gordon (Article)
Now that ETFs represent anywhere from 30% to 40% of small-cap trading volume, the creature that was created to shadow its master has become bigger than the index itself. Let's look at the impact of this rapid growth and the three important questions it raises.
2011-09-20 00:00:00 The Irrational Optimist by Michael Lewitt (Article)
'Most past bursts of human prosperity have come to naught because they allocated too little money to innovation and too much to asset price inflation or to war, corruption, luxury and theft,' writes Matt Ridley. These words hit the proverbial nail on the head. The misallocation of capital in today's economy is a severe threat to future prosperity and perhaps survival itself.
2011-09-02 00:00:00 If Carlsberg Did Mortgages by Niels C. Jensen of Absolute Return Partners
The old world is drowning in debt. Governments are responding with austerity programmes and near zero interest rates but neither will work. Economic growth will be required to get the escalating debt under control, but policy makers need to dig deep into the tool box for different ideas as to how to create this growth. In this month's Absolute Return Letter we focus on one particular idea which will greatly benefit economic growth at no cost to the tax payer - reform the mortgage finance system across the world, using the model developed by the Danes over the past 200 years.
2011-08-26 00:00:00 Boomers Are Going To Be A Real Drag by Lance Roberts of Streettalk Live of Advisor Perspectives (dshort.com)
Many may scoff at the Fed's report that stock prices will not recover to their 2010 highs until 2027. The migration of "baby boomers" into retirement, combined with sustained high unemployment, low savings rates and a weak economy, does not bode well for strong financial markets into the future. While there are hopes that the economy will recover in spite of the abundance of factors building against it, the reality is that we may be dealing with the "Japanese Experience".
2011-08-23 00:00:00 Letters to the Editor by Various (Article)
A reader responds to our article, Jeremy Grantham Guarantees Gold will Crash, which appeared on May 18, 2010. Another reader responds to Michael O. Kokesh's Letter to the Editor, published last week, which was in response to Paul Kasriel's July 26 commentary, Washington Had a Spending Problem.
2011-08-15 00:00:00 Intense Volatility Rattles Investor Confidence by Bob Doll of BlackRock Investment Management
We believe investors are overly pessimistic about the possibility of a renewed recession in the U.S. It is important to remember that equity markets have a poor track record as acting as predictors of recessions and corporate fundamentals remain strong. Since 1950, the U.S. has never entered a recession with corporate balance sheets as flush with cash as they currently are-at present, nonfinancial companies are holding cash in the amount of around 11% of their balance sheets, the highest level in over 60 years.
2011-08-12 00:00:00 Buy, Sell or Hold? Relax and Don't Panic by Frank Holmes of U.S. Global Investors
There was more blood in the streets Monday as the world continued to digest S&Ps downgrade of US debt, the two-week market selloff, and the likelihood the US economy could possibly slide back into recession. These concerns, combined with continued political/economic struggles in the eurozone from socialist policies, have created a potent concoction of fear across global markets and sent volatility skyrocketing Monday to its highest level since the May 2010 Flash Crash. While many investors are running for the exits, others have chosen to ride the wave of volatility or buy depressed shares.
2011-08-09 00:00:00 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.
2011-07-20 00:00:00 Secular Outlook: Implications for Investors by Bill Benz of PIMCO
As the economy undergoes important realignments, investors will need to rethink their traditional approaches to managing their portfolios. As the lines between interest rate and credit risk become blurred, finding sources of safe spread becomes even more critical. More, not less, discretion is warranted when navigating volatile global markets, avoid sectors affected by financial repression and hedge against inflation and/or adverse tail events. We believe investors need to look at risk factors rather than traditional asset classes when making asset allocation decisions.
2011-06-28 00:00:00 Reducing Risk through Value-Oriented Tactical Strategies by Mark E. Ricardo, JD, LLM, AAMS (Article)
Conventional wisdom was that the best way to reduce portfolio risk is to adopt a diversified long-term strategic asset allocation. That paradigm was challenged - deservedly so - following the 2008 financial crisis. Fortunately, an improved paradigm has emerged: Investors should combine long-term strategic allocations with a value-oriented tactical rebalancing strategy.
2011-06-15 00:00:00 The End of Retirement by Michael Pento of Euro Pacific Capital
Americans are broke, the real estate market is still in secular decline, stock prices are in a decade?s long morass, real incomes are falling, public pension plans are insolvent and our entitlement programs are structurally unsound. If the pillars that seniors have relied on in the past fail to miraculously regenerate (and there is certainly no reason to believe they will), all that most retirees will have will be freshly printed greenbacks that come from a never ending policy of federal deficits and an obliging Federal Reserve.
2011-06-07 00:00:00 Low Volatility Equity Solutions ? Is Now The Time? by K.Sean Clark of Clark Capital Management Group
Correlations converging amid the market declines of 2008 called attention to the limits of relying on diversification between assets for portfolio protection. The desire for non-correlated returns among assets had led to a significant reduction in U.S. equity exposures and accelerated flows into non-U.S. equities and alternative strategies. But the correlations of these uncorrelated assets spiked under the extreme market stress of 2007 and 2008. This shows that for downside protection, buying assets with many different risk profiles is not a substitute for buying volatility to manage risk.
2011-06-03 00:00:00 Five Misconceptions Squashed by Niels C. Jensen of Absolute Return Partners
DSK is not the only one in need of a bailout! As the sovereign crisis intensifies - and it will - bond yields in some countries will go higher. But they won?t go higher everywhere. Demographic as well as technical factors (e.g. Solvency II) will drive ever more money towards bonds, and that money will have to go somewhere. Germany, Switzerland and Scandinavia are probably the safest bets in terms of where sovereign bond yields could fall further. You should also expect high quality corporate bond yields to trade through sovereign yields in many countries. The trend has already begun.
2011-06-02 00:00:00 Expert Roundtable on Risk by Mark W. Riepe, Liz Ann Sonders, Randy Frederick, Rob Williams, & Brad Sorensen of Charles Schwab
The word "risk" has a negative connotation-something to steer clear of whenever possible. However, in the investing world, risk and performance are intertwined. Market sentiment can shift quickly depending on economic or political news, geopolitical events and even natural disasters and these shifts can sometimes send investors fleeing for safety or taking on more risk as they seek higher returns. Mark Riepe, led a roundtable discussing the concept of risk in investing, strategies for reducing portfolio risk, and investment suggestions tailored to both risk-seeking and risk-averse investors.
2011-05-26 00:00:00 In Good Company ? Institutional ETF Usage Trends by Kevin Feldman of BlackRock Investment Management
More institutional investors are making ETFs part of their portfolio strategy, and that?s good news for retail investors. With many innovations, institutional investors are often the first in. Later the retail investors follow. ETFs, however, have shown a slightly different pattern. After 1993, when the first ETF was introduced in this country, ETFs were primarily of interest to institutional investors. At first, their main use was as a place to hold cash before investing in a new asset class, but institutions soon began using them for other purposes, such as tactical allocations and hedges.
2011-05-13 00:00:00 The Institutional Gold Rush by Peter Schiff of Euro Pacific Capital
I've worked on Wall Street my entire life, and one thing I've learned is that large institutional investors, like pension funds and endowments, rarely veer from the herd. They manage too much of other people's money to stick their necks out alone-if their investments go bad, at least they can point to everyone else who fared just as poorly. For this reason, these funds are often lagging in their perception of crucial market changes. While many of us are buying precious metals to hedge against the collapse of the dollar, gold and silver have been taboo investments on Wall Street for years.
2011-05-13 00:00:00 Bernanke Double Talk Creates Opportunity by John Browne of Euro Pacific Capital
Fed Chairman Bernanke?s remarks at his historic first press conference were met by a tidal wave of skepticism. Although many of the mainstream outlets characterized his performance as ?serious? and ?masterful," most rank-and-file Americans were left with a very different impression. Any casual glance at the broad internet coverage of the event shows that the public is deeply skeptical of Mr. Bernanke and the actions he is taking. If that skepticism runs more than skin-deep, it could herald a fundamental change in American politics and a restoration of sound finance in America.
2011-05-09 00:00:00 The Menu by John P. Hussman of Hussman Funds
One of the ways investors can think about prospective return and risk is from the standpoint of the Capital Market Line, which lays out a menu of investment possibilities at various levels of return and risk. In theory, investors like to believe that this menu is always a nice, positively sloped line, where greater risk is associated with greater prospective return. And somehow, regardless of where market valuations are, investors often seem to believe that 10% is 'about right' for the prospective return on stocks. As it happens, valuations exert an enormous effect on the prospective returns
2011-05-03 00:00:00 The Case for Human Ingenuity by Niels C. Jensen, Nick Rees and Tricia Ward of Absolute Return Partners
This month we take a closer look at oil and reach what many of our readers will probabaly find a surprising conclusion: We believe that we are approaching the end of the oil era and that oil prices will undergo a substantial correction over the next several years. But we cannot be very precise on timing, as there are too many variables at this stage. Our conclusion is based on 3 observations.
2011-04-27 00:00:00 Turkey?s Shaky Foundations: Structural Deficit Underpinned by Volatile Capital Inflows by David Rogovic of Roubini Global Economics
In 2009, at the height of the global financial crisis, a reduction in capital inflows and domestic demand caused a narrowing of external imbalances across Europe. Now, as the region returns to growth and recovers from the crisis, Turkey stands out in terms of the size and speed at which its current account deficit is expected to grow. This is due in part to a more rapid recovery, but also to a shortfall of domestic savings relative to investment. The country is more reliant now than in previous episodes on short-term and historically more volatile foreign capital to finance the deficit.
2011-04-26 00:00:00 Ethics Among Thieves by Michael Edesess (Article)
'Inside Job' is a thoroughgoing indictment of the financial industry that has its virtues but relies on some unsavory vices. On the one hand, through interviews, congressional testimony, and other video, the film exposes cronyism, corrupt ethics, and excessive power at the core of the financial industry. On the other, the movie at times unfortunately feels more like a polemic than a hard-hitting, fact-finding investigative reporting piece.
2011-04-20 00:00:00 Is Europe at the Tipping Point? Sol Sanders & Bill Alpert on Keynes, Keynesianism -- and Keynesianit by Team of Institutional Risk Analyst
With the world preparing for the collapse of the post-WWII, post-Bretton Woods economic order, we thought it might be useful to look at what Keynes actually said. We depart from our optimism due to the situation in Europe. Forget the threat of a ratings downgrade by S&P, Washington on debt ceilings or our part-time POTUS, the final collapse of the southern states of Europe is accelerating. Most banks in the EU are insolvent and the states supposedly backing them cannot access the global markets. The collapse of the EU bank bailout effort could be the next catalyst for global contagion.
2011-03-31 00:00:00 Skunked by Bill Gross of PIMCO
Medicare, Medicaid and Social Security now account for 44% of total federal spending and are steadily rising. Previous Congresses (and Administrations) have relied on the assumption that we can grow our way out of this onerous debt burden. Unless entitlements are substantially reformed, the U.S. will likely default on its debt; not in conventional ways, but via inflation, currency devaluation and low to negative real interest rates.
2011-03-23 00:00:00 In Search of Value by David A. Rosenberg of Gluskin Sheff
Within the space we do favour large-caps, strong balance sheets, high-quality, low P/E stocks, and commodities, especially energy. But among all the worries, we still see this as an overvalued market and we believe in buying low and selling high. We know that many pundits like to use short-term market measures of valuation using year-ahead or trailing earnings or cash flow, which at times seems a little disingenuous for an asset class that is inherently long-term in duration. Be that as it may, perhaps we can shed some light on why patience may still be virtuous here.
2011-03-17 00:00:00 Madoff Was Right About One Thing by Bill Mann of Motley Fool
This past week, a Financial Industry Regulatory Authority (FINRA) panel ordered broker Morgan Keegan to repay $250,000 to a client whose entire investment account had been invested in Madoff's fund. That's nice. I expect there will be several more judgments and restitutions paid in the future, none of which will actually cause a change in behavior on Wall Street. Regulators failed to catch Madoff even when the evidence was dangled in front of them, and they've since failed to enact meaningful reform for how Wall Street operates.
2011-02-08 00:00:00 The Downside to Venture Investing (like Facebook?) by Dan Richards (Article)
In this interview, Harvard Business School professor Josh Lerner discusses the dangers of venture capital investing and the basis behind Facebook's valuation. This is a transcript of the interview.
2011-01-24 00:00:00 Weapons of Mass Poverty by Mark Elliott of Elliott Asset Management
Modern financial management dogmas may be fundamentally, terminally, and irreparably flawed ? and may be key ingredients in modern asset bubbles. I believe what could be the most serious catastrophe to face retirees and other investors since The Great Depression may be currently underway and, as in past recent financial catastrophes, most investors and financial ?professionals? will fail to act ? despite what appears to be clear writing on the wall.
2010-11-09 00:00:00 A Reading List for 2010 by Vitaliy Katsenelson (Article)
Updated for 2010 and in time for the holidays, here is the latest installment of my recommended books. I originally wrote this list in 2008 and again last year. I intend to keep adding to and revising it every year. It contains seven sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, Risk and Books for the Soul. The first three sections are presented below and the remaining four will be presented next week.
2010-11-04 00:00:00 I Pick The Seven Most Powerful New Economists by Dan Ariely of Predictably Irrational
Many people have contributed over the years to behavioral economics. The individuals on this list have not only changed the face of economics as we know it, but they are likely to contribute a great deal more in the years to come. Each of these individuals has tremendous creativity and insight that has enabled them to capture and explain our odd, complex, and sometimes irrational human nature. Armed with this new understanding of human behavior, and taking our human weaknesses into account, behavioral economics could help us take steps toward designing a better world.
2010-11-03 00:00:00 Four Rather Sick Patients by Niels C. Jensen of Absolute Return Partners
The world is in an unprecedented situation in which all four major trading currencies (EUR, GBP, JPY and USD) face serious challenges. Not all four major currencies, however, can fall at the same time. Currencies are unique in the sense that they are relative as opposed to absolute trading objects. You don't just buy dollars. You buy dollars against some other currency. The scaremongers may have their day in the sun, but ultimately common sense will prevail and currency traders will have to go back to focus on housing starts again.
2010-10-01 00:00:00 Insolvency Too by Niels C. Jensen, Nick Rees and Patricia Ward of Absolute Return Partners
On 1st January 2013, Solvency II, a new directive governing capital adequacy rules in the European insurance and life insurance industry, will come into effect. Going forward, European insurers will have to be able to pass a 1-in-200 years' event stress test, which has been designed to give the industry enough of a cushion to withstand even the most severe of bear markets without being forced to sell. Risky asset classes such as equities, commodities and other alternative investments will be assigned much higher reserve requirements than less risky asset classes such as bonds.
2010-09-22 00:00:00 Too Soon to Call for Asian Decoupling by Nouriel Roubini of Roubini Global Economics
Even without a double-dip, weak U.S. and EU recoveries will cause export-dependent Asian economies to grow below their 2003-07 trends in the coming years. Nonetheless, widening growth differentials with the G7 countries and healthy public- and private-sector balance sheets - along with rising incomes and expanding middle classes - will drive economic growth and foreign investment in Asia and increase intra-Asia and EM trade and investment.
2010-09-20 00:00:00 Mr. Energy by Jeffrey Saut of Raymond James Equity Research
According to Dow Theory, the primary trend of the stock market is 'up.' That upward trend would be reconfirmed if the Dow Jones Industrial Average and the Dow Jones Transportation Average break above their respective August 9 closing highs of 10698.75 and 4516.35. Such action would also suggest a run toward the Dow's April 26th closing high of 11205.03. Last week, however, stocks stalled around their August recovery highs. With 75.8 percent of the S&P 500's stocks above their 50-day moving averages, we are currently overbought.
2010-09-02 00:00:00 Beggar Thy Neighbor by Niels C. Jensen, Nick Rees and Patricia Ward of Absolute Return Partners
Austerity hurts domestic economic growth, and all those countries facing harsh austerity programs over the next several years will thus realize that the only way out of the current predicament is through higher exports and/or lower imports. We cannot all export our way out of our problems, however. Somebody will have to do the imports. Lower economic activity will again lead to lower tax revenues for the public sector; it is a very unfortunate and rather vicious spiral which is also very deflationary.
2010-07-27 00:00:00 Stress Test Zombies: Reverting to the Global Mean by Christopher Whalen of Institutional Risk Analyst
Some of the big American zombie banks - Citigroup, JPMorgan Chase and Bank of America in particular - are seeing positive results from the Fed's net interest margin drip. Many, however, are reverting back to the global mean for performance due to the zero-interest rate policy maintained by the central bank. In the end, the carry trade enhancement allowed by low interest rates amounts to a subsidy for credit losses by banks that comes out of the pockets of savers.
2010-06-07 00:00:00 The European Disease by Niels C. Jensen of Absolute Return Partners
It should be blatantly clear that Greece is by no means the only country at risk of falling into the much dreaded debt trap. The United Kingdom, the United States, New Zealand, Spain, France, Portugal and Australia are all in dangerous territory and Ireland is in very deep trouble on this account. This cross-European contagion risk threatens the very existence of our banking system, and it is this risk that French and German leaders are thinking about when they say that Greece will not be allowed to go down.
2010-05-05 00:00:00 The Commodities Con by Niels C. Jensen of Absolute Return Partners
Investor allocation to commodities has grown dramatically in recent years - to the point where commodities have become a mainstream asset class. Commodity prices have thus at least partly been driven not by fundamental demand but by demand from financial investors eager to diversify their equity risk and attracted to the seemingly high probability of generating uncorrelated returns. What these investors do not seem to understand, however, is that now that traders themselves determine market prices, the promised land of uncorrelated returns is little more than wishful thinking.
2010-04-21 00:00:00 The Bernanke Put: Creating Tetrodotoxin Investors by Cliff W. Draughn of Excelsia Investment Advisors
The 'Bernanke Put' of low interest rates over an extended period of time has effectively lured investors to pursue greater and greater levels of risk without critically thinking about the ramifications of upcoming mortgage resets, consumer spending versus income, credit contraction, valuations, and unemployment. Our country has never experienced leverage of this magnitude. In this environment, we must remember the lesson from Benjamin Graham: 'The margin of safety takes priority over all other investment considerations.'
2010-04-07 00:00:00 When the Facts Change by Niels C. Jensen of Absolute Return Partners
An echo bubble is upon us. Echo bubbles are the children of primary asset bubbles, and emerge when monetary authorities respond to the bursting of a primary asset bubble by slashing policy rates. Extraordinarily low interest rates are currently encouraging another bout of excessive risk taking. If policymakers raised rates now, however, they would almost certainly kill the fledgling recovery. The pressure is therefore on monetary authorities to keep rates low and feed the new bubble. Investors should steer toward assets that benefit from high volatility.
2010-03-30 00:00:00 Seven Tips for a Successful Family Foundation by Nancy Opiela (Article)
Managing a foundation's assetswins you the cachet of being seen as helping your clients fulfill their philanthropic goals, and it is extremely lucrative work that can create a practice-building bridge to the next generation.The administrative aspects, as Nancy Opiela writes, can be daunting and she offers seven tips for a successful family foundation.
2010-03-30 00:00:00 Not a Lost Decade for Diversified, Balanced Portfolios by Joni L. Clark, CFA, CFP (Article)
Did the last ten years really demolish the foundations of Modern Portfolio Theory and classic investing principles? How did portfolios that stuck to the principles of effective diversification and buy-and-hold investing actually perform during the so-called "Lost Decade?" The answers to both questions is an unqualified "no," writes Joni Clark of Loring Ward in this guest contribution, based on her analysis of a DFA-based strategy.
2010-03-29 00:00:00 Bank Profile: First Interstate BancSystem (FIBK); Achim Dübel on Covered Bond Legislation by Christopher Whalen of Institutional Risk Analyst
This post features a comment from international mortgage finance consultant Achim Dubel of German financial think tank Finpolconsult. Dubel says that legislation proposed by Representative Scott Garrett of New Jersey to create a covered bond market in the U.S. needs to be changed if it is to restore investor trust and provide needed new liquidity to real estate markets. Legacy problems with shaky assets of all colors on bank balance sheets should be solved via bad banks and/or bank insolvency and restructuring, not through a new secondary market for bank mortgages.
2010-03-17 00:00:00 Are Married Women Less Risk-Averse? If So, Why? by Graziella Bertocchi , Marianna Brunetti and Costanza Torricelli of VoxEU
Does marriage make people less averse to risk? This column argues that this is the case for women, but not for men. But married women's different attitude towards risk has fallen over time as the prevalence of marriage in society has faded. For women who work, marriage makes no difference.
2010-03-04 00:00:00 The Retirement Lottery by Niels C. Jensen of Absolute Return Partners
Aggressive advertising feeds us the fallacy that as long as we invest for the long term, equities will always provide us with solid returns. This may be true if your investment horizon is 30 or 40 years, but most people do not start saving for retirement until they are in their 40s. Hundreds of millions of baby boomers are now chasing whatever returns they can to ensure that they can retire in relative comfort. Jensen also examines the relationship between net private savings, foreign capital inflows and government debt.
2010-02-06 00:00:00 A Bubble in Search of a Pin by John Mauldin of Millennium Wave Advisors
Mauldin covers three topics. He digs into the employment numbers and concludes that it is a "mixed bag" - the numbers of unemployed rose but the unemployment rate declined. Looking at the Reinhart-Rogoff book, he argues that Fed policy makers were at fault for failing to recognize the housing bubble. Last, he discusses Greece's fiscal problems in a historical context.
2010-01-21 00:00:00 unbiased industriousness by Tom Brakke of the research puzzle
As for industriousness, one dictionary defines it as 'attentive and persistent effort.' While there are building blocks that an investment professional must use, there should be nothing rote ab
2010-01-04 00:00:00 Ariana Huffington: Move Your Money!; Skin in the Game: Interview with FASB Chairman Bob Herz by Christopher Whalen of Institutional Risk Analyst
2010-01-04 00:00:00 Timothy Geithner Meets Vladimir Lenin by John P. Hussman of Hussman Funds
2009-12-30 00:00:00 Stock Market Double Dip Probability - Leverage, the US, & China by Michael J. Schussele of Michael J. Schussele, CPA
2009-12-26 00:00:00 Paul McCulley Discusses PIMCO's Cyclical 2010 Outlook by Paul McCulley of PIMCO
2009-11-17 00:00:00 Ned Davis: The Cyclical Bull Rally is Not Over by Robert Huebscher (Article)
In February of last year, Ned Davis, president and senior investment strategist of an eponymous Florida-based institutional research firm, correctly forecast last year's market decline. In February of this year, he called the market rally that began in March. Now, he says, that cyclical bull rally is not over.
2009-11-03 00:00:00 The Best Books on Investing by Vitaliy Katsenelson (Article)
Author and fund manager Vitaliy Katsenelson provides us with his list of the best books on investing. It contains six sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, and Books for the Soul.
2009-10-06 00:00:00 A Quarter-End Letter to Send Clients by Dan Richards (Article)
Last fall, Dan Richards began posting quarter-end letters that advisors could adapt for their own use. Many advisors have told him that they have received an outstanding response to the letters they sent as a result, and Dan provides a template for a third-quarter letter.