More on Related Themes
2016-04-19 00:00:00 How Do You Measure Which Retirement Income Strategy Is Best? by Michael Kitces (Article)
In framing different retirement income strategies – and the trade-offs they entail – it’s important to scrutinize the measuring stick used to evaluate the outcomes. The best retirement income strategy will depend on whether you measure based on wealth, spending, probabilities of success, magnitudes of failure or utility functions that weigh both the upside and downside risks!
2016-04-15 00:00:00 Digital Technology’s Impact on Investment Decisions by Shlomo Benartzi of Allianz Global Investors
In this digital age, people have instant access to their investment accounts and can monitor markets on a whim. In a new paper, Shlomo Benartzi Chief Behavioral Economist of the Allianz Global Investors Center for Behavioral Finance, discusses how "monitoring frequency" can increase loss aversion and affect investment decisions.
2016-04-14 00:00:00 In the Know: DOL Expands Fiduciary Definition by Yaqub Ahmed of Franklin Templeton Investments
The intent of the DOL’s new rule is, in its words, to enhance consumer protection and ensure that advisors and financial institutions put their clients’ best interests first. These are principles we can all support.
2016-04-12 00:00:00 Three Tips to Avoid Presentation Disasters by Dan Solin (Article)
I give a lot of presentations and attend many conferences where I have the opportunity to hear talks given by a diverse group of speakers. I’m still honing my presentation skills, but here are three tips to avoid the big mistakes I often see.
2016-04-07 00:00:00 Harnessing Value in Dislocated Credit by Sai Devabhaktuni of PIMCO
Market volatility, diminishing liquidity and credit imbalances combine to create mispricings and attractive opportunities in leveraged finance.
2016-03-29 00:00:00 Evolution or Extinction: The Future of Mutual Fund Wholesalers by Jeff Briskin (Article)
While the Internet has made it easier for fund companies to communicate with advisors, it has also caused an information overload that, ironically, is making it more difficult for wholesalers to deliver value to advisors. Wholesalers, who once saw their mission as delivering a polished pitchbook and touting fund performance, are losing ground to those who are able to craft a message based on an intimate understanding of the needs of advisors and their clients.
2016-03-29 00:00:00 The Détente Agreement by Steve Blumenthal of CMG Capital Management Group
“Corporate sector metrics have been disappointing of late… Companies are scaling back expenditures of all kinds (capital expenditures, hiring, and inventory-builds, for example), as their top-line revenues and earnings decelerate. Though first-quarter numbers may come in better than beaten-down forecasts, firms are finding that top line revenues are still hard to grow significantly.” Rick Rieder, Head of Global Fixed Income, BlackRock
2016-03-27 00:00:00 25 Years of Investing in Asia by Robert Horrocks, Sharat Shroff of Matthews Asia
Matthews Asia has reached a milestone in its history—25 years of investing in Asia. What have been the biggest challenges? What lessons have been learned? This month’s Asia Insight features Robert Horrocks, PhD, and Sharat Shroff, CFA, who share their thoughts on the investing disciplines they have formed in the two decades since Asia has evolved from “interesting but obscure” to a frontline asset class.
2016-03-22 00:00:00 Why Firms Pay for Services they Don’t Need by Matt Lynch (Article)
Nobody wants to get a bill for services they didn’t need or purchase. But that’s what’s happening – unwittingly – to advisors as the vendors that supply them expand their service offerings.
2016-03-21 00:00:00 Ian McAvity by Jeffrey Saut of Raymond James
“When times get tough, economic nationalism and protectionism tends to rise because it is always easier to blame someone else for self-inflicted problems.”. . . Ian McAvity
2016-03-15 00:00:00 How to Create an Effective Introductory Packet by Teresa Riccobuono (Article)
An impactful information packet is an easy and effective way to gain an advantage over your competition. It is especially valuable when working with centers-of-influence (COIs).
2016-03-15 00:00:00 A Market Valuation Gauge That Works by Theodore Wong (Article)
In my previous article, I examined many popular metrics that show that U.S. equities have been overvalued for over 20 years. The conventional explanation is that the overvaluation and its unusually long duration is a statistical outlier. But until the anomaly is better understood, naively equating the lack of mean reversion with overvaluation will lead to ill-advised investment strategies.
2016-03-09 00:00:00 On My Radar: Stick With the Drill – Stay Wary, Alert and Very, Very Nimble by Steve Blumenthal of CMG Capital Management Group
I was in Florida this week attending the 32nd Annual Chicago Board of Options Exchange (CBOE) Risk Management Conference. Attendees were mostly asset managers and larger pension and endowment managers. Several comments stood out to me; particularly the one above from Paul R.T. Johnson, Jr., Board Member of the State University Retirement System. “42% funded?” He added that the good news is that his is the most funded of all the states. Yikes.
2016-03-01 00:00:00 Four Big Mistakes Hurting Your Firm’s Growth by Damian Ornani (Article)
Growth for an RIA usually means boosting assets under management and/or client count. However, this presents a problem for the diligent RIA: How do you responsibly grow your firm without jeopardizing quality – and, with it, the existing client relationships you cherish? The answers could fill volumes. Avoiding these four big mistakes is a crucial start to grow while maintaining quality.
2016-02-24 00:00:00 Why Are Stocks and Oil Prices Moving in Tandem? by Sonu Varghese of Convex Capital Management, LLC
Are stocks up or down this week? It seems that is dependent on whether oil prices are up or down.
2016-02-22 00:00:00 Self-Sabotage by Cliff Stanton, Jeremy Frank of 361 Capital
The field of Behavioral Finance has contributed greatly to our understanding of how investors make decisions. Unfortunately, many of the findings from this growing body of work have confirmed that investors routinely make sub-optimal decisions. What we know is that investors routinely chase performance; buying high and selling low. This cycle repeats itself to the point that the typical investor barely keeps up with inflation.
2016-02-16 00:00:00 Skip the Speculation: What Would a Fiduciary Do? by Tom Rowley of Invesco Blog
W-2s are out, marking the heart of the IRA season, when more business is traditionally done than at any other time of year. And where does this occasion find many financial advisors (FAs)? They could be speculating endlessly about what the imminent Department of Labor (DOL) fiduciary rule may mean for IRAs. (Please see my earlier blog post, IRA opportunity knocks, despite DOL fiduciary rule). Truth be told, though, nobody knows or will know until the final version of the rule is released, likely in mid-March. In the interim, however, IRA opportunity is knocking loudly.
2016-02-12 00:00:00 APViewpoint Events presents: Taking the Fiduciary High Ground by APViewpoint (Article)
Presenter: Blaine Aikin
Monday, February 22, 4:00 pm ET
Regulation seeks to protect the public; professional advisors seek to serve the public. In this session, Blaine will help advisors understand how the "big picture" can make a big difference when it comes to successfully managing their regulatory and professional obligations. Blaine will answer attendees' questions during the webinar and will also be available to continue the discussion on APViewpoint.
2016-02-10 00:00:00 70 Is the New 65: Demographics Still Support 'Lower Rates for Longer' by Matthew Tracey, Joachim Fels of PIMCO
The so-called demographic cliff remains at least a decade away; meanwhile, global demographics should continue fueling the savings glut.
2016-02-08 00:00:00 The Most Dangerous Financial Products by Michael Edesess (Article)
What would we think of doctors who deliberately hurt patients by prescribing dangerous and unhealthful products in order to make more money? Fortunately, the medical profession is set up in such a way that such things virtually never happen. This is not so in the financial services industry, where hazardous products are routinely sold to unsuspecting consumers.
2016-02-02 00:00:00 Today's KYC Rules No Substitution for Know Your Customer by Francois Sicart of Tocqueville Asset Management
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, contrasts current 'Know Your Customer' rules with those that had been practiced for decades, when "stockbrokers were among the most trusted members of their communities."
2016-02-02 00:00:00 On My Radar: The Last Bull Standing by Steve Blumenthal of CMG Capital Management Group
Today, I share with you some of my high-level notes from this week’s Inside ETFs Conference in Hollywood, Florida. The forward return theme was consistent, from Vanguard to Wharton Professor Jeremy Siegel: expect low equity and fixed income returns. Jeffrey Gundlach left the audience in a state of depression (well the audience, not Gundlach) and Mark Yusko spoke of likely recession citing poor ISM numbers. This left Prof. Siegel to later say, “It appears I’m the only bull at the conference.”
2016-02-01 00:00:00 James Montier on Fed-Induced Bubbles, Market Valuations, Smart Beta and Liquid Alts by Robert Huebscher (Article)
James Montier is a member of Grantham Mayo van Otterloo’s (GMO’s) asset allocation team. In this interview, he discusses the effect of monetary policy on market valuations, and offers his opinion on smart-beta and liquid-alt investment products.
2016-02-01 00:00:00 What Would Minsky Do Now? by Laurence B. Siegel (Article)
In the two decades since his death, Hyman Minsky’s stature has grown enormously. He foresaw the great financial crisis of 2007-2009, and economists routinely refer to “Minsky moments” as the tipping point when seemingly stable financial markets collapse with catastrophic consequences. It’s instructive to speculate on how Minsky would view our post-crisis economic recovery, and a new book allows us to do just that.
2016-02-01 00:00:00 The Role of Short Selling in Equity Markets by Niall H. O’Malley (Article)
To understand the role of short selling, one has to step back and see how it impacts price discovery in equity markets. We are familiar with terminology such as short squeeze, prime brokers and short interest, but what does it all mean?
2016-01-26 00:00:00 Second Set of Updates at Crestmont Research by Doug Short (Article)
Note from dshort: My friend Ed Easterling, whose Crestmont Research P/E valuation is a regular feature on this website, has published a collection of periodic updates to his ongoing analysis. The commentary below is based on his latest distribution email to subscribers.
2016-01-22 00:00:00 Market Macro Myths: Debts, Deficits, and Delusions by James Montier of GMO
In the context of the role that debts and deficits play in overall economic policy, in this paper I focus on the philosophy known as “sound finance,” which includes adherents who believe that governments should seek to balance their budgets. I, however, take a different view, and believe that the role of government when dealing with budget deficits should be one of “functional finance,” which ensures that the policies implemented help to reach the overarching goals of macroeconomic policy (generally held to be full employment and price stability).
2016-01-21 00:00:00 Colombia Shifts to Keep Its Balance Amid Slide in Oil Prices by Pablo Echavarria of Thornburg Investment Management
Accepting short-term fiscal and foreign exchange pain for long-term macroeconomic gains, which may compound with infrastructure investment and possibly peace dividends.
2016-01-19 00:00:00 Newsletter - Volume 9, No. 1 - January 2016 by Harold Evensky of Evensky & Katz / Foldes Financial Wealth Management
A belated Happy and Healthy New Year! Now for this NewsLetter’s musings…
2016-01-16 00:00:00 On the Couch by Howard Marks of Oaktree Capital Management
I woke up early on Saturday, December 12 – the morning after a day of significant declines in stocks, credit and crude oil – with enough thoughts going through my mind to keep me from going back to sleep. Thus I moved to my desk to start a memo that would pull them together. I knew it might be a long time between inception and eventual issuance, since every time I dealt with one thought, two more popped into my head. In the end, it took a month to get it done.
2016-01-12 00:00:00 Should Advisors Hire a Financial Planner? by Bob Veres (Article)
Based on conversations with advisors who have allowed themselves to be financial planning clients, I’ve come to believe that most – perhaps all – financial planners should hire an outside professional.
2016-01-08 00:00:00 Forecasting Returns: Simple Is Not Simplistic by Jim Masturzo of Research Affiliates
The value of a forecasting model is that it improves on the alternative models available and classifies the forecaster’s knowledge of asset classes into an economically intuitive framework for building portfolios. A yield-based model is simple, but it checks both boxes.
2016-01-07 00:00:00 New Updates at Crestmont Research by Doug Short (Article)
Note from dshort: My friend Ed Easterling, whose Crestmont Research P/E valuation is a regular feature on this website, has published collection of periodic updates to his ongoing analysis. The commentary below is based on his latest distribution email to subscribers.
2015-12-30 00:00:00 The Next Generation in Philanthropy: The Rockefeller Foundation to the Zuckerberg Chan Initiative by Robert J. Holton of Cleary Gull
This recent announcement, from a modern technological billionaire using the latest technology to shake up the philanthropic world, echoes the thoughts and actions of another notable American, John D. Rockefeller. Adjusting for inflation, John D. Rockefeller may have been the wealthiest American to have ever lived, holding assets estimated at $253 billion in today’s dollars[i]. The Rockefeller Foundation today is worth a far more modest $4 billion, but has been setting a standard for philanthropy for the past 100 years.
2015-12-24 00:00:00 From Congress: An Early Christmas Present for the Charitably Inclined by Tara Thompson Popernik of AllianceBernstein
Christmas came early for US taxpayers when Congress passed the Protecting Americans from Tax Hikes (PATH) Act of 2015 on December 18. The Act extended several expired tax provisions, some permanently, including qualified charitable IRA distributions. But other giving strategies may make some philanthropic taxpayers even merrier come tax time.
2015-12-22 00:00:00 The Case against Wall Street by Bob Veres (Article)
Ladies and gentlemen of the jury, we are here today to consider the case of a defendant who is familiar to everyone: the brokerage industry, or simply Wall Street. The defendant is charged with a number of crimes: employing deceptive business practices; operating a cartel; undermining consumer protections; engaging in anti-competitive behavior against the emergent financial advisory profession; exerting undue and improper influence on Congress and the regulators; raking in excess profits and thereby harming the American economy that it originally was created to benefit.
2015-12-18 00:00:00 Past vs. Prologue: Cutting Through the Noise of Investment Returns by David Robertson of Arete Asset Management
While investors are fortunate to have good data on returns to guide them, the quality of translation of that information into investment advice varies considerably.
2015-12-15 00:00:00 Why Dividend-Paying Stocks are Riskier than You Think by Larry Swedroe (Article)
As advisors shift allocations from bonds to high-dividend stocks, they are exposing their clients to equity market risk. But they are also increasing interest-rate risk. Investors in two of the biggest dividend ETFs – SDY and VIG – are among the most exposed to the surging demand for dividend-paying stocks.
2015-12-14 00:00:00 On My Radar: El-Erian’s 2016 Outlook & The T Junction by Steve Blumenthal of CMG Capital Management Group
I spent a few days earlier in the week in Scottsdale, Arizona. I was invited to present on portfolio positioning and best execution at the 20th annual IMN Global Indexing and ETF Conference. One of the big highlights for me was El-Erian’s keynote presentation. Today, I share with you my notes from El-Erian’s speech. He is humble, balanced and brilliant. I have listened to my recording of his presentation several times. Stop-start-rewind-replay-rinse-repeat. Fun for me and well worth the effort. In short, he puts the odds for a good outcome at 50/50 saying he, “hates to say that."
2015-12-11 00:00:00 Intelligent Design Sustainable Income by Chris Brightman, Vitali Kalesnik, and Engin Kose of Research Affiliates
The AND principle means building in desirable features without the trade-offs that conventional thinking considers inevitable. Case in point: an equity income index holding liquid, quality stocks with high dividend yields. (1) The AND principle holds that creative product design can surmount some trade-offs that conventional thinking considers unavoidable.Simple investment strategies are easier to govern than complex ones and may be less likely to result in catastrophic outcomes. A simple new design demondemonstrates that income-oriented indices need not trade off yield for capacity & quality.
2015-12-11 00:00:00 George Friedman’s World of Geopolitics by John Mauldin of Mauldin Economics
In today’s letter, I have transcribed a conversation George Friedman and I had a few days ago. In it, we talk about how our new joint effort came about and why George has left Stratfor to create his new firm, Geopolitical Futures.
2015-12-10 00:00:00 GMO Quarterly Letter by Ben Inker, Jeremy Grantham of GMO
In a new quarterly letter to GMO's institutional clients, co-head of asset allocation Ben Inker examines whether emerging-market equities might be a "value trap," and if U.S. equities are "deserving of trading at a premium P/E to the rest of the world" ("Just How Bad Is Emerging, and How Good Is the U.S.?"). In part two of the letter, chief investment strategist Jeremy Grantham provides "a list of propositions that are widely accepted by an educated business audience ... but totally wrong. ...
2015-11-30 00:00:00 We'll Always Have Paris by Zachary Karabell of Envestnet
The past weeks are a stark reminder of the risks that we live with in the world today. Such times trigger multiple questions, and their answers may be more vital than how we invest. Nonetheless, how we plan and invest for our futures is of core importance.
2015-11-25 00:00:00 To Be Continued … the Fed Drama and Its Implications by David Robertson of Arete Asset Management
The Fed has strung investors along for quite a while in anticipation of the first rate increase in nearly a decade. What would happen if low rates were to become a permanent fixture of the investment landscape?
2015-11-23 00:00:00 On My Radar: Global Recession a High Probability by Steve Blumenthal of CMG Capital Management Group
“I have long made the claim that the transnational nature of Europe cannot be sustained. The divergent economic interests of EU countries, some with unemployment over 20 percent, some with it under 5 percent, meant that it was impossible for all of them to live not only under the same monetary regime, but under the same trade regime, which we cannot call free trade with agriculture, among other things, being protected. This would lead to a focus on national interest and on a resurrected nation-state.” -George Friedman
2015-11-17 00:00:00 Can the Free Market Protect Consumers? by Michael Edesess (Article)
A new book, Phishing for Phools, by Nobelists George Akerlof and Robert Shiller – respectively, authors of the phrases “market for lemons” and “irrational exuberance” – says that the exact same free-market process that Adam Smith lauded for doing a great job of satisfying mutual self-interests, also incentivizes scamming.
2015-11-17 00:00:00 Gundlach – The Psychology of a Rate Hike by Robert Huebscher (Article)
The consensus is building for a Fed rate hike in December. But how the market will react is far less certain. According to Jeffrey Gundlach, that will depend on the context in which the Fed takes action.
2015-11-17 00:00:00 Sustaining a Foundation, Stepping Up as Fiduciaries by Seth Masters of AllianceBernstein
Establishing a foundation can be a great way to pursue charitable objectives, but it often brings a host of fiduciary responsibilities that donors may feel ill-equipped to handle. In this hypothetical case study, a couple of entrepreneurs sought our advice on asset allocation.
2015-11-12 00:00:00 Myopia & Market Function by Roger Nusbaum of AdvisorShares
The Wall Street Journal posted an article written by Shlomo Benartzi who is a professor at UCLA specializing in behavioral finance. The article primarily focuses on the behavioral problems, like myopic loss aversion, that can arise when investors check their account balances or the prices of their holdings which thanks to technology has become increasingly more convenient to do.
2015-11-09 00:00:00 Psychological Whiplash by John Hussman of Hussman Funds
Investors have experienced a great deal of whiplash in recent months. After a rapid but relatively contained retreat in August and September, the stock market has rebounded to within 2% of its May record high. Only weeks ago, investors were concerned about economic deterioration. As of Friday, strength in nonfarm payrolls has suddenly convinced investors that a December rate hike by the Fed is all but certain.
2015-11-06 00:00:00 Portfolio Risk: It’s More Complicated Than You Think by Harin de Silva of Analytic Investors, Sub-Advisor of 361 Capital
2015-10-29 00:00:00 Income and the Interest Rate Game by Gene Tannuzzo of Columbia Threadneedle Investments
An investment strategy based purely on guessing where interest rates are headed is destined to miss the mark. We still expect the Fed to raise rates soon (but probably not in October) and we think longer term rates should drift higher (but we wouldn’t want to bet the farm on that). Investors should focus on areas of the bond market that offer attractive income relative to the risk, and retain the flexibility to adjust that positioning as the market evolves.
2015-10-26 00:00:00 Dan Fuss: Rates Will Rise (and so will taxes) by Robert Huebscher (Article)
If there truly were a “bond king,” it would not be Bill Gross or Jeffrey Gundlach. It would be Dan Fuss, whose tenure in the fixed-income markets has spanned more than half a century. In a talk last week, Fuss warned investors to expect higher interest rates along with higher taxes.
2015-10-23 00:00:00 A Bond-Free Portfolio: Why Cash Should Replace Bonds to Reduce Risk and Improve Returns by Kendall Anderson of Anderson Griggs
In a recent interview, Howard Marks, the great investor and co-chairman of Oaktree Capital, quoted the original Dr. Doom, Henry Kaufman, who once said “There are two kinds of people who lose money: those who know nothing and those who know everything.” Those of us who are selling investment services, whether portfolio management or investment products, have a tremendous ability to locate or create research that rationalizes our approach to building and maintaining a portfolio.
2015-10-20 00:00:00 Risk-Adjusted Return: A Better Small-Cap Measure by Stephen Grant of Value Line Funds
For most investors, the first step in evaluating a mutual fund is to look at its historical performance despite mutual fund disclosure that “past performance is no guarantee of future results.” The second step likely would be to look at a fund’s rating by a financial data company such as Morningstar or Lipper, but these ratings are primarily derived from past performance, so the investor returns to square one.
2015-10-17 00:00:00 Weekly Economic Commentary by Carl Tannenbaum, Asha Bangalore of Northern Trust
Wealth Has Different Effects in Different Places; Our Good Fortune with Health Care Costs May Soon End; The Nobel Prize Rewards Digging into the Details
2015-10-08 00:00:00 Rainmakers by Rick Lear of Lear Investment Management
The onslaught of financial events in the past several months created massive confusion and uncertainty in the global financial markets. Much of the confusion revolves around economic factors - interest rates, currency, energy prices and growth policy. Several economic factors are influenced by policy makers and central banks. Our goal this month is to slice through the confusion and find direction for the remaining months of 2015.
2015-10-08 00:00:00 Done in By Biases? by Roger Nusbaum of AdvisorShares
Howard Gold had a post at MarketWatch noting research that shows baby boomers have too much in equities relative to when they would be likely to retire. He talks about this being poor asset allocation strategy, that it plays into some behavioral finance issues, says that many people need to admit they can’t manage their own money and concludes that everyone should put their 401k money into the target date fund in their 401k most suited to their intended retirement date.
2015-10-07 00:00:00 Mom and Investment Underdogs by Jerry Wagner of Flexible Plan Investments
I was talking with a friend the other day about troubles in his family. At one point he remarked, “A mother is only as happy as her saddest child.” It’s a saying that has been attributed to Jackie Kennedy (and that is certainly understandable), but I think it goes much further back in time. My wife said her mother used to say it when she was growing up.
2015-09-28 00:00:00 The DOL’s Fiduciary Rule: What We Can Learn from the U.K. by Joe Tomlinson (Article)
The DOL’s proposed fiduciary rule has led to a furious debate over whether low- and middle-income Americans will be deprived of financial advice. Three years ago the U.K. made similar changes affecting the delivery of financial advice, and those changes were studied in detail. I’ll assess what we can learn from the British studies and give my views on additional steps the U.S. should take to improve financial outcomes.
2015-09-24 00:00:00 Thank Serendipity, but Don’t Depend on It by Glenn Dial of Allianz Global Investors
Many Americans caught a lucky break when it came to retirement preparation, but they can't afford to be complacent.
2015-09-21 00:00:00 How to Generate Alpha without Selecting Superior Funds by Bob Veres (Article)
In Part I of my series on active investment management, I described two types of research that attempted to help advisors uncover above-average talent: identifying conditions where you are more likely to find outperformers, and better ways to identify above-average managers. As it turns out, there’s a third possibility. Instead of identifying superior funds, you identify superior combinations of funds – which, of course, includes a fund-selection process, but then takes it one step further.
2015-09-17 00:00:00 Empirical Finance: Meeting Fiduciary Standards Through Skepticism, not Cynicism by Adam Butler, Michael Philbrick, Rodrigo Gordillo of ReSolve Asset Management
Michael Edesses is out with a scathing article lambasting the field of empirical finance. He draws inspiration from Harvey, Liu and Zhu’s (HLZ) recent article, entitled “…and the Cross Section of Expected Returns”, but extends HLZ’s conclusions to an absurd limit. In this article, we discuss why we embrace the framework of healthy skepticism described by HLZ, but in the context of a more optimistic and constructive view of empirical finance.
2015-09-14 00:00:00 Investing for Income: Meeting the Challenges of a Low Yield Environment by Paul Reisz, Tina Adatia, Tanya Sanwal of PIMCO
For many investors, generating a high and sustainable income stream is challenging in the current secular landscape, which PIMCO calls The New Neutral. Over the next three to five years, we expect to see global economies converging to modest trend growth rates as central banks are constrained to set policy rates at levels well below those that prevailed before the financial crisis.
2015-09-09 00:00:00 Newsletter - September 2015 by Harold Evensky, of Evensky & Katz / Foldes Financial Wealth Management
Harold Evensky's quarterly letter to his readers.
2015-09-08 00:00:00 Curb Your Mind by Rick Lear of Lear Investment Management
With the recent events in China and Greece causing volatility in the global markets, we think it is more important than ever to take a moment to reflect on how capital markets function. People trade stocks; and an understanding of the human thought processes is at the foundation of markets. The recent gyration of the world’s markets reminds us how quickly greed can turn to fear and how investors can begin to make mistakes. We find that heightened emotions often lead to mistakes that can be easily avoided.
2015-09-07 00:00:00 The First Step in Launching a Firm-wide Marketing Strategy by Kristen Luke (Article)
In order for a firm to grow and succeed beyond its owner’s capabilities, marketing and business development must become a company-wide responsibility. Here’s a process to make that happen.
2015-09-02 00:00:00 Provise Bullets by Team of ProVise Management Group
There is a big debate within the financial services industry regarding who should be required to be a fiduciary. Basically a fiduciary puts their clients’ interests ahead of their own, a philosophy ProVise has espoused since our founding in the mid-80s. The Department of Labor has proposed a rule which would require ALL who give advice on retirement plans to do so at a fiduciary standard of care.
2015-09-02 00:00:00 Is "New Normal" Enough to Grow China's Economy? by Jerry Zhang of Wells Fargo Asset Management
Jerry Zhang, Ph.D., CFA, explores the economic underpinnings that can spark growth in China—and, in turn, present investing opportunities for growth seekers.
2015-08-28 00:00:00 Who Ate Joe’s Retirement Money? Sequence Risk and its Insidious Drag on Retirement Wealth by Peter Chiappinelli, Ram Thirukkonda of GMO
Defined Contribution (DC) plan participants are haunted by an invisible risk called sequence risk (sometimes called sequence-of-returns or path dependency risk), that is, getting the “right” returns but in the “wrong” order. Sequence risk in the retirement phase has been studied extensively. Sadly, not as much attention has been paid to sequence risk during the accumulation phase, but it is equally important.
2015-08-26 00:00:00 As Market Fears Grow, Stay Focused on the Long Term by Brad McMillan of Commonwealth Financial Network
One bad day doesn’t make a bear market. Two bad days, however, and the prospect of more to come, may well signal one.
2015-08-24 00:00:00 Strategies to Convert More Prospects by Dan Solin (Article)
Evidence-based advisors are no match for the media’s steady drumbeat of misinformation. As a consequence, they need to be especially skilled at persuasive techniques grounded in peer-reviewed data, which will permit them to convert more prospects into clients. Here is a research-backed strategy to accomplish that goal.
2015-08-21 00:00:00 Was the Euro a Good Idea? by Carl Tannenbaum of Northern Trust
The creation of the euro was done for political reasons; as long as it is politically less costly for its members than the alternatives, the euro is here to stay.
2015-08-21 00:00:00 Schwab’s Perspective on Recent Market Volatility by Team of Charles Schwab
Global financial markets endured their worst week of the year this past week amid concerns over slowing economic growth and currency woes in China and other emerging markets, among other reasons. At times like these it is easy to start thinking short term, but keep in mind that the foundations of investing success are well established (have a plan, keep a close eye on expenses, stay diversified, and make sure your portfolio composition is lined up with your tolerance for risk and the timetable for when you’ll need to start drawing down the portfolio).
2015-08-14 00:00:00 Investing with the Slowskys: Appreciating the Value of Expertise, Analysis, and Judgment by David Robertson of Arete Asset Management
News bits and data items with obvious implications are ever present but get discounted by the market very quickly. Only deeper, “slow traveling ideas” provide long term investors with a chance of realizing superior results.
2015-08-13 00:00:00 Exit from Wonderland: Change Is Now on the Horizon by Ed Easterling of Crestmont Research
Many investors and advisors are unsure about the current financial market environment. They have been wrestling with how to weight equities and whether to include alternative investments. Although equities have performed well in recent years, many alternatives have lagged expectations. This should not be surprising: the financial world is operating just as the Fed has intended.
2015-08-12 00:00:00 Watch the Retirement Risk Gap by Glenn Dial of Allianz Global Investors
Choosing the right glide path isn't just about getting the most return for a certain level of risk anymore, writes Glenn Dial, Head of US Retirement Strategy at Allianz Global Investors. There's a sizeable disparity between what retirement savers are willing to do and what's needed to hit their goals.
2015-08-11 00:00:00 The Hidden Cost of Ignoring Evidence by Dan Solin (Article)
An advisor recently told me that he lost a large client to another firm. This advisor said he had carefully explained the benefits of evidence-based investing to the prospect and thought he had made a convincing case. The losing advisor was distraught and confused. He wanted to know if I could help him understand how the prospect could make such an “irrational” decision.
2015-08-07 00:00:00 What Airlines Can Teach the Energy Sector about Adversity by Frank Holmes of U.S. Global Investors
If you’ve studied psychology, and specifically behavioral finance, you might be familiar with the concept of adversity quotient (AQ), which measures how well someone is able to face and cope with, well, adversity. It looks at how we use the tools given to us in order to survive and recover from setbacks.
2015-07-21 00:00:00 How to Use a Prospect’s Biases to Your Advantage by Daniel Solin (Article)
Jiu-jitsu is a gentle art. Instead of meeting force with greater force, skilled practitioners use their opponent’s force against them. Advisors can learn a lot from this principle.
2015-07-17 00:00:00 ProVise Bullets by Team of ProVise Management Group
In just a few short days, the comment period will close on a controversial proposal proffered by the Department of Labor (DOL) which would require virtually all financial advisors to adhere to a fiduciary standard of care when giving clients or prospective clients advice on their retirement plans, including IRAs. Ironically, most Americans believe that the advice that their financial advisor provides is already held to this high standard.
2015-07-16 00:00:00 Market Overview Q215 by David Robertson of Arete Asset Management
Massive interventions by central banks over the last several years have created a “game of Chicken” that has fundamentally changed investing into an exercise that more closely resembles gambling. Until the game resolves investors will do well to recognize this “game” as largely unwinnable and await better opportunities later.
2015-07-14 00:00:00 Make Plan Success a Priority for the CFO by Glenn Dial of Allianz Global Investors
Targeting chief financial officers can help advisors get more plan participants to achieve financial wellness, justify their value to plan sponsors and win new business. But you have to speak their language and show them the numbers.
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.
2015-06-29 00:00:00 Newsletter - June 2015 by Harold Evensky of Evensky & Katz
Ever hear of Noah? I hadn’t until I read an article in Institutional Investors. It turns our Noah is a NYSE-listed wealth management firm – a Chinese wealth management firm. It employs 779 relationship managers in 94 offices in 64 cities throughout China! Not only that, it was founded and managed by Chairman and CEO Wang Jingbo, a young woman! I remember hearing a lot about a “New Era” in the ’90s. That story fizzled, but I believe this story is about a real New Era. It’s a risky time to be myopic with a home country bias in investing.
2015-06-29 00:00:00 Grantham: Stocks Will Continue Upward until the Election by Justin Kermond (Article)
Jeremy Grantham says equity valuations are heading toward the “two-sigma” level that is the requisite threshold for a true bubble. At some point – which is not imminent – he says a “trigger” will precipitate the reversion back to mean levels. The market will continue to deliver positive returns until the next election, according to Grantham.
2015-06-29 00:00:00 Sallie Krawcheck’s Solution to the Retirement Crisis by Justin Kermond (Article)
Sallie Krawcheck is a woman with a cause. She has a solution to the retirement crisis and a strategy for advisors to grow their female client bases.
2015-06-24 00:00:00 Handicapping Bubbles and Shocks by Kristina Hooper of Allianz Global Investors
Kristina Hooper, US Investment Strategist for Allianz Global Investors, explains the results of the 2015 Allianz Global Investors RiskMonitor Survey, a global study of prevailing views on portfolio construction, asset allocation and risk among a cross-section of institutional investors.
2015-06-23 00:00:00 The Inventor of Behavioral Finance Looks Back by Laurence Siegel (Article)
Behavioral finance is one of the great discoveries of our time, and the University of Chicago professor and investment manager Richard Thaler is one of its principal discoverers. Misbehaving is Thaler’s personal account of his discoveries, which influence the way assets are managed, policy is conducted and economic theory is understood and taught.
2015-06-16 00:00:00 The Seven Dumbest Mistakes I Made as an Advisor by Robert J. Martorana (Article)
After 30 years in the advisory business, I’ve made plenty of mistakes. It is my hope that this article will help others avoid following in my errant footsteps.
2015-06-16 00:00:00 How the Wall Street Journal Can Help You Land Clients by Dan Richards (Article)
A financial advisor dramatically increased her closing rate after using a seven-question checklist from the Wall Street Journal to help prospects frame their decision making process to select an advisor.
2015-06-16 00:00:00 How to Use Color to Make an Impact by Daniel Solin (Article)
Most firms have marketing materials available on their websites and in hard copy. And every advisor communicates with clients via email and through periodic performance reports. I have yet, however, to meet an advisor who pays the same attention to these materials as they do to their clothes or the way their office is appointed.
2015-06-11 00:00:00 Risky Business: Single-Manager Target-Date Funds by Daniel J. Loewy, Christopher Nikolich of AllianceBernstein
Target-date funds are the only big pool of assets overseen by fiduciaries that typically rely on single-manager solutions. Best practices—and our research—suggest a multi-manager approach is better.
2015-06-11 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.
2015-06-09 00:00:00 Precision in Your Retirement Short Game by Glenn Dial of Allianz Global Investors
Getting the asset allocation right as plan participants close in on retirement is critical, writes Glenn Dial, Head of US Retirement Strategy at Allianz Global Investors. And professional advice can help them find that pinpoint accuracy.
2015-06-08 00:00:00 Why Stocks are Not "Cheap Relative to Bonds" by John Hussman of Hussman Funds
One of the constant refrains we hear at present is that while stocks may be richly valued on an absolute basis, they are “cheap relative to bonds.” At least one professor recently told students that valuations are meaningless because the P/E on cash is 100. Technically, with T-bill yields at just 0.01%, the P/E on cash is more like 10,000, but let’s not quibble. Using simple P/E ratios or inverted interest rates as a standard of value only makes sense if you have no appreciation for how securities are valued.
2015-06-08 00:00:00 Risk Revisited Again by Howard Marks of Oaktree Capital Management
In April 2014, I had good results with Dare to Be Great II, starting from the base established in an earlier memo (Dare to Be Great, September 2006) and adding new thoughts that had occurred to me in the intervening years. Also in 2006 I wrote Risk, my first memo devoted entirely to this key subject. My thinking continued to develop, causing me to dedicate three chapters to risk among the twenty in my book The Most Important Thing. This memo adds to what I’ve previously written on the topic.
2015-06-02 00:00:00 Does JPMorgan Chase Add Value For Investors? by Larry Swedroe (Article)
J.P. Morgan Asset Management has more than $318 billion in assets under management in mutual funds. But the question remains: Have their funds been adding value for investors, or has the firm itself been the real beneficiary?
2015-05-26 00:00:00 The Most Important Step to Convert Prospects by Dan Richards (Article)
Most advisors using traditional mass-marketing methods without building early credibility will see heightened struggles to get a return on their effort. Fortunately, once the will and priority is in place, there are some proven models to successfully build credibility.
2015-05-21 00:00:00 The 3 R's of a Winning Retirement Plan by Glenn Dial of Allianz Global Investors
There's a new paradigm for enhancing plan design, and therefore improving outcomes for plan participants, writes Glenn Dial, Head of US Retirement Strategy at Allianz Global Investors. It's not just about the 3 F's anymore (fiduciary responsibility, fees and funds). Learn why you should look to the 3 R's instead: results, reliability and risk.
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.
2015-05-19 00:00:00 Do Goldman Sachs' Funds Add Value for Investors? by Larry Swedroe (Article)
Over the last few years, an expanding line of mutual funds created by commercial banks such as Goldman Sachs and JPMorgan Chase have been drawing billions of dollars from investors looking to earn a good return. While the fees these funds have generated are among the few consistent bright spots of growth on Wall Street, the question for investors is whether or not the active mutual funds managed by these banks actually have been good investment choices.
2015-05-12 00:00:00 The Future of Investing ESG Portfolios: Changing Beliefs, Perceptions and Goals by Sponsored Content by ClearBridge Investments (Article)
Investing consistent with environmental, social and governance (ESG) principles can no longer be dismissed as a short-term fad. Assets under management are growing steadily, accompanied by a rise in the number and type of investment options across asset classes. Clearbridge's research explores how institutions are investing with impact today.
2015-04-30 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
2015-04-29 00:00:00 Newsletter by Harold Evensky of Evensky & Katz
Harold Evensky presents his quarterly newsletter.
2015-04-28 00:00:00 Five Words that Shape Client Behavior by Dan Richards (Article)
Financial advisors know the difficulty of getting clients to do the right things. Clients often fail to diversify portfolios, rebalance out-of-whack allocations or discuss inheritance plans with adult children. These behaviors undermine long-term outcomes. But five words can put the right default behavior in place.
2015-04-28 00:00:00 Are You Financially Literate? by Jerry Wagner of Flexible Plan Investments
That is the question being asked throughout the month of April, which is designated as National Financial Literacy Month. This effort highlights the importance of financial literacy and supports teaching Americans on how to establish and maintain healthy financial habits.
2015-04-27 00:00:00 Fair Value on the S&P 500 Has Three Digits by John Hussman of Hussman Funds
We continue to classify market conditions among the most hostile expected return/risk profiles we identify. The current profile joins rich valuations with continued evidence of a subtle shift toward risk aversion among investors, which we infer from market internals (a variant of what we used to call “trend uniformity”), credit spreads, and other risk-sensitive measures.
2015-04-21 00:00:00 Social Security & Portfolio Withdrawals; It’s Complicated by Roger Nusbaum of AdvisorShares
The Wall Street Journal ran a blog post that outlined Michael Kitces’ argument for delaying Social Security which can be summed up by saying it should be thought of it as an asset in a portfolio so by waiting, the value of your asset grows.
2015-04-06 00:00:00 Weighing the Week Ahead: Correction Looming? by Jeff Miller of New Arc Investments
After a week loaded with economic data there are plenty of fresh economic worries. In addition, the Fed seems ready to act in spite of some weak data. This means that good news is (finally) good news, and bad news will be bad. For economic and market skeptics, it signals a market shift that they see as long overdue.
2015-04-05 00:00:00 Weighing the Week Ahead: Correction Looming? by Jeff Miller of New Arc Investments
No one has a good, verifiable, real-time track record at predicting small corrections. Meanwhile, many investors get sidelined because they read an article or saw a chart suggesting that “the big one” was right ahead. Some people have been waiting for years for the correction so that they can get back in the stock market. Even when the correction finally comes they will be losers – and that assumes the ability to pull the trigger when things look bad!
2015-03-31 00:00:00 The Final Say on Spending Rules by Laurence B. Siegel (Article)
After decades of focused research, why can't finance experts decide on a safe withdrawal rate for retirement? It is time to refocus this debate by asking a slightly different question: Is there a spending rule that retirees can use over a fixed time horizon? There is and I call it "the only spending rule you will ever need."
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.
2015-03-27 00:00:00 Liquidity by Howard Marks of Oaktree Capital Management
My wife Nancy’s accusations of repetitiveness notwithstanding, once in a while I think of something about which I haven’t written much. Liquidity is one of those things. I’m not sure it’s a profound topic, and perhaps my observations won’t be either. But I think it’s worth a memo.
2015-03-17 00:00:00 How to Deal with High-Anxiety Clients by Daniel Solin (Article)
This is not an easy time to be an investor. Market volatility, often represented in the financial media through triple-digit gyrations in the Dow), creates understandable anxiety. Here's how to assess the source of your clients' anxiety and some tips for easing it.
2015-03-16 00:00:00 This Too Shall Pass by Scott Minerd of Guggenheim Partners
Behavioral finance reminds us that ignoring daily volatility roiling the market is wise. Instead, investors should focus on the positive, fundamental outlook for equities and fixed income.
2015-02-18 00:00:00 A World of Uncertainty by Jerry Wagner of Flexible Plan Investments
After spending over 32 years working in and around the financial services industry, I have come to a realization about one of the most important attributes for investors.
2015-02-17 00:00:00 Is Modern Portfolio Theory Dead? by Vern Sumnicht of iSectors
A response to an article titled, “Modern Portfolio Theory is Dead.” The point is to simply ask which of the principles of Modern Portfolio Theory are no longer true. I think it’s more than obvious that these sound principles of investing that have been with us for more than 50 years will be here 50 years from now.
2015-02-17 00:00:00 Keynesian Contrarianism: Where is the Minority Today? by William Smead of Smead Capital Management
To get a good feel for where the largest pools of money are invested around the world and to identify the minority, we draw from the NACUBO-Commonfund Study of Endowments in North America. This year’s survey included $516 billion in investable assets. The results for the fiscal year ended June 30th of 2014 are listed below. Pay particular attention to the largest endowments, because we believe they represent the asset allocation of the largest worldwide institutions.
2015-02-10 00:00:00 Harold Evensky - Nine Key Communication Points by Robert Huebscher (Article)
Advisors should put their mouths where their money is, according to Harold Evensky. Educating and preparing clients for what advisors will ultimately deliver must be a core principle of every practice. In a recent presentation, Evensky described nine key ways that advisors should interact with clients, the media and their peers.
2015-02-10 00:00:00 Why Building Trust is the Top Priority in 2015 by Robin Powell (Article)
I have long advocated using high-quality, engaging content to build trust and attract and retain more clients. Your content reflects - or should reflect - you and your values and it has to take center stage in your firm's marketing strategy.
2015-01-31 00:00:00 Encouraging Lifetime Income in US DC Plans by Daniel A. Notto of AllianceBernstein
With the continuing shift from defined benefit (DB) plans to defined contribution (DC) plans, fewer Americans have the ability to enjoy guaranteed income for life. Now, federal regulators are trying to change that.
2015-01-30 00:00:00 Finding Tax-Free Transfer Opportunities in Undervalued Energy Stocks by Carin Pai, Elisa Shevlin Rizzo of Fiduciary Trust Company International
In the past few weeks, crude oil has extended its biggest price slump since the 2007-2009 global financial crisis, dropping to the lowest levels since 2009 amid signs of softer demand growth from major economies, strong output from the US and steady output from the rest of the world.
2015-01-27 00:00:00 2014 Global Factor Round Up by Michael Nairne (Article)
Factor performance can vary as a result of business cycle influences, market sentiment, interest rate changes, sector composition and other variables. Here are the returns earned by each factor globally in 2014 compared to the overall broad market.
2015-01-27 00:00:00 Should Clients Select Lump-Sum Pension Payments? by Neal Angel (Article)
Employers are increasingly offering lump-sum pension payments. Should your client take the money? Or should they take the monthly paycheck for life?
2015-01-16 00:00:00 Yesterday?s Gone: Year-End Capital Markets Commentary and Expectations by Chris Brightman, Jim Masturzo of Research Affiliates
With updated return expectations, we estimate that the performance of U.S. stocks and bonds over the next 10 years will be significantly lower than long-term historical averages. Other asset classes may produce moderately better returns.
2014-12-22 00:00:00 Weighing the Week Ahead: Time for the 2015 Pundit Forecasts! by Jeff Miller of New Arc Investments
With little fresh news during the holidays and many pros on vacation, I expect a time of reflection and prediction. Publications hungry for content and TV producers needing to fill slots will highlight forecasts of any and all flavors. This happens every year, but the mid-week holidays are pushing it a little earlier than usual,
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.
2014-12-04 00:00:00 The Illusion Of Full Employment And Technology by Lance Roberts of Streettalk Live
Recently, Tim Duy wrote an interesting piece entitled "Yes, I am Optimistic" wherein he stated that: "The lesson no one wants to draw from this recovery is that the US economy is both stronger and more resilient than commonly believed. Do not dismiss the real improvement in the economy since 2009. It is not unimportant that 2014 is likely to be the biggest year for private sector employment..."
2014-11-25 00:00:00 How to Visually Illustrate the Fiduciary Obligation to Clients by Seaborn Hall (Article)
Industry and legal experts have described the fiduciary obligation as complex, simple, elusive, atomistic, and contradictory. It is like the parable of the six blind men describing the elephant: how you see it depends on your vantage point. Deriving a flexible, easily explained definition of the fiduciary obligation is a challenge.
2014-11-18 00:00:00 Is This Purgatory, Or Is It Hell? by Ben Inker of GMO
GMO is often accused of being a glass half empty investor, and I admit that in a year that has seen the S&P 500 rise 8.3%, MSCI All-Country World rise 3.7%, and the Barclays U.S. Aggregate rise 4.1% through the third quarter, the words Purgatory and Hell are unlikely to come to mind to most investors when opening their brokerage statements. It has been a dull year, perhaps, but certainly not a hellish one. So what is bringing Danteesque visions of damnation into our slightly warped minds?
2014-11-17 00:00:00 The Hypocritical Assertions of CFP Lobbyists CFP Lobbying Organization Calls Out RIAs by John H. Robinson (Article)
Recently released research from the Financial Planning Coalition is likely generating the desired attention its media-savvy crafters intended, but an informed reading of the materials reveals a campaign that is at odds with the ethical preaching of its three member organizations.
2014-11-12 00:00:00 Our Investment Beliefs by Chris Brightman, Jonathan Treussard, Jim Masturzo of Research Affiliates
The public launch of Research Affiliates interactive Asset Allocation website this month gives us an opportunity to describe the investment beliefs underlying our models, expected returns, and investment strategies. To be clear, our beliefs are constructs that help us make sense of the capital markets.
2014-11-11 00:00:00 Capital Raising in the MLP Sector Remains Active by David Chiaro of Eagle Global Advisors
We continue to see evidence that underpins our long term positive outlook on MLPs and midstream energy infrastructure companies. The need for new midstream infrastructure remains significant and announcements of large projects continue to be made. New export markets for U.S. hydrocarbons continue to develop and offer new profit opportunities for MLPs.
2014-11-07 00:00:00 Retirement Planning: Millennials vs. Boomers by Noah Beck of Research Affiliates
Rob Arnott and Lillian Wu recently wrote that young workers are more likely than older ones to lose their jobs in an economic downturn.They are also prone to draw on their 401(k) plan to meet basic living expenses while they are unemployed. Given these facts, the early-phase concentration in equitieswhose market prices are roughly correlated with the business cyclemakes target-date funds inordinately risky for young investors. In this article, Noah Beck considers TDFs in the broader context of workers total assets, including their own human capital.
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.
2014-10-30 00:00:00 Newsletter by Harold Evensky of Evensky & Katz
Harold Evensky presents his quarterly newsletter.
2014-10-28 00:00:00 Why It's So Brutally Hard to Get Prospects to Move by Dan Richards (Article)
Two factors underlie the difficulty in getting prospects to make a change - the risk of pain is too great or the prospect of gain is insufficient. The good news is that there are some strategies that can overcome these obstacles.
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.
2014-10-16 00:00:00 October is a Scary Month by Brian Andrew of Cleary Gull
The current environment for stock investors can be trying. Global cross currents regarding economic growth, employment, government policy, and corporate earnings have created the first test of investors mettle in almost two years. We have an opportunity to use current market events to review our investment plan and check our emotional temperature.
2014-10-16 00:00:00 Measuring Up by Gary Stroik of WBI Investments
Are you a better than average driver? According to a number of survey results, a lot of drivers think they are. A Survey by PublicMind at Fairleigh Dickinson University found that 68% of the drivers polled considered themselves above average, 30% considered themselves average, and just 1% considered themselves to be below average. (1% were unsure or refused to answer.)
2014-10-14 00:00:00 Bill Sharpe on Retirement Planning by Robert Huebscher (Article)
Bill Sharpe discusses topics at the forefront of financial-planning research: The role of annuities in a retirement portfolio, the proper glidepath for target-date funds, if investors should anticipate mean reversion in market returns and whether ESG- and SRI-oriented portfolios make sense.
2014-10-14 00:00:00 You Ain't Seen Nothin Yet by William Smead of Smead Capital Management
Someone recently asked a group of us which band we saw at our first rock concert. My answer was the Canadian band, The Guess Who, in 1975. With hits like No Time, Undun and These Eyes, The Guess Who hit the perfect balance between my 17-year old testosterone driven aggressiveness and my urge to romance the woman of my dreams. The key members of the band in the 1960s and 1970s were Burton Cummings and Randy Bachman.
2014-10-06 00:00:00 New Updates at Crestmont Research by Doug Short (Article)
Note from dshort: My friend Ed Easterling, whose Crestmont Research P/E valuation is a regular feature on this website, has published collection of periodic updates to his ongoing analysis. The commentary below is based on his latest distribution email to subscribers.
2014-09-30 00:00:00 Microcap as an Alternative to Private Equity by Chris Meredith, Patrick O'Shaughnessy of O'Shaughnessey Asset management
Private equity has become a central component of many institutional and high-net-worth investment portfolios over the past decade. While private equity offers potential advantages, it also requires taking distinct risks. This paper highlights an alternative to private equitymicrocap equitieswhich mitigates several of these particular risks.
2014-09-23 00:00:00 The Tax Harvesting Oasis - A Response to Michael Edesess by Daniel Egan and Boris Khentov (Article)
In a recent article, poetically titled "The Tax Harvesting Mirage," Michael Edesess referenced our firm's Betterment TLH+ service and the performance estimate we have published and attempted to estimate the value of TLH on his own. We would like to highlight where our assumptions differ from Edesess' and why we believe ours are appropriate.
2014-09-18 00:00:00 “You’re Going to Need a Bigger Boat”: Alpha and Interest Rates by Brooks Ritchey of Franklin Templeton Investments
Caution has been the dominant sentiment among investors in recent times even as equities have continued to march along. But as the prospect of rising US interest rates becomes ever more real, Brooks Ritchey, senior managing director at K2 Advisors, Franklin Templeton Solutions, takes a look at how some individuals and institutions are changing their guarded approach. He says alternative investments could find increased interest among savvy investors as interest rates start to tick higher.
2014-09-09 00:00:00 What is "Fee-Only?" Is the CFP Board Taking the Right Approach to Defining it? by Bob Veres (Article)
Which is more important to your advisory practice - your CFP designation or your fee-only status? Before you answer, consider this: Your CFP mark says very little about whether you adhere to a fiduciary standard, and less about your mode of compensation. Those issues are at the forefront of an ongoing controversy pitting the CFP Board against a prominent advisor, and there is little sign that its outcome will resolve the ongoing debate about how to define a fee-only professional engagement. If anything, it raises more questions than answers.
2014-09-09 00:00:00 Market Perspective by The CCR Wealth Management Investment Committee of CCR Wealth Management
In our office we frequently make sport of the countless headlines we encounter on a daily basis from various media outlets across the web. These headlines are often splashed across the home pages of market or financial sitesthough often across mainstream news outlets, or the business sections of Sunday newspapers as well.
2014-09-05 00:00:00 True Grit: The Durable Low Volatility Effect by Feifei Li, Philip Lawton of Research Affiliates
There is no assurance that low-risk stocks will continue to produce superior long-term returns. Nonetheless, due to investors preferences and managers incentives, the outlook remains promising. And the market does not seem to learn from experience.
2014-09-04 00:00:00 Risk Revisited by Howard Marks of Oaktree Capital
In April I had good results with Dare to Be Great II, starting from the base established in an earlier memo (Dare to Be Great, September 2006) and adding new thoughts that had occurred to me in the intervening years. Also in 2006 I wrote Risk, my first memo devoted entirely to this key subject. My thinking continued to develop, causing me to dedicate three chapters to risk among the twenty in my book The Most Important Thing. This memo adds to what Ive previously written on the topic.
2014-08-08 00:00:00 Investor or Speculator? by Scott Minerd of Guggenheim Partners
The recent selloff in U.S. stocks is healthy and could set markets up to reach new highs by year end. Long- term investors should not fall victim to panic and sell.
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.
2014-08-01 00:00:00 ProVise Bullets by Ray Ferrara of ProVise Management Group
Earnings season got started on the right foot with Alcoa, the company that traditionally reports first, handily beating expectations and then company after company following. That is not to say that all companies beat expectations, but many surprised to the upside. Standard & Poors now expects earnings for the S&P 500 companies to come in at $29.12 for the second quarter which is a 10.4% improvement over the $26.36 during the same period last year. S&P is projecting total earnings for 2014 at $119.18 versus $107.30 for 2013, or an increase of 11%. The projection for 2015 is
2014-07-30 00:00:00 The Outlook for MLPs and Midstream Energy Infrastructure Continues to Look Bright by David Chiaro of Eagle Global Advisors
The quarter saw a number of positive developments that underpin our long term positive outlook on MLPs. Firstly, the need for new midstream infrastructure remains significant, and a number of announcements of large new projects highlighted that this need is not abating. Also, a significant new development in the quarter was the emergence of new export markets for ethane and condensate which will entail associated infrastructure development and other possible profit opportunities for MLPs.
2014-07-29 00:00:00 20 Predictions for 2039 by Dan Richards (Article)
The shifts in the next 25 years will be just as substantial as those in the previous 25 years, and the most successful advisors will be those who are able to anticipate and adapt to these changes. Here are 20 predictions for what the financial-advising business will look like in 2039.
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.
2014-07-16 00:00:00 Analysis of Ayres and Curtis Critique of 401(k) Plans by Brian Donohue of October Three Consulting
In our previous article we reviewed [Professors Ayres and Curtis's paper Beyond Diversification: The Pervasive Problem of Excessive Fees and 'Dominated Funds' in 401(k) Plans] (John M. Olin Center for Studies in Law, Economics, and Public Policy Research Paper No. 493). Our purpose in that article was simply to describe what Professors Ayres and Curtis are saying. In this article we evaluate their findings and proposals, discussing the limits of and possible objections to their conclusions.
2014-07-09 00:00:00 New Analysis of 401(k) Plan Performance and Fees by Brian Donohue of October Three Consulting
In the paper Professors Ayres and Curtis conclude that 401(k) plan participants suffer significant losses from (1) sponsor-fiduciary fund menu construction decisions, (2) participant asset allocation mistakes and (3) high fees on plan investment options. To remedy this problem they make several innovative proposals for changes in the rules for 401(k) plan fund menu construction.
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%.
2014-07-08 00:00:00 Newsletter by Harold Evensky of Evensky & Katz
Hi! I hope you had a great 4th and youre having a great summer. Its been a busy one at E&K as youll see from my closing note and a fun one for Deena and me as we recently returned from a cruise to Reykjavik, Iceland, a most charming city but a bit off-putting with over 20 hours of sunlight.
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.
2014-07-02 00:00:00 Alternative Investments: The Right Expectations by Roger Nusbaum of AdvisorShares
Every year around this time we hear about the fiscal year investment results for the various college endowments and typically there is much written about the endowments and 2014 is no exception but this year most of the attention seems to be on the extent to which various forms of alternative investments have been a drag on endowment results after years of their having provided outsized gains.
2014-06-24 00:00:00 The Over-Capitalization Curse by William Smead of Smead Capital Management
At Smead Capital Management we are conscious of the few, but significant pitfalls which we believe exist for the long-duration common stock investor. One of the main pitfalls we want to avoid is the over-capitalization curse. This is a situation where investor enthusiasm gets very high, prices get historically high and investors drown the company, industry or sector with capital. In our experience, it pays to avoid the over-capitalized areas for as long as five to ten years as they work their way back to being hated and contentious.
2014-06-10 00:00:00 Six Questions for the Future of the Planning Profession by Bob Veres (Article)
A few weeks ago, I asked for your help as we created the scenario learning session for the Insider's Forum conference in September. We're going to map out some possible futures that you can prepare for, using as raw material the crowdsourced thoughts and ideas that you provide to us. Here are six questions that have been raised and addressed about the future in the first round of our exercise.
2014-06-10 00:00:00 The Orphaned Bull Market by William Smead of Smead Capital Management
Howard Gold is an inquisitive writer for Marketwatch.com and we think has done us all a great favor in his latest column titled, Not even a bull market can interest people in stocks. He points out via the chart below thatdespite a huge rebound the last five years in US common stocksequity holdings as a percentage of global investable assets just climbed to levels only seen at major stock market low points. Relative to the past 50 years, this stock market has been abandoned and orphaned even as it had made participants wealthy.
2014-05-28 00:00:00 Where’s Molly? by Jerry Wagner of Flexible Plan Investments
It was after midnight. While the sky was clear and the stars were sparkling, there was no moonlight as the moon was new. I walked briskly down the street, but after a long day of sales presentations and meetings, inside I was tired and dragging. On each side of me dark houses loomed. There were no street lights.
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.
2014-05-09 00:00:00 Sell in May and Go Away? by Russ Koesterich of iShares Blog
An old market adage says to sell in May and go away. While now actually may be a good time to trim positions and lower risk, this isnt because of the calendar month. Russ explains.
2014-05-07 00:00:00 Behavioral Finance and the Bond Market by Jerry Paul, Zach Jonson of ICON Advisers, Inc.
Over the last decade the concept of behavioral finance has received increased recognition in both the academic world and with investors. Modern Portfolio Theory makes three distinct assumptions: investors are rational, markets are efficient, and expected returns are purely a function of risk. In contrast, followers of behavioral finance generally believe investors are less than perfect and subject to many emotional biases. Said differently, behavioral finance differs from traditional finance in that it focuses on how investors actually behave, rather than theorizing how they should behave.
2014-05-06 00:00:00 The Six Most Costly Words for Your Business by Dan Richards (Article)
Every advisor knows the most dangerous and expensive words when it comes to investing - "It’s different this time." An email in response to a recent article led me to conclude that there’s six words that are just as costly...
2014-04-29 00:00:00 How to Help Business Clients Unlock Wealth by Bob Veres (Article)
Is there a way to help your business clients diversify their holdings, take some risk off the table and create a side investment portfolio that will sustain them if their business runs into trouble? Is there a way you can help your clients find capital when they need it most?
2014-04-29 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.
2014-04-25 00:00:00 Slugging It Out in the Equity Arena by John West and Ryan Larson of Research Affiliates
Selling recent losers and buying recent winners is the antithesis of the systematic rebalancing discipline through which smart beta strategies earn long-term excess returns. Indeed, we contend that this procyclical behavior is what pays, over time, for the value added by fundamentally weighted index investing and other smart beta strategies.
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.
2014-04-16 00:00:00 Every Portfolio Has Faith by William Smead of Smead Capital Management
At Smead Capital Management, we believe that everyone who invests has faith in someone or something. We also believe that who and what you put your faith into is greatly influenced by the time period involved. As we look out into the rest of 2014 and beyond, we would like to consider the kind of faith required by the largest pools of investment dollars in the US. This includes looking at who they are trusting, what they are trusting in, and what time frames they are operating under.
2014-04-10 00:00:00 "I Will Gladly Pay You Tuesday for a Hamburger Today" by Robert Mark of Castle Investment Management
In October of 2013, Robert Shiller won the Nobel Prize in economics for his research on spotting market bubbles. Shiller, an economist and professor at Yale University who accurately predicted the housing bubble, is a pioneer of behavioral finance, or the understanding of how psychology causes us to act irrationally with our money.
2014-04-03 00:00:00 Fiduciary vs. Suitability Standards-Your Need to Know the Difference by H. William Wolfson of American Financial Advisors
Beth Banker, a successful business woman, has been having ongoing neck and back issues. She decided to access web based information as to obtain self treatment options. Upon her reading, she realized that her condition, although appearing musculoskeletal in nature may be more involved with underlying pathologies. Although her intent was to heal herself, in reality she became more concerned and stressed as to the amount of research and data that existed?which she didn?t understand.
2014-04-01 00:00:00 More Ticking Time Bombs that Threaten Your Business by Dan Richards (Article)
Last week I discussed four inevitable changes in how Americans invest. This week and next, I’ll focus on four aspects of advisory practices that are unsustainable. These four issues will cause significant changes in the next 10 years - or perhaps sooner.
2014-03-25 00:00:00 The Takeaways from the Latest Fama-French Research by Michael Edesess (Article)
The latest Fama-French research expands their three-factor model with the addition of two new factors: profitability and investment. My question is whether this work provides any information that can be of practical value to advisors or investors. After careful evaluation of their paper, I conclude that the answer is no.
2014-03-25 00:00:00 Four Inevitable Changes that Threaten Your Business by Dan Richards (Article)
If you step back and look at the status quo in the advisory business and ask yourself what things simply don’t make sense and are unsustainable as a result, you will come up with a surprisingly long list. Today’s article focuses on inevitable changes in the investing environment.
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.
2014-03-19 00:00:00 A Preference for Discomfort by Chris Brightman of Research Affiliates
Is the stock market inefficient or do investors have varying preferences? How does behavior affect wealth accumulation? Unpopular choices can result in improved outcomes....
2014-02-28 00:00:00 The Stock Market's Shaky Foundation by Chris Martenson of Whitney Peak
Martenson explains the headwinds that make the long-term case for lower valuations than we've seen in previous decades. But more urgently, he lays out the litany of short-term triggers likely to result in a vicious correction in stock prices this year. In fact, for the first time in years, he believes the time to actively short equities is arriving.
2014-02-19 00:00:00 Investor Refresher (An Intersection of Investing and Firefighting) by Roger Nusbaum of AdvisorShares
Anyone who has read my blog for any length of time may recall my active involvement with the local volunteer fire department where I live in Northern Arizona. Occasionally my work in the investment industry intersects with some aspect of firefighting and one such intersection just occurred last week.
2014-02-19 00:00:00 If You Can?t Retire at 30 Then How About 38? by Roger Nusbaum of AdvisorShares
A couple of weeks ago we looked at an article from MarketWatch about a couple, now 39, who ?retired? when they were 30. They live frugally, one way or another accumulated a pretty decent nest egg in their 20?s and took the time to become financially literate.
2014-02-12 00:00:00 Harvard?s Endowment: Wise or Foolish? by William Smead of Smead Capital Management
Warren Buffett says, "What the wise man does in the beginning, the fool does in the end." In a Barron's feature over the weekend, writer Andrew Bary dug into the portfolio of Harvard's Endowment through an interview with their CIO, Jane Mendillo. After all, who could possibly be wiser than what many would argue is the most respected undergraduate and graduate university in the world? Using a combination of Bary?s article and our perspective, this missive will seek to determine whether the Harvard Endowment is wise or foolish.
2014-02-11 00:00:00 Why Are There Timeless Lessons That Do Not Get Arbitraged Away? by John Alberg and Michael Seckler (Article)
Strategies in which an investor buys shares in good companies mired in high pessimism (and therefore offered at low prices) bubble their way to the top in terms of persistent, long-term performance. By adhering to these types of contrarian or value-oriented strategies, investors can perform consistently and remarkably well across long periods. No other strategy even comes close. How could it be that the strong performance of contrarian-style strategies persists over time?
2014-02-11 00:00:00 Focus on Income: The Illiquidity Premium: Opportunities for Investing in Credit Today by Jack Rivkin of Altegris
At a time when many investors are seeking income for their portfolios, traditional sources of fixed income - principally government bonds and high-grade corporate bonds - look less than compelling. Yields are low and there is an increasing risk that interest rates will rise, which would cause the value of existing bonds to fall.
2014-02-04 00:00:00 James Montier - What Worries Me Right Now by Robert Huebscher (Article)
GMO’s investment strategist James Montier discusses why corporate profits will revert to the mean, what investors should know about the controversy over CAPE valuations, and the one issue that is the "preeminent occupation" of his mind right now.
2014-02-04 00:00:00 Letters to the Editor by Various (Article)
A reader responds to Stephanie Keltons article, Code Red or Red Herring? Mauldin and Teppers Code Red Reviewed , and a reader responds to Justin Kermonds article, Harvards Post-Crisis Endowment Strategy, both of which appeared last week.
2014-01-31 00:00:00 Thrift, Thrift, Burning Bright by Christine Hurtsellers, Matt Toms of ING Investment Management
Does the title sound familiar? Think feral instead of frugal, and William Blakes "Tyger, Tyger, burning bright" may start to flicker between the synapses of memory and an English lit class you once soldiered through. But even if you havent read "The Tyger", its theme is aptly captured in the opening line and its image of a big flaming kitty cat. Essentially, Blake saw reality in duality: To appreciate the ferocious feline in all its glory is to come face to face with the same force that created "The Lamb", another entry in the poets Songs of Innocence and of Experience.
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.
2014-01-28 00:00:00 Looking Back at the Advisory Profession 20 Years from Now by Bob Veres (Article)
Ive powered up my time-travel hardware to take a clear look at the year 2034. Ive received budgetary approval to make a long-distance phone call into the future, and conduct a real interview with a successful advisor in that time period. Yes, it was expensive. But nothing is too good for our readers.
2014-01-23 00:00:00 EPV: Establishing Predictive Value (i.e., Demand Characteristics) by David Kleinberg of Universal Orbit
EPV: Establishing Predictive Value (i.e., Demand Characteristics) is designed as a complement to quantitative portfolio strategies and fundamental research. Continuing the thread from EPV:RO, tested is the premise of structural bias in performance benchmarks as determined by third party data vendors with implied effects on peer group analytics and valuation.
2014-01-21 00:00:00 Albert Edwards and Dylan Grice: Bearish Forecasts from Two Top Strategists by Robert Huebscher (Article)
Its been nearly 18 years since Albert Edwards forecast an "ice age" in which bonds would outperform equities. Hes been right until just recently, when cumulative returns on the two classes converged. But Edwards insists that his thesis is still accurate - deflation will be the force to propel bonds over stocks, he says. Dylan Grice, meanwhile, warns that the markets operate on an unstable equilibrium that could devolve into apocalyptic conditions.
2014-01-10 00:00:00 5 Investor Tips for 2014 by Kristina Hooper of Allianz Global Investors
While the winding down of QE signals better times ahead, investors need to be selective and focused in taking smart risks, says US Investment Strategist Kristina Hooper.
2014-01-07 00:00:00 Ten Predictions for Advisors in 2014 by Bob Veres (Article)
Nobody can predict the markets. But it is possible to forecast the challenges that financial advisors and planners will face in the next 12 months, or at least provide a warning system for impending threats. Here are my top 10 issues to think about as we enter 2014 - offered with humility and respect for the world’s ability to surprise us.
2014-01-07 00:00:00 Turn the Page: Outlook for Economy/Stocks in 2014 by Liz Ann Sonders of Charles Schwab
In this comprehensive (read: long...sorry!) 2014 outlook report, we assess the likelihood a correction is in the offing given the strong gains since 2009.
2013-12-31 00:00:00 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don’t always get the readership they deserve. We’ve posted the 10 most-widely read articles for the past year. Below are another 10 that you might have missed, but I believe merit reading.
2013-12-26 00:00:00 Newsletter by Harold Evensky of Evensky & Katz
I admit it, I do occasionally pick on Money Magazine and other consumer financial publications, but as Ive written in the past, for the most part, Money does a great job of educating consumers. Its story on Lessons from the Crash "Lehman Brothers collapse in September 2008 sent stocks on a terrifying ride. A year-by-year look back reveals five key takeaways you need to heed today" is an excellent example. Here are Moneys "Lessons."
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.
2013-12-03 00:00:00 Secular Bull or Secular Bear? by Leo Cesna of Relevant Investments
Applying statistical control limits to Dr. Shillers CAPE Index reveals where the S&P 500 is likely headed.
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.
2013-11-15 00:00:00 DC Plan Design for the Bumpy Road Ahead by Mohamed El Erian of PIMCO
In late October, PIMCOs CEO and Co-CIO Mohamed A. El-Erian presented the keynote speech at Pensions & Investments West Coast Defined Contribution Conference. He also spoke with P&I about top-of-mind concerns for retirement plan providers and sponsors. The Q&A below is based on that conversation.
2013-11-05 00:00:00 Three Trends That Will Change the Game for Advisors by Steve Lockshin (Article)
This article is excerpted from Steve Lockshins new book, Get Wise to Your Advisor. This book makes an impassioned argument as to why clients should choose independent advisors who adhere to a fiduciary standard.
2013-11-04 00:00:00 How I Explain Amazon's Stock Performance by Chuck Carnevale of F.A.S.T. Graphs
Amazon (AMZN) is a stock that seems to defy conventional wisdom about how a stock is, or should be, valued. Fundamental investors, like yours truly, recognize and respect the importance of the earnings and price relationship. Moreover, I will be so bold as to emphatically state that in the long run profitability (earnings) will be the primary determinant of a businesses fair value, any business. However, my bold statement is predicated on the longer run. In the short run it is often a truth that all bets are off.
2013-10-30 00:00:00 The Thermometer of the Stock Market by Bill Smead of Smead Capital Management
As long-duration owners of common stock, we believe it is the wealth created by the businesses which causes the owners to prosper. We have also been participants in the US stock market since 1980 and are very aware of big swings in enthusiasm for owning common stocks. So we thought it would be helpful to share our opinion on the current temperature of the market. To take the temperature of the market we need to examine the thermometer readings.
2013-10-29 00:00:00 Can Financial Engineering Cure Cancer? by Robert Huebscher (Article)
Securitization and the collateralized obligations it produced led to the financial crisis and the near-collapse of the financial markets. But financial engineering’s bad reputation could turn around. Andrew Lo, a professor at the MIT Sloan School of Management and director of its Laboratory for Financial Engineering, thinks financial engineering can cure cancer.
2013-10-24 00:00:00 Glory Days: Could They Come Back for US Equities? by Liz Ann Sonders of Charles Schwab
A "great rotation" may not be underway by individual investors; even amid record-breaking outflows from bond funds this summer. But fund flow data do show some shift in preferences and highlight the sensitivity of investors to any rise in longer-term interest rates. A more interesting place to look is at the fiduciary community; that has decidedly shifted its attention away from traditional equities (and fixed income) over the past decade.
2013-10-23 00:00:00 I Thought The Safety Was On by Liam Molloy, Bethany Carlson, Charlie Mas of Galway Investment Strategy
For the past thirty years investors could allocate a portion of their portfolio to investment grade bonds and regard that money as safe. Wealth preservation was easy buy a ladder of Treasuries or triple-A rated corporates and go back to bed. That perceived safety was a direct result of a continuing, if not steady, decline in interest rates.
2013-10-18 00:00:00 Trying to Stop a Bull Market Has Risks by Frank Holmes of U.S. Global Investors
U.S. stocks have been on a tear. The S&P 500 Index has climbed a surprising 20 percent so far this year, as a global synchronized recovery takes shape and funds flow back to equities. As I often say, investors take risks when they try to stop a bull run, and plenty of data suggest you might regret taking that action this year.
2013-10-18 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.
2013-10-15 00:00:00 Letters to the Editor by Various (Article)
Readers respond to Robert Huebscher’s article, The Futility of the Endowment Model, which appeared last week.
2013-10-14 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.
2013-10-10 00:00:00 Frustrating the Most People by Bill Smead of Smead Capital Management
A venerable sage once said, "The markets do whatever they have to do to frustrate the most people." For the long-duration investor, this means that you need to look at what people are invested in to determine where the frustration will come from. Thanks to the Associated Press, we know what the masses have done with their investments in the last five years.
2013-10-09 00:00:00 Getting Serious About Investing Responsibly by Luke Spajic, Josh Olazabal of PIMCO
To date, much of ESG-related investing has focused on negative screening, but we believe there is a better approach. This approach rests on three pillars: identifying and analyzing key ESG issues facing a given investment sector, engaging with the issuers of securities, and supporting the development of markets for ESG investments.
2013-10-08 00:00:00 The Futility of the Endowment Model by Robert Huebscher (Article)
In the past two decades, the so-called endowment model has been adopted by hundreds of endowments, foundations and advisors ? particularly those serving ultra-high-net-worth clients. By aggressively allocating to illiquid alternative asset classes, those investors hoped to duplicate the results of Yale and other top-tier institutions. New research exposes the futility of those efforts.
2013-10-02 00:00:00 ProVise Bullets by Ray Ferrara of ProVise Management Group
Effective October 1st, the health exchanges are open for business and enrollment can occur over the next 90 days. It will be interesting to see just how many people feel compelled to sign up under the individual mandate. While the premiums are not inexpensive for most of the eligible people, many will receive tax credits to help offset the cost. Nonetheless, others will find it a significant burden to the budget, and there is great debate over just how this will affect the economy long-term.
2013-09-27 00:00:00 Invest to Your Full Potential Even Under Pressure by Frank Holmes of U.S. Global Investors
In times of extreme pressure, athletes, students and investors have one thing in common: they occasionally choke. Whether its Rick Perry forgetting the third item on his list during the Republican debate or a favorite basketball player missing the basket in the playoffs, when stakes are high, people can fail to perform to their full potential.
2013-09-27 00:00:00 Calculating A Stock's Fair Value Based On Future Growth Expectations: Part 2A by Chuck Carnevale of F.A.S.T. Graphs
In part one of this two-part series I focused primarily on calculating the intrinsic value of a common stock based on an analysis and review of historical information and data. Although I strongly believe that there is much that investors can learn by studying the past, I even more strongly believe that since we can only invest in the future, that it is also implicit that we embrace a rational method of forecasting.
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.
2013-09-18 00:00:00 Newsletter September 2013 by Harold Evensky of Evensky & Katz
SAY IT ISNT SO... Investment News headline Ex-J.P. Morgan broker: Firm pushed house funds. The story went on to report: Claims reps didnt get commission on trades of outside funds. A former J.P. Morgan broker has filed an arbitration claim alleging that the banks securities unit encouraged sales of proprietary funds by withholding commissions from brokers on trades of outside funds.
2013-09-17 00:00:00 The Fiduciary Pyramid: Demystifying the Fiduciary Landscape by Seaborn Hall (Article)
The term fiduciary is at once accessible, familiar and confusing. We hear it often and think that we know what it means. But do we? Consider this assertion: A fee-only registered investment adviser (RIA) is at the top of the fiduciary pyramid. Is this a valid, provable statement?
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.
2013-09-13 00:00:00 What's Happening to Bonds and Why? by Mohamed El-Erian of PIMCO
To say that bonds are under pressure would be an understatement. Over the last few months, sentiment about fixed income has flipped dramatically: from a favored investment destination that is deemed to benefit from exceptional support from central banks, to an asset class experiencing large outflows, negative returns and reduced standing as an anchor of a well-diversified asset allocation.
2013-08-27 00:00:00 Why Bad Decisions Happen to Good People: An Introduction to Behavioral Finance by Scott Clemons (Article)
Cognitive biases frequently cause even skilled investors to make irrational decisions. Thankfully, irrationality is fairly predictable. Here are four behavioral biases that investors face and techniques for recognizing and overcoming them.
2013-08-23 00:00:00 What Does an Improving Economy Mean for Stocks and Bonds? by Charlie Dreifus of The Royce Funds
With the economy improving, inflation tame, and a Federal Reserve meeting approaching in September, Portfolio Manager and Principal Charlie Dreifus believes that small-caps remain an attractive option within the equities market.
2013-08-13 00:00:00 A Better Way to Measure Systemic Risk by Michael Edesess (Article)
The economics profession has faced harsh criticism since the financial crisis of 2007-09 ? not least from its own members?for relying on mathematical models that failed to foresee the crisis and in some cases abetted its onset. Is the criticism justified, and what can be done about it?
2013-07-30 00:00:00 Revisiting “The Cost of Socially Responsible Investing” by Paul A. Ruud (Article)
Endowments have been warned that socially responsible investing incurs a financial cost, based on research by two prominent academicians. But that research ? which has been presented and debated in this publication ? is based on a tenuous model that is highly sensitive to its assumptions. Change those assumptions reasonably, as I did in my research, and the cost of SRI becomes trivial.
2013-07-23 00:00:00 Fantasy versus Factors by Michael Nairne (Article)
Investors who wish to earn market-beating returns have a choice. They can indulge in the fantastical quest for alpha via high-cost active managers or they can construct factor tilts in their equity allocations via low-cost exchange traded or enhanced index funds. It doesnt take a PhD in mathematics to determine which route is more likely to take an investor to higher performance.
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.
2013-07-09 00:00:00 The Five Best New Investment Ideas: New Age Paradigms for the Post-MPT World by Bob Veres (Article)
Over the past four years, Ive been collecting the most tangible, concrete post-Modern Portfolio Theory insights offered by professional investors.
2013-07-09 00:00:00 Letters to the Editor by Various (Article)
A reader responds to Mitchell Eichen and John Longos article, The Practical Application of Behavioral Finance, which appeared last week, and a reader responds to Geoff Considines article, ?The Greatest Anomaly in Finance: Understanding and Exploiting the Outperformance of Low-Beta Stocks, which appeared on February 14, 2012.
2013-07-02 00:00:00 The Practical Application of Behavioral Finance by Mitchell D. Eichen and John M. Longo (Article)
From the Dot-Com bubble onward, traditional investment models have repeatedly disappointed those who relied on them. When compared to mathematically based models, behavioral finance provides a superior foundation. Here is an alternative investment paradigm, grounded in behavioral finance, that is practical and effective over time periods that are relevant for a significant portion of investors.
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.
2013-06-26 00:00:00 The Fed's Dirty Little Secret: QE Does Not Work by Gary Halbert of Halbert Wealth Management
Today I hope to dispel the myth that the Fed?s massive quantitative easing (QE) policy has driven long-term interest rates lower. I will argue that the opposite is true and demonstrate that the yield on the 10-year Treasury note has actually risen during QE-1, QE-2 and QE-3. This flies in the face of most market commentators.
2013-06-25 00:00:00 Reframing Expectations by Aaron Reynolds of Baird Advisors
Even facing headwinds, bonds still serve important roles in a portfolio, including diversification and downside protection potential. As the heavy burden of total return falls on interest income, investors are being pulled toward higher-yield, higher-risk bond types. Investors can still benefit from the segmented bond market and the various strategies that are available. Expectations need to be reframed given the current environment of low yields and potential interest rate increases.
2013-06-21 00:00:00 Asia Brief: China's Energy Demand by Edmund Harriss, James Weir of Guinness Atkinson Asset Management
China has the worlds largest unconventional gas reserves, but these so far remain untapped despite its growing demand for energy. China is now trying to follow the example of the US, and the government has set aggressive targets for unconventional gas production. As the demand for transportation fuels grow over the next decade, this gas could be a major contributor to meeting that need.
2013-06-18 00:00:00 Retirement Income Designations ? Which Should You Choose? by Wade Pfau (Article)
With more than 50 certification programs based on the withdrawal phase of the planning lifecycle, advisors are faced with a paralyzing choice about which designation provides the most valuable curriculum. Here’s some guidance on choosing the right program for advisors.
2013-06-07 00:00:00 Portfolio Comfort in Stock Splits by Bill Smead of Smead Capital Management
We have noticed that there has been a dearth of stock splits among the S&P 500 index companies in the last 5 years. Our observation is that the natural habitat for stock splits is normally a multiple-year market upswing and numerous stocks trading over $60 per share. What does the history of stock splits tell us about where we are in the long-term stock market cycle for the S&P 500 index? Who will the marginal buyer of common stocks be in the near term and what do stock splits teach us about who the marginal buyer is?
2013-06-06 00:00:00 A Longer Time Horizon Can Be an Advantage for Value Investors by Mark Cooper of PIMCO
We believe that given challenging prospects for attractive investment returns, the value premium could become even more important in the years ahead. Even in an uncertain environment like we are currently experiencing, we believe the merit in owning equities for the long term is unchanged: We want to participate as an owner in a growing, profitable business.
2013-06-06 00:00:00 The Wisdom of Crowds by Niels Jensen, Nick Rees,Tricia Ward of Absolute Return Partners
Are markets efficient? This is a debate that has been on-going for decades. In one corner you have the proponents of the Efficient Markets Hypothesis. In their world alpha does not exist, or at the very least it is not sustainable. In the other corner you have the supporters of behavioural finance who see investors as being mostly irrational and suffering from all sorts of behavioural biases which create alpha opportunities galore. Out of this long lasting stand-off a new paradigm is emerging called the Adaptive Markets Hypothesis which aims to reconcile the two.
2013-05-29 00:00:00 Weekly Market Commentary by Team of Tuttle Tactical Management
Last week we talked about the market being overbought in the short term, so the three day selloff (Wednesday-Friday) was to be expected. The media will blame the Fed but they didnt tell us anything we didnt already know. Bottom line, when the market gets extremely overbought traders will use anything and everything as an excuse to take profits. Interestingly, last week was the first streak of three down days this year. The S&P 500 seemed to find some support at 1640.
2013-05-21 00:00:00 Measuring the Cost of Socially Responsible Investing by Adam Jared Apt (Article)
Quite apart from its motivations, the consequences of socially responsible investing have intrigued analysts. The actual results, as distinct from the desired results, cannot be taken for granted. Mark Kritzman has written about the subject, but his research was little noticed until recently, when SRI achieved renewed prominence in the form of popular demands that institutional portfolios divest themselves of investments in fossil-fuel companies. Kritzmans point, and the conclusion of his analysis, is that SRI, properly understood, incurs a cost to the portfolio.
2013-05-20 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.
2013-05-16 00:00:00 Searching For a New Investment Paradigm by Philip Lawton of Research Affiliates
Investment management is supposed to be built on brilliant minds novel insights and innovative approachesor so our training and traditions have led us to believe. We celebrate our best investors, such as Warren Buffett, Peter Lynch, and Bill Gross, and our best financial theories, such as modern portfolio theory (MPT) and the efficient markets hypothesis (EMH).
2013-05-10 00:00:00 The Importance of Being Different by Francois Sicart of Tocqueville Asset Management
In his latest essay, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, writes about how superior investment managers outperform their market benchmarks -- by taking advantage of volatility, among other things -- as well as how to properly evaluate investment performance.
2013-05-08 00:00:00 Monthly Letter to Our Clients and Friends by Kendall Anderson of Anderson Griggs
It has been years since we have seen new highs on the Dow Jones Industrial Average and the S&P 500. Although the wait can be traumatizing, its nice to get proof that market prices ultimately recognize growth of business value.
2013-05-01 00:00:00 Weekly Market Review Notes by Team of Tuttle Tactical Management
he mixed economic numbers we have been seeing lately----higher than expected consumer confidence and home prices vs. lower than expected Chicago PMI---might be confusing to some. One number shows the economy improving while another shows the economy contracting. However, for investors this is actually good news as the data continues to confirm that we are in a Goldilocks economy, not too hot, not too cold.
2013-04-30 00:00:00 Implementing Behavioral Portfolio Management by C. Thomas Howard, PhD (Article)
Behavioral portfolio management is based on the notion that if the advisor can redirect his or her emotions and mitigate the impact of client emotions, it is possible to build superior portfolios by harnessing market emotions. This article describes how this can be done and presents evidence of the superiority of focusing on investor behavior when constructing and managing portfolios.
2013-04-24 00:00:00 Weekly Market Review Notes by Team of Tuttle Tactical Management
Bulls and Bears continue to fight it out around the S&P 500 record high. There is a lot to worry about at this point----earnings and economic numbers have been somewhat disappointing, terrorism fears are back (Boston Marathon, Canada, fake Twitter posts, etc), and we continue to see a divergence between riskier areas of the market and less risky areas. On the plus side there is still nowhere else to go except for stocks. As we have said before, volatility around an all time high is normal and to be expected.
2013-04-23 00:00:00 How to Help Your Middle-Class Clients Retire by Dan Richards (Article)
The burgeoning field of behavioral finance points to some simple methods to help clients save more, invest their savings more effectively and maintain motivation through tough patches. Using these methods, advisors can help middle-income clients take the steps to increase the odds of being able to retire when they want, how they want ? and to reduce their stress along the way.
2013-04-18 00:00:00 The Lure of Hedge Funds by John West of Research Affiliates
Investors often buy what they think is exciting, sophisticated, and complex with the embedded assumption that all of these attributes will lead to greater returns. We see this today where we witness the continued explosive growth of hedge funds. But, a careful examination of the data reveals that these fancy lures fail to hook as much in excess, after-fee returns as more time tested strategies.
2013-04-17 00:00:00 Gold Is Crashing...And the Storm Begins by John Rothe of Riverbend Investment Management
The storm in the US stock market that I have been talking about for the past few weeks may have finally arrived. After weeks of poor economic data, we are starting to see the first crack in the current euphoria in the markets.
2013-04-16 00:00:00 Using Behavioral Data to Earn Superior Returns by C. Thomas Howard, PhD (Article)
Emotional crowds dominate pricing; that was the first basic principle, which I demonstrated last week. This would seem to indicate that BDIs earn superior returns by taking positions opposite the crowds. But this is not necessarily the case.
2013-04-16 00:00:00 2013 US Financial Markets by Clyde Kendzierski of Financial Solutions Group
In the fall of 2012 the S&P 500 came close to our forecast high (S&P- 1500) Last year we suggested that not only was the S&P likely to reach 1500, but also speculated that renewed bullish sentiment could take us back to the old highs of 1565. When the S&P touched 1563 a couple weeks ago, I started getting client calls complimenting my prescient forecast.
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.
2013-04-10 00:00:00 Weekly Market Review Notes by Team of Tuttle Tactical Management
The market continues to experience volatility around the new record high. Again, this is to be expected as this is a very psychologically important level so we shouldnt expect the market to blow through this and never look back. There is still a lot of background "noise" in the markets. Last weeks jobs numbers were disappointing, we have had some weaker economic numbers, Cyprus, etc. None of this looks like it can change the fact that money has nowhere else to go but stocks at this point, but the economic numbers bear watching.
2013-04-09 00:00:00 The Evidence that Emotion Dominates Market Pricing by C. Thomas Howard, PhD (Article)
Last week, I introduced the concept of behavioral portfolio management (BPM) as a way to build superior portfolios. BPM is built on the dynamic interplay between two investor groups and rests on three basic principles. I will discuss the first basic principle in this article, the second in a series of five.
2013-04-04 00:00:00 Teachings from Recovered Markets by Richard Michaud of New Frontier Advisors
Domestic indices all-time record highs indicate that U.S. domestic equity markets have largely recovered from the 2008 Great Recession. It may have taken four years but it still seems a remarkable achievement given the Dows low of 6620 in March 2009. It is worth noting that prior highs were attained in an era with a poor savings rate and wide use of levered strategies. The last four years were widely characterized by a low return market mantra and fear of equities stoked by many doomsayers, pundits, and strategists who greeted every upturn with pessimism.
2013-04-03 00:00:00 Weekly Market Review Notes by Team of Tuttle Tactical Management
After hitting a record close last week the market is showing some warning signs, which is to be expected. You dont typically break through an important resistance point without testing it and re-testing it so some volatility around a record high is normal. We are also slightly concerned that small and mid cap stocks have drastically underperformed the S&P 500 over the past two days.
2013-04-02 00:00:00 New Research on Investor Behavior by C. Thomas Howard, PhD (Article)
Market theory passed through two distinctly different paradigms in the past 80 years and is experiencing the rise of a third. Those transitions have marked the introduction of improved ways to explain price movements. The ascendant paradigm, based on new research in the field of behavioral economics, promises to offer superior guidance to investors and advisors who hope to exploit market inefficiencies.
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.
2013-03-28 00:00:00 What Maslow and Rand Would Tell Investors Today by Frank Holmes of U.S. Global Investors
While gold?s performance in the short term has been counterintuitive, I plan to stick to my own advice. I simply feel safer with a small weighting in gold as insurance.
2013-03-27 00:00:00 Call Him Ishmael by Jeffrey Bronchick of Cove Street Capital
One of the hardest things to conquer as a value investor is the concept of "price." The industry remains mired in fascination with abstract prices like 100, 1,000, 14,000, previous highs, new lows, etc. The stock is up x% from x dollar price; it is down x% from x price. There is also much in print and general fretting in regard to "price action," with lots of attention paid to where the stock has "been" and how this move relates to other "moves," as in "the largest move since last December 12th."
2013-03-27 00:00:00 Weekly Market Review Notes by Team of Tuttle Tactical Management
The continuing mess in Cyprus and the S&P 500 nearing a record close dominated the news this week. As I said last week, Cyprus is insignificant, the only important aspects of what is going on is timing. If the crisis hit the news during a time when the market was oversold and due for a rally then it would have little, if any, impact. The fact that that market has rallied this year without much of a selloff gives traders an excuse to use something like this to take profits.
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.
2013-03-20 00:00:00 Weekly Market Review Notes by Team of Tuttle Tactical Management
The banking crisis in Cyprus dominated the news this week as the market sold off 3 days in a row after being up 10 days in a row. The selloff was blamed on what was going on in Cyprus but that was not the real story. Globally Cyprus is pretty insignificant, most people probably dont even know where it is. The real story is that markets just dont go up for 10 straight days without needing a breather from time to time, Cyprus was just an excuse to take some profits.
2013-03-14 00:00:00 Weekly Market Review Notes by Team of Tuttle Tactical Management
The Dow continues to make new highs but the rate of climb has slowed considerably this week. This is normal as markets have to take a breather after large moves.
2013-03-14 00:00:00 Newsletter by Harold Evensky of Evensky & Katz
In the latest edition of his client newsletter, Harold Evensky highlights a number of interesting bits of news, including a must-see destination for your friends, your kids and your grandkids, some advice from Warren Buffett, a tip from Albert Einstein and the latest data on hedge fund performance.
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.
2013-03-11 00:00:00 Who's Selling And Who's Buying As The Dow Trades In Record Territory? by John Rothe of Riverbend Investment Management
Last week turned out to be another positive week for investors, as the S&P 500 finished the week up 2.2 percent. However, as my regular readers know, I consider the current market risk high, and have been building a case these past few weeks that we will soon be entering a bear market.
2013-03-07 00:00:00 Weekly Market Review Notes by Team of Tuttle Tactical Management
Yesterday saw a new record close on the Dow Jones Industrial Average and a renewal of the panic buying we saw earlier in the year. While it is great to see that the Dow has retraced all of the losses from the 2008 decline I am concerned about what message will be directed towards individual investors. The asset allocation/buy and hold crowd will use this milestone to "prove" that markets always come back so that their approach is still valid. This is true, but it ignores the fact that it took the market almost 6 years to come back and the lost opportunity cost associated with that.
2013-03-06 00:00:00 Smooth Returns by Bill Smead of Smead Capital Management
Harry Markopolos was working for a hedge fund of funds and attempting to put a portfolio together that would "smooth" long-term returns. In the process of marketing what his company was doing, he ran into a client who already had a money manager doing that for him. The money manager the client used was Bernie Madoff. When Markopolous looked at the long-term track record of Madoff's client, he instantly knew that it was mathematically impossible to have a return that high with as little year-to-year variance in the return. We at Smead Capital Management would like to ask a few questions.
2013-03-01 00:00:00 Wait for Your Pitch in Today's Market by John West of Research Affiliates
Great hitting in baseball depends in part on waiting for the right pitch. In today's market, most asset classescoming off their impressive 2012 recordare "high and outside" the valuations necessary for future big league returns. Patience is the name of the game today.
2013-02-27 00:00:00 Weekly Market Review Notes by Team of Tuttle Tactical Management
For a while it was obvious that the market had become overbought and was due for a selloff, all traders needed was an excuse, this past week they got two of them. First, the Fed hinted that QE might end and then Italian elections sparked uncertainty in Europe. Add those things in with the looming sequester and you have all the ingredients for a profit taking selloff. At this point this is all part of normal market machinations. The market doesn't go up in a straight line and it doesn't go down in a straight line.
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.
2013-02-20 00:00:00 Weekly Market Review Notes by Team of Tuttle Tactical Management
Markets continued to move up this week in spite of looming Fiscal Cliff budget cuts. Everyone still expects a selloff but money continues to flow into the market as it has nowhere else to go.
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.
2013-02-19 00:00:00 Ducks, Swans and Old People by Mariko Gordon (Article)
Today we talk about experience. Specifically, why it's overrated and how an understanding of history helps you, as an investor, spot inflection points and exploit misunderstandings on the part of other investors.
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
2013-02-13 00:00:00 Weekly Market Review Notes by Team of Tuttle Tactical Management
After a decent selloff earlier in the month the market has continued to move up, but in very small increments. Most people seem convinced that we are due for another selloff, which seems to be tempering upside enthusiasm. On the other hand, there also doesn't seem to be any enthusiasm to sell.
2013-02-08 00:00:00 Overcoming 3 Bad Investing Behaviors by Russ Koesterich of iShares Blog
Do you avoid the stock market? Shun diversification? Trade inefficiently? Russ and guest blogger Nelli Oster an investment strategist on Russ' team examine three common bad behaviors among investors and provide tips for potentially mitigating their impact.
2013-02-04 00:00:00 A Gross Underestimate by Jonathan Coleman, Soonyong Park of Janus Capital Group
As we enter 2013, we felt it would be an appropriate time to revisit one of last years most controversial predictions of future equity performance. We acknowledge that equities in general may not continue to deliver the same real rate of return they have over the last century; however, we believe the glum outlook for the asset class forecasted by Bill Gross last year misses the mark. Our estimates of future equity returnsbased on three different approachesall point to a meaningfully higher forecast than Gross' pessimistic prediction.
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
2013-02-01 00:00:00 A Gross Underestimate by Jonathan Coleman and Soonyong Park of Janus Capital Group
The glum outlook for the asset class forecasted by Bill Gross last year misses the mark. Our estimates of future equity returnsbased on three different approachesall point to a meaningfully higher forecast than Gross pessimistic prediction.
2013-01-30 00:00:00 Weekly Market Commentary by Matthew Tuttle of Tuttle Tactical Management
The market continued to "melt up" this week. Everybody is expecting some sort of correction, but just like every time there is a consensus on something it never tends to happen. It is hard to envision the market having a massive continuation of this rally without some pullback, but we could easily continue to inch up for a while.
2013-01-25 00:00:00 Truth vs. IgnoranceThe Impactful Investment Manager of Tomorrow by Katy Sherrerd of Research Affiliates
Ignorance in investing can have devastating consequences for individual portfolios and personal wealth. Too often, capital market participants have little knowledge of how markets work, how to make investment decisions, or how to manage their portfolios. This month's Fundamentals explains how investment managers can add value for their clients through insight and education combined with the quest for alpha.
2013-01-25 00:00:00 The Road to Restoring Confidence in Retirement by Seth Masters of AllianceBernstein
The next-generation DC design can provide participants with better outcomes and more control. Particularly if the default includes lifetime income, participants no longer need to struggle with almost impossibly complex planning problems.
2013-01-15 00:00:00 It's Not What Happens That Matters by Bill Smead of Smead Capital Management
Late in 2008 and in early 2009, a group of what we like to call "brilliant pessimists" hit the airwaves with their economic theories. The prognosticators' vision of the future was and is predicated on the history of similar situations and the mathematical realities of the huge debt overhang from the prior ten years of profligate economic behavior. They put very effective names on their visions like "new normal" and "seven lean years". They marketed their visions incredibly well to the point of shaming anyone who might disagree with their theories.
2013-01-11 00:00:00 Thanks, Everybody...We'll be Right Back! by Colin Moore of Columbia Management
The Washington Comedy Club has taken a brief intermission and will be back in session shortly to resume the show. Please enjoy the facilities of this great country, free of charge, while you wait. Ignore the "Nero" character in the far corner playing the fiddle. Apparently, he isn't part of the show. Economic uncertainty emanating from fears of the U.S. fiscal cliff has been deferred but not avoided.
2013-01-08 00:00:00 A New Year?s Message from the Publisher by Robert Huebscher (Article)
Advisor Perspectives just wrapped up a momentous year, and I'd like to share with you some of our accomplishments from 2012 as well as our plans for next year.
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.
2012-12-26 00:00:00 Lessons from the Downfall of Lance Armstrong by Charlotte Beyer (Article)
The private wealth industry - where teams of elite advisors are trusted to safeguard the wealth of individuals and families and hold themselves to a fiduciary standard - can take several lessons from what happened at the Tour de France.
2012-11-29 00:00:00 Are E&Fs Jeopardizing Their Missions? by Seth Masters of AllianceBernstein
Many US endowments and foundations (E&Fs) still plan to spend 5% of their assets each year, despite unusually low expected returns. We think few understand how likely it is that this will limit their ability to fulfill their missions in perpetuity.
2012-11-27 00:00:00 A Critique of Grantham and Gordon: The Prospects for Long-term Growth by Laurence B. Siegel (Article)
The vigorous global economic growth of the last two centuries is over, according to Jeremy Grantham and Robert Gordon. That prediction, if correct, has profound and worrisome implications for investors. And the short-term trend is indeed disquieting: Growth has been close to zero over the last decade in advanced countries. But the most likely outcome is that per capita GDP growth going forward will approximate its U.S. historical average of 1.8%, and it will grow faster in developing markets.
2012-11-06 00:00:00 The Prize for the Fiduciary Standard: Global Market Leadership by Stephen Winks (Article)
Tough times in the brokerage business are about to get tougher. A difficult investment environment and damage to its reputation are threatening the industry, and now it faces regulatory challenges under Dodd-Frank as it evolves from its current sales-driven culture to a professional services culture focused on advice and the fiduciary standard. Bold leadership will be necessary to navigate this challenge; without it, the brokerage industry and their clients will suffer.
2012-10-23 00:00:00 How to Change the Regulatory Debate - Before it's Too Late by Bob Veres (Article)
After almost a decade of lobbying, arguing, and posturing, the long fight on Capitol Hill over who will regulate RIAs and how to define 'fiduciary' is approaching a close. Within the next six months, there will no longer be any real excuse to put off a decision, and new players, both in Congress and at the SEC, will be eager to start fresh.
2012-09-11 00:00:00 Can Our Retirement System be Fixed? by Robert Huebscher (Article)
Google 'Teresa Ghilarducci' and you'll find countless references to her as the most dangerous woman in America. That dubious distinction stems from her 2008 book, When I'm Sixty-Four, in which she advocated replacing voluntary 401(k) plans with government-mandated savings accounts. Ghilarducci was attempting to address a problem that thus far has eluded solution, so it's important to consider her arguments, which have drawn praise from some quarters, too.
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.
2012-09-04 00:00:00 New Research - How to Help Clients Make Better Decisions by Joe Tomlinson (Article)
Making decisions is not something human beings are very good at. We do a poor job of predicting what will make us happy in the future, we often misjudge our ability to handle risk, and our decisions are plagued by subtle biases that throw us unwittingly off course. Because the essence of financial planning is making decisions about the future, it's critical that clients and advisors understand how decision-making biases can be identified and overcome.
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?
2012-06-12 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.
2012-06-05 00:00:00 Daniel Kahneman on the Two Kinds of Thinking - Fast and Slow by Laurence B. Siegel (Article)
When advisors want to understand why their clients make seemingly irrational financial choices, odds are they will find answers in the research of Nobel-winning behavioral economist Daniel Kahneman. But guiding clients toward a better financial future is only one way to apply behavioral finance. Kahneman says we solve virtually all problems, not just financial ones, with two distinct types of thinking.
2012-04-24 00:00:00 The Number One Priority for Advisors by Dan Richards (Article)
What's the single most critical need for advisors to succeed? There are lots of candidates ? investment knowledge, communication skills, the ability to sell, and attracting and motivating a strong team.
2012-04-17 00:00:00 Harold Evensky's Fiduciary Oath by Harold Evensky (Article)
Harold Evensky, the founder and principal of the Florida-based wealth management firm Evensky & Katz, shared with us the Fiduciary Oath he provides to his clients.
2012-04-17 00:00:00 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.
2012-04-12 00:00:00 Diversification 201: Implications of Diversification for Investor Behavior by Team of American Century Investments
Here we look at diversification as a tool to address many classic failings identified by the science of behavioral finance. Earlier we explained the rationale behind diversification and how it can be used for structuring a portfolio to help manage risk and maximize risk-adjusted performance. We also provided an Intro to Alternatives meant to highlight the types of strategies that can be used to diversify a traditional portfolio. In future months well address such topics as diversification in a post-Financial Crisis world, and what types of diversification strategies make the most sense.
2012-03-20 00:00:00 Hot Buttons that Motivate Prospects by Dan Richards (Article)
If you spend $12,000 to promote an event for prospects, you should expect results. That didn't happen for an advisor whose recent prospecting events failed. Here's how he could have created a successful event - by focusing on the hot buttons that motivate prospects.
2012-03-13 00:00:00 Letter to the Editor - Tactical Asset Allocation v. Behavioral Finance by Various (Article)
Ken Solow, Michael Kitces and Sauro Locatelli respond to Christopher Sidoni's article, The Conflict between Tactical Asset Allocation and Behavioral Finance, which appeared on February 21.
2012-03-06 00:00:00 Why Invest? - Part 2 by Adam Jared Apt (Article)
Risk tolerance is a quality inherent in an individual or an institution. Whether quantified or not, risk tolerance is the amount of return the investor requires as compensation for the extra risk that comes with investing. It's a concept that is essential for making investment decisions, yet it is elusive and maddeningly difficult to specify. Even so, many investment advisors like to give the public the impression that they're proficient at determining it.
2012-02-28 00:00:00 Letters to the Editor by Various (Article)
Readers respond to Christopher Sidoni's article, The Conflict between Tactical Asset Allocation and Behavioral Finance, which appeared last week, and to Simon Johnson's commentary, Too Big to Jail, which appeared on February 21.
2012-02-21 00:00:00 The Conflict between Tactical Asset Allocation and Behavioral Finance by Christopher J. Sidoni, CFA, CFP (Article)
How?s this for irony? Certain investor behavior creates the conditions for a tactical asset allocation strategy to succeed ? but the same behavior simultaneously Increases the likelihood that clients will not follow the strategy. Recent research by Ken Solow, Michael Kitces and Sauro Locatelli identified a promising approach to tactical portfolio strategy, but our firm?s experience indicates clients will be reluctant to follow this approach ?particularly when the expected payoff is highest.
2012-02-14 00:00:00 ?The Greatest Anomaly in Finance' by Geoff Considine (Article)
If I told you that there is an easy-to-exploit market anomaly that has enabled investors to consistently and substantially outperform the market with less risk for more than four decades, your first instinct might be to roll your eyes. After all, the unending quest to improve returns while lowering risk has yielded countless methods with initial promise that subsequently collapse under further scrutiny.
2012-02-14 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.
2012-02-09 00:00:00 Private Equity: Fact, Fiction and What Lies in Between by Team of Knowledge @ Wharton
What good is private equity, anyway? Critics say these investment pools make money the wrong way -- buying "target companies," slashing jobs, piling on debt and selling the remnants, which by then are doomed to fail. Defenders say PE is a strong creator of jobs and value, and a vital source of outsized returns for pension funds, university endowments and other investment pools that serve ordinary people. Who's right?
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.
2011-12-22 00:00:00 Value Traps and Investor Psychology by Team of American Century Investments
Many financial market participants are familiar with what is generally known as the two basic emotions felt by investors, greed and fear. Very often, over-enthusiasm is observed accompanying greed during bull markets and over-despondency is seen on the heels of fear during bear markets. Besides the cyclical aspects of investor psychology, there are other aspects of behavioral finance (another name for this branch of psychology) to explore that relate to value trap avoidance.
2011-12-20 00:00:00 Wall Street Journal: Three Words of Advice for Million-Dollar Producers by Dan Richards (Article)
The financial advisor careers section of Wall Street Journal asked 60 advisors from all over the U.S. for suggestions to new advisors starting in the business whose goals were to be million-dollar producers. Their advice came down to three words.
2011-12-06 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.
2011-11-18 00:00:00 Behavioral Finance (Why Watching CNBC Wont Make You Rich) by David Edwards of Heron Financial Group
The current confluence of strong and rising earnings, low stock price valuations and exceptionally low interest rates presents one of the best stock buying opportunities in 50 years. Most Americans will not take advantage of that opportunity because most invest with their hearts, not with their heads, and right now their hearts are filled with fear! To help our clients invest with their heads, we present this commentary on behavioral finance.
2011-11-15 00:00:00 Michael Aronstein on Today's Key Macro Trends by Robert Huebscher (Article)
Michael Aronstein is the president and chief executive officer of Marketfield Asset Management. Since its inception in 2008, his fund has returned 31% while the S&P has been down 15%. I spoke with him about the key macroeconomic and strategic issues facing investors today.
2011-10-25 00:00:00 On Market Timing and Whiskey by J.J. Abodeely (Article)
Noah S. 'Soggy' Sweat, Jr. a Mississippi legislator, gave a famous speech addressing the controversial subject of prohibition. The consummate politician, Soggy tried to appeal to advocates on both sides of the issue, illustrating a lesson that advisors today will surely appreciate: In order to get at the substance of a contentious issue, sometimes you have reframe the question.
2011-09-20 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.
2011-09-13 00:00:00 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.
2011-09-06 00:00:00 Predictably Incorrect by Bob Veres (Article)
I had to read through this commentary by behavioral economics researcher Dan Ariely twice before I was willing to draw the obvious conclusion. It's the biggest bunch of hooey I've ever read in the financial planning press.
2011-09-06 00:00:00 How Advisors can Improve Client Returns by Dan Richards (Article)
There's a growing body of behavioral finance research on what investors can do to improve the performance of their portfolios. But how about advisors - what can they do to improve investor returns? Some new research answers that question.
2011-08-23 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 Driving Buffalo over a cliff by David Edwards of Heron Financial Group
Who wins from the volatility of last week? High frequency trading firms that can effectively manipulate the markets by placing thousands of one sided trades on individual stocks, or even more effectively on thinly traded ETFs, to force the market one way or the other. There are no uptick rules and no margin requirements preventing these firms from setting up an initial position, manipulating the market in the right direction, and closing out the trades with a profit a few minutes later. Who loses?Pension plans, endowments, mutual funds, individual investors and corporations.
2011-08-09 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.
2011-07-26 00:00:00 Comfort is Rarely Rewarded; Maverick Risk and False Benchmarks by J.J. Abodeely, CFA, CAIA (Article)
Conventional investment strategies, while affording the investor at least a temporary degree of comfort, are destined to produce mediocre results. Only by distancing themselves from the ordinary approach ? as Jeremy Grantham and Seth Klarman have ? can asset managers achieve superior performance and truly fulfill their fiduciary duties by acting as proper stewards of their clients? capital.
2011-06-14 00:00:00 What Fama and French?s Latest Research Doesn?t Tell Us by Michael Edesess (Article)
With the high name recognition and respect that the team of Eugene Fama and Kenneth French enjoys in the world of finance, anything they publish warrants attention. Their latest offering, Size, Value, and Momentum in International Stock Returns, offers some interesting data on global equity performance. But they fail to offer any insights that explain the reasons behind their findings.
2011-06-07 00:00:00 New Challenges for the Endowment Model by Robert Huebscher (Article)
The multi-billion dollar endowments of elite institutions like Harvard, Yale, and Princeton are supposed to never be strapped for cash, but that's not how things played out during the financial crisis, when all those schools and many others were forced to raise liquidity under adverse market conditions. The endowment model, despite those failures, is still basically sound, according to Luis Viceira, but it needs several key improvements before institutions and individuals can rely on it.
2011-05-31 00:00:00 Fantasy-world Returns for Equity Indexed Annuities by Robert Huebscher (Article)
When research fails to meet the basic standards of academic rigor, its conclusions should be questioned. One such case is a recent paper, Real-World Index Annuity Returns, whose conclusions you should trust at your own risk.
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.
2011-04-27 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.
2011-02-22 00:00:00 Toward an Understanding of Risk - Part 2 by Robert Huebscher (Article)
How should clients think about risk in their portfolios? Advisor Perspectives put that question to a cross-section of prominent advisors and academics. Their answers encompassed diverse opinions and underscored how crucial that question is to the investment process. In part one of this series, which appeared last week, we heard from seven practitioners in the financial planning community. This week, we hear from seven well-known academics, including two Nobel Prize winners.
2011-02-22 00:00:00 John Campbell on the Proposed Squam Lake Reforms by Dan Richards (Article)
In this interview, John Campbell, chairman of the economics department at Harvard, discusses his research into the underlying drivers of securities prices, and the key recommendations for reforming the financial system, based on his participation in the Squam Lake Group. This is a transcript of the interview.
2011-02-08 00:00:00 The Downside to Venture Investing (like Facebook?) by Dan Richards (Article)
In this interview, Harvard Business School professor Josh Lerner discusses the dangers of venture capital investing and the basis behind Facebook's valuation. This is a transcript of the interview.
2011-01-25 00:00:00 Demand Transparency in an Opaque Mutual Fund World by Andy Rachleff (Article)
Too many investors will end up in actively managed funds that fail in their mission to outperform a passive benchmark. And investors won't know until it's too late because they lack the information to evaluate which funds might consistently outperform the market.
2010-12-28 00:00:00 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don't always get the readership they deserve. Here are 10 articles that you might have missed, but we believe merit reading.
2010-11-30 00:00:00 Why Bubbles Inflate and How to Avoid Them by Robert Huebscher (Article)
In this interview, Meir Statman discusses the psychological underpinnings behind the creation of bubbles in the financial markets, why some bubbles are good and others are not, and how investors should frame their decisions when facing a potential bubble.
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.
2010-11-02 00:00:00 Flaws in Vanguard?s Withdrawal Strategy: Income versus Total-Return Portfolios by Geoff Considine, Ph.D. (Article)
Vanguard advertises that its mission is to simplify investors' retirement decisions. In a recently published study, however, it oversimplified the critical choices investors and their advisors face in constructing a portfolio for the withdrawal phase of retirement.
2010-10-26 00:00:00 An Exceptional Resource for Asset Allocation by Michael Edesess (Article)
Roger C. Gibson's fine and exemplary book, Asset Allocation: Balancing Financial Risk, Fourth Edition, shows that character and conscience-based counseling still exist, even in the financial profession. It is still possible for advisors to look out for their clients' long-term interests.
2010-10-19 00:00:00 'Bond Bubble' Fears Overblown by G. David MacEwen (Article)
Despite considerable debate in the financial media about the existence of a bond market "bubble," the fixed income team at American Century Investments finds little evidence to support this claim. None of the factors traditionally associated with asset bubbles are at work in the bond market. However, a confluence of economic headwinds argues for a prolonged period of low interest rates and inflation, while behavioral finance trends favor further bond inflows.
2010-10-12 00:00:00 The Perfect Storm: Threat or Opportunity by Dinesh Sharma and Michelle Goldstein (Article)
Our primary client base, baby-boomers, is quickly sliding into retirement, leaving us to question where our growth will come from. And now we have the uncertainty surrounding the Dodd-Frank Wall Street Reform and Consumer Protection Act and the anxiety that comes with it. Financial advisors can choose to see the convergence of these factors as a threat to their well-being or as an opportunity to prosper.
2010-09-28 00:00:00 Three Traps that Chew Up Your Day by Dan Richards (Article)
Time has always been the scarcest resource for successful financial advisors. Given all the demands advisors face, today it's essential to make maximum use of your workday. To make that happen, Dan Richards says you have to overcome three common traps.
2010-09-21 00:00:00 The One-Sided Fallacy by Richard E. Cripps, CFA (Article)
The current tenor of political debate has amplified one-sided arguments as each party attempts to sell their view to voters. The same polarization has become evident in approaches to investment, and market bears are exhibiting all the classic symptoms of confirmation bias. But we know better than to let these slanted arguments sway our market convictions. As Richard Cripps explains in this guest contribution, there are plenty of reasons to remain invested in equities.
2010-09-14 00:00:00 Latest Bond 'Bubble' Fears are Overblown by Team of American Century Investments
Despite considerable discussion in the financial media about the existence of a bond market bubble, the fixed-income team at American Century Investments finds little evidence to support this claim. Bond bubble proponents base their argument largely on record flows into fixed-income investments, bonds' extended outperformance over stocks, and record low interest rates. However, a confluence of economic headwinds argues for a prolonged period of low interest rates and inflation, while investor demographic and behavioral finance trends also appear to favor further bond inflows.
2010-08-24 00:00:00 What Investors Really Want by Robert Huebscher (Article)
Using a mean-variance optimizer to construct a retirement portfolio that sits on the efficient frontier is tantamount to dining on a well-prepared meal that was pureed in a blender, believes Meir Statman, a professor of finance at Santa Clara University. Statman's research focuses on behavioral finance, and how advisors can help investors make smarter decisions.
2010-08-17 00:00:00 Cerulli Survey Results: New Themes in Advisors? Portfolio Strategies by Bing Waldert (Article)
New ideas, such as tactical asset allocation and the use of alternatives, have seen some uptake even before the market crisis, particularly within large institutions, but they are receiving increased attention as solutions for risk-averse clients. This article examines some of the evolutions, using data from a Cerulli Associates survey of Advisor Perspectives readers conducted in June and July of 2010.
2010-07-30 00:00:00 ProVise Bullets by Ray Ferrara of ProVise Management Group
The two most important aspects of the financial reform bill: (1) Congress told the SEC to come up with rules for a common version for a standard of care when providing personalized investment advice to individuals; making everyone (financial planners, stockbrokers, insurance agents, etc.) who provide these types of services do so with a fiduciary standard of care; (2) a mandate from Congress to the GAO to do a six month study about the regulation of financial planning as a distinct business. Recent data on retirement readiness is summarized and several other topics are covered.
2010-07-27 00:00:00 Important New Research Talking to Seniors About Risk and Market Volatility by Dan Richards (Article)
New research shows how to talk to seniors about their investments. Titled "Behavioral finance and the post-retirement crisis" and released in May, this report compiles findings on how older investors perceive risk and make financial decisions. Dan Richards discusses the findings.
2010-07-27 00:00:00 A Marketing Guide for RIAs: Part 7 ? Implement a Centers of Influence Referral Strategy by Kristen Luke (Article)
In her series on low-budget marketing for startup RIA firms, Kristen Luke discusses how to implement centers-of-influence referral strategies.
2010-07-20 00:00:00 Letter to the Editor by Various (Article)
In a letter to the editor, a reader responds to several recent articles which have addressed the fiduciary standard for advisors.
2010-07-20 00:00:00 Behavioral Finance Lesson - Frequent Flier Points? by Dan Ariely of Predictably Irrational
'Medium maximization' is when people focus on near-term concrete goals (such as frequent flyer miles), and while trying to maximize these immediate and clear goals forget or discount the real reason for their actions, such as maximizing their financial outcomes. Why do people engage in medium maximizations? Because they are easy. They give people a clear direction for behavior. Just having something measurable within reach can redirect our motivation, while having such immediate and concrete goals give us a sense of progress.
2010-07-13 00:00:00 How to Fix the SEC by Bob Veres (Article)
Bob Veres' view is that the SEC is adequately funded, but perhaps is not ideally allocating the resources it already has. Fiduciary standards and regulatory reform are only part of the solution to protecting consumers from the predatory behavior of some financial services professionals in our midst. The remainder of the fix is potentially uncomplicated. See Bob's other contribution below.
2010-07-06 00:00:00 Stock Markets and a Sea of Change by Ron Surz (Article)
Ron Surz provides his award-winning market commentary, analyzing performance across global markets during the first half of this year. He also addresses several other topics, including the fiduciary standard, developments in target date funds, and distortions in style assignments created as a byproduct of the financial crisis.
2010-06-15 00:00:00 Strategy Advice from Apple and Google by Dan Richards (Article)
Last week Dan Richards conducted a webinar focused on the key decision that will drive advisors' long term success. Richards talks about what advisors can learn from the success of Apple, Google, Coke and Walmart.
2010-05-25 00:00:00 Sleeping with the Enemy by John W. Pfenenger II, CFA (Article)
When it comes to investing, our worst enemy may be the one we see in the mirror every morning - ourselves. In this guest contribution, John Pfenenger looks at how emotions affect investment decisions, and how understanding behavioral economics can help advisors work with their clients.
2010-05-11 00:00:00 Why Some Hedge Funds Made Money in 2008 by Robert Huebscher (Article)
Steven Drobny is the co-founder of Drobny Global, an international macroeconomic research and advisory firm that counts many of the leading global hedge funds and money managers as clients. He is also author of a recently released book that identifies why some hedge funds made money in the 2008 crisis, while the majority did not. In this interview, he discusses the common themes among successful strategies.
2010-05-11 00:00:00 Join a Professional Association ? Just Not Your Own Profession by Kristen Luke (Article)
Don't limit your involvement in professional associations to your own profession, says Kristen Luke. To actively market your business, spend more time with professional associations that pertain to your prospective clients than for your own industry.
2010-04-28 00:00:00 Fiduciary Responsibility vs. Fiduciary Duty by Michael J. Schussele of Michael J. Schussele, CPA
While the campaign to establish a fiduciary standard is commendable in that it could establish fiduciary responsibility for advisors, the fiduciary standard is not the same as professional fiduciary duty. Fiduciary responsibility assumes unavoidable conflicts of interest, while professional fiduciary duty does not tolerate any conflicts of interest at all. It is time to clearly delineate who is who, to have salesmen and advisory salesmen regulated by the SEC and FINRA, and to have true fee-only professional advisors regulated by an independent Consumer Financial Protection Agency.
2010-04-20 00:00:00 Lessons from Yale?s Endowment Model and the Financial Crisis by Geoff Considine, Ph.D. (Article)
The Yale endowment's performance during the financial crisis was worse than what would be mathematically expected, but not significantly enough to question the endowment model's tenets. Moreover, Yale's performance and philosophy suggest two very important lessons for advisors and investors- to diversify beyond equities and fixed income, and that some illiquid asset classes can be an important source of alpha.
2010-03-30 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.
2010-03-23 00:00:00 The Best Books on Passive Investing by Indudeep Chhachhi & Edward R. Wolfe (Article)
Two finance professors, Edward Wolfe and Indu Chhachhi, survey the literature on passive investing and offer their recommendations for authors and books. Whichever side of the active-passive debate you take, these books should be required reading. The evolution through which the literature on passive investing has gone is striking. Early writers started out with a point to prove: that passive investing is the only way to invest that makes sense. Today, the writing in this area has moved beyond "proving a point" to expanding on what is a settled issue.
2010-03-23 00:00:00 Financial Reform and the Fiduciary Standard by Tom Brakke (Article)
In this guest contribution, Tom Brakke of TJB Advisors updates the status of financial reform and, in particular, the fiduciary standard. This article is geared to clients, not advisors, and it may help you formulate your communications with your clients.
2010-03-23 00:00:00 Game On! by Lance Paddock (Article)
Advisor Lance Paddock comments on the exchange between Wealthcare's Dave Loeper and SCM's Roger Schreiner. Paddock lauds Loeper's focus on managing assets based on client goals, but says Schreiner's challenge is nonetheless fair, and urges Loeper to accept Schreiner's terms.
2010-03-03 00:00:00 February/March 2010 News and Events by Harold Evensky of Evensky & Katz
Congress is currently debating whether to apply the fiduciary standard to anyone providing investment advice. Evensky and Katz argue this would help protect client interests. Some brokerage and insurance representatives claim, however, that this would chill the ability of brokers or advisors to provide advice. Evensky and Katz also examine health care costs, social statistics and other varied topics.
2010-02-23 00:00:00 Jason Zweig on Protecting your Wealth by David Raileanu (Article)
Jason Zweig is a senior writer and columnist for Money magazine and frequently writes for the Wall Street Journal. In this interview, he discusses strategies for protecting client wealth, proper asset allocation, and the role of advisors in a fiduciary relationship.
2010-02-16 00:00:00 How to Squander $170 Billion by Robert Huebscher (Article)
Some of the managers supposed to be among the sharpest have cost their clients $170 billion dollars over the last two decades. These are "plan sponsors" who handle pension funds, endowments, and foundations, and Scott Stewart, a former money manager who now teaches finance at Boston University, has documented their value destruction in a recently published study.
2010-02-16 00:00:00 How Professionals Select Investments by Adam Jared Apt (Article)
In this guest contribution intended for the educated layman, advisor Adam Apt discusses the process by which investment managers select individual securities, contrasting the disciplines of fundamental and technical analysis.
2010-02-09 00:00:00 Overconfidence and Excessive Trading Harm Investor Returns by Dan Richards (Article)
The question Terrance Odean asks is if someone sells a stock and then buys another stock, on average does the stock they bought outperform the one they sold by enough to cover their trading costs? Odean, a professor at Berkeley, has researched this question and the role of excessive trading and overconfidence in investor decisions.
2010-01-19 00:00:00 Letters to the Editor by Various (Article)
Readers responded to a range of topics in our letters to the Editor: our Paul Krugman interview, our article last week on the causes of the financial crisis, our article on the true cost of insuring the uninsured, and our article on costless collars using options.
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.
2009-11-17 00:00:00 Five End-of-Year Marketing Tips by Kristen Luke (Article)
The slow period in November and December doesn't mean you should halt your marketing efforts. As Kristen Luke writes, you need to adjust your strategies and take advantage of the unique opportunities that are available during this period. Here are five tips to help make the most out of your end-of-year marketing.
2009-11-10 00:00:00 Investment Viewpoints - September 2009: Four Reasons to Emphasize Active Investment Management by Enrique Chang and Scott Wittman (Article)
Since the onset of the global financial crisis, there has been an increasing number of articles in financial journals and the financial press pointing out that actively managed investments of all types did not fare well relative to passive investment strategies. In this article, American Century Investments provides four fundamental reasons why those who have forecast the demise of active investment management are mistaken, in part due to one of the most common errors of behavioral finance-the Recency Effect. We thank them for their sponsorship.
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.
2009-11-03 00:00:00 I am a Fiduciary Financial Advisor by Ron A. Rhoades, J.D., CFP (Article)
The fiduciary standard of conduct is necessary to properly align investors' interests with those of the advisors who serve them, says Ron Rhoades in this guest contribution. Moreover, the fiduciary standard of conduct is not onerous and should not be feared. Advisors who embrace a fiduciary standard of conduct must simply follow the guidelines he sets forth.
2009-10-20 00:00:00 Advice as Art by Jason K. Branning, CFP (Article)
Giving advice to clients is a delicate art, like creating a beautiful symphony from a group of musical instruments. In this guest contribution, advisor Jason Branning explains how you can offer advice to clients that transcends mere projections or proposals, and becomes something more.
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.
2009-09-22 00:00:00 Predictably Irrational - How Investors Frame Decisions by Robert Huebscher (Article)
One of the most provocative sessions at last week's Schwab Impact conference was given by Dan Ariely, who deftly summarized his current research in the important field of behavioral finance. Ariely's message was that, no matter how good their intentions or how deep their experience, people - investors specifically - consistently make the wrong decisions. They behave irrationally, and predictably so.
2009-09-15 00:00:00 Mohammed El-Erian: We Have Not Reached Escape Velocity by Robert Huebscher (Article)
Kicking off this year's Schwab Impact conference in San Diego, Mohammed El-Erian told an audience of nearly 1,000 advisors on Sunday night that the US financial system has not fully emerged from the financial crisis. El-Erian and his co-presenter, Larry Fink of Blackrock, addressed a range of topics, including the safety of the financial system, the future of regulation, and the outlook for inflation.
2009-09-15 00:00:00 Investing Lessons from Golf and Blackjack Players by Robert Huebscher (Article)
At key moments investors refuse to take those chances that will make them money. Behavioral finance has a term for this - risk intolerance. Research supporting these claims comes from two divergent pastimes - the games of golf and blackjack.
2009-08-18 00:00:00 A Crash Course in Investing Six Lessons from the Market Meltdown by Dougal Williams, CFA (Article)
The market decline from October 2007 to early March 2009 was the worst since the late 1930's. Stocks dropped 60%, investor uncertainty skyrocketed, and trust and confidence were shattered. The age-old rules for personal investing are now being questioned: Is Buy-and-Hold dead? Has Asset Allocation outlived its usefulness? Does Diversification still work? In this guest contribution, Dougal Williams provides answers to these questions that can serve as a guide for long-term investment success.
2009-08-11 00:00:00 At the Risk of Repeating Ourselves by Michael Lewitt (Article)
We have said before that Michael Lewitt's newsletter is a must-read, and this edition is no exception. Lewitt questions whether we are witnessing a summer calm before the storm, comments on the secured and unsecured debt asset classes, and opines on the abuses of unregulated dark pools of capital. We encourage you to subscribe to this valuable publication through the link we provide.
2009-08-11 00:00:00 Behavioral Finance Traps En Route to Investment Success by Dan Richards (Article)
To understand why investors fail to stick to their plans, economists and academics are studying the rapidly growing field of "behavioral finance," analyzing the patterns of behavior that cost investors serious money. Dan Richards looks at the current research and its implications for investors and advisors.
2009-08-04 00:00:00 A Wakeup Call for Advisors: Turmoil at the Top of the Market by Dan Richards (Article)
Recent articles in Business Week, the New York Times and the Wall Street Journal describe turmoil among high-net worth investors and have profound implications for financial advisors. Dan Richards offers a five-point response for advisors to counteract investor disillusionment with their current relationship.
2009-08-04 00:00:00 Letters to the Editor by Various (Article)
In our letters to the Editor, readers respond to last week's article, How Long is the Long Run?, Geoff Considine's article, The Retirement Portfolio Showdown: Jeremy Siegel v. Zvi Bodie , and Ted Wong's article, Moving Average: Holy Grail or Fairy Tale - Part 3.
2009-07-21 00:00:00 Change or be Changed by Bob Padgette, CFA, CIMA and Ted Ponko, CFA (Article)
New financial services regulation will touch on many areas, and mutual fund evaluation and monitoring is one likely candidate. Over the past two decades, screening has been at the core of most mutual fund evaluation processes. The advisor picks the criteria, sets a minimum or maximum level for each, and comes up with a list of funds that survive all screens. Bob Padgette and Ted Ponko of Klein Systems demonstrate several inherent flaws in this process.
2009-07-21 00:00:00 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 00:00:00 Behavioral Finance ? A Three-Part Model for Client Relationships by Susan B. Weiner, CFA (Article)
Behavioral finance can improve your client relationships during market turmoil, if you recognize your clients' emotional right-brained reactions before you offer insights based on your analytical left-brained analysis. By applying a three-pronged process of Recognize-Reflect-Respond, you can adapt to new information in a thoughtful and effective framework.
2009-07-07 00:00:00 Burton Malkiel Talks the Random Walk by Robert Huebscher (Article)
Passive investing has no more outspoken advocate than Burton Malkiel. At age 72, Malkiel remains every bit as committed to the efficient market hypothesis as when he wrote A Random Walk Down Wall Street in 1973. Malkiel, who has taught finance at Princeton for the last 20 years, was a featured speaker at the Forbes Advisor Conference last week. He insists that investors should buy and hold index funds and defended his position against a series of challenges put to him.
2009-06-16 00:00:00 Seth Klarman: Why Most Investment Managers Have It Backwards by Robert Huebscher (Article)
In his keynote speech last week to the Boston Security Analysts Society, Seth Klarman discussed how he repositioned his portfolio last fall to capture opportunities created in the wake of the financial crisis. Klarman is the lead editor of the sixth edition of Graham and Dodd's Securities Analysis, and his fund, The Baupost Group, is among the top performing hedge funds over its 27 year history.
2009-06-02 00:00:00 Jeremy Grantham's Warnings to Investors by Robert Huebscher (Article)
Of the thousands of investment letters penned in the industry, only one draws as much readership as Warren Buffet's annual letter to his shareholders: The quarterly commentary written by Jeremy Grantham. Grantham, the Chairman of the Boston-based investment firm Grantham Mayo Van Otterloo, was a featured speaker at Morningstar's Investor Conference last week, and he spoke at two breakout sessions. Those who, like me, attended both were richly rewarded, as he gave two distinctly different talks, addressing many subjects not covered in his commentaries.
2009-02-03 00:00:00 How to Think about Investing by Adam Jared Apt (Article)
Adam Jared Apt's column answers the question "how to think about investing" from the perspective of an educated laymen. Apt traces the development of classical finance, modern portfolio theory, and behavioral finance, and shows the role each plays in the construction of a properly diversified portfolio.