More on Related Themes
2014-05-09 Weak Stock Market Closes Are On the Rise by Team of GaveKal Capital
We've taken note of an increasing number of weak-ish stock market closes and decided to build an indicator to measure the number of weak closes and compare it to stock prices.
2014-04-08 Predatory Trading ? Just How Big an Issue is High-Speed Trading? by Matt Waldner of Columbia Management
High-frequency trading (HFT) is a topic institutional investors and traders have been battling for years. A new book titled Flash Boys by author Michael Lewis of Moneyball fame, investigations out of U.S. regulators and a 60 Minutes spot on a recently developed exchange, IEX, brought this topic from Wall Street to Main Street. In this article, we?ll take a walk around the issue, educate our investors, and hopefully, quell any concerns.
2014-04-05 The Lions in the Grass, Revisited by John Mauldin of Millennium Wave Advisors
Today we explore a few things we can see and then try to foresee a few things that are not quite so obvious. The simple premise is that it is not the lions we can see lounging in plain view that are the most insidious threat, but rather that in trying to avoid those we may stumble upon lions hidden in the grass.
2014-04-02 Reforming China?s State-Market Balance by Joseph Stiglitz of Project Syndicate
Many of China?s problems today stem from too much market and too little government. Or, to put it another way, while the government is clearly doing some things that it should not, it is also not doing some things that it should.
2014-03-16 Inequality and Opportunity by John Mauldin of Millennium Wave Advisors
Today we will continue our thinking about income inequality, and I will respond to some of your letters, as they make good launching points for further discussion of the topic.
2014-03-14 Dangerous Assumptions for Retirees by Rob Isbitts of Sungarden Investment Research
One of the main difficulties with MPT, is that by focusing on historical data to calculate asset allocation, it completely ignores extreme risk (2007-2008).
2014-03-09 The Problem with Keynesianism by John Mauldin of Millennium Wave Advisors
Keynes himself would appreciate the irony that he has become the defunct economist under whose influence the academic and bureaucratic classes now toil, slaves to what has become as much a religious belief system as it is an economic theory. Men and women who display an appropriate amount of skepticism on all manner of other topics indiscriminately funnel a wide assortment of facts and data through the filter of Keynesianism without ever questioning its basic assumptions. And then some of them go on to prescribe government policies that have profound effects upon the citizens of their nations.
2014-02-15 The Economic Singularity by John Mauldin of Millennium Wave Advisors
Today, let’s think about central banks and liquidity traps and see if we agree that central bankers are driving the car from the back seat based upon a fundamentally flawed theory of how the world works. That theory helped produce the wreck that was the Great Recession and will have its fingerprints all over the next one.
2014-02-01 Central Banker Throwdown by John Mauldin of Millennium Wave Advisors
The Federal Reserve is signaling that it is going to end quantitative easing at some point in the future; therefore, investors are trying to find the exits before the end actually comes.
2014-01-18 Forecast 2014: 'Mark Twain!' by John Mauldin of Millennium Wave Advisors
The surface of the market waters looks smooth, but the data above suggest caution as we proceed. Perhaps slowing the engine and taking more frequent soundings (or putting in closer stops!) might be in order. The cry should be "Mark twain!" Let’s steam ahead but take more frequent readings and know that a course correction may soon be necessary.
2014-01-04 Forecast 2014: The Human Transformation Revolution by John Mauldin of Millennium Wave Advisors
It is that time of the year when we peer into our darkened crystal balls in hopes of seeing portents of the future in the shadowy mists. This year I see three distinct wisps of vapor coalescing in the coming years. Each deserves its own treatment, so this year the annual forecast issue will in fact be three separate weekly pieces.
2013-12-24 How Much Should We Pay to Emit Carbon? by Michael Edesess (Article)
Many consider emissions of greenhouse gases to be what economists call a ’negative externality,’ meaning that they are likely to impose a cost on society through climate change and ocean acidification. The cost of that externality should, in principle, be borne by the emitters, who should pay a price to emit. But what should that price be?
2013-12-17 Optimizing Asset Location: Is It Worth the Effort? by Joe Tomlinson (Article)
Asset location - the choice of whether to hold stocks and bonds in taxable or sheltered accounts - is receiving increased attention as advisors seek more ways to add value. New research has challenged long-held beliefs. I’ll examine that research and answer a question that should concern every advisor and client: Does the value provided by asset-location advice justify the fees for the work involved?
2013-12-17 Five Strategies for a Rising-Rate Environment Revisited by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)
In June 2010, we recommended five strategies for a rising-rate environment, acknowledging that we had no idea when or how abruptly rates would rise. Indeed, rates fell since we wrote that article. But they are on the rise again. After reviewing how our original five strategies performed, we’ll now present our revised recommendations for investing as rates increase.
2013-12-10 How Much Can Clients Spend in Retirement? A Test of the Two Most Prominent Approaches by Wade Pfau (Article)
In my last article, I described research-based innovations for variable withdrawal strategies from retirement portfolios. In this article, I put Guyton’s and Blanchett’s strategies to the test. My results provide planners with a better understanding about the potential spending paths generated by these different approaches.
2013-12-10 How Service Screw-ups Can Create Happier Clients by Dan Richards (Article)
Companies mess up and let us down. And chances are at some point you’ve dropped the ball with your clients, where an unintended mistake caused frustration and inconvenience. But a recent conversation highlighted a four-step plan to turn service problems into client satisfaction success stories.
2013-12-07 Interview with Steve Forbes by John Mauldin of Millennium Wave Advisors
For whatever reason, Steve Forbes seems to bring out the passion in me. When I think about what central bank policies are doing to savers and investors, how we are screwing around with the pension system, circumventing rational market expectations because of an untested economic theory held by a relatively small number of academics, I get a little exercised. And Steve gives me the freedom to do it.
2013-12-03 Jeremy Siegel - The Market is 10% to 15% Undervalued by Robert Huebscher (Article)
According to Wharton’s Jeremy Siegel, ’the fair market value for the stocks today is 10% to 15% higher, and that might even be on the conservative side.’
2013-12-03 How to Keep Prospects from Stealing Your Ideas by Dan Richards (Article)
After multiple meetings with prospective clients during which you provided recommendations on their situation, at some point every advisor has walked away feeling that someone took their advice and implemented it on their own. How do you prevent this from happening?
2013-11-26 Second-Level Thinking: John Hussman Responds to Howard Marks by John Hussman (Article)
While I am a very great admirer of Howard Marks, his fairly sanguine view of equities here seems inconsistent with what he calls "second-level thinking" about how securities are valued, and is almost certainly inconsistent with his observation that "Rule number one, most things will prove to be cyclical. Rule number two, some of the greatest opportunities for gain and loss come when people forget rule number one."
2013-11-24 Game of Thrones - European Style by John Mauldin of Millennium Wave Advisors
The Eurozone crisis is not over, and it will not end quickly or soon. Even if it seems to unfold in slow motion - like the slow build-up in a Game of Thrones storyline to violent internecine clashes followed by more slow plot developments but never any resolution, the Eurozone debacle has never really gone away. The structural imbalances have still not been fixed; politicians and central bankers have still not agreed to solve major fiscal problems; the overall economy still disintegrates; unemployment is staggeringly high in some countries and still rising; and the people are growing restless.
2013-11-19 Asset Class Allocation and Portfolios: Critique and Complication by Adam Jared Apt (Article)
In Part 1 of this essay, I explained that for asset class allocation to become an investment practice, it required a foundation of theory. And Modern Portfolio Theory was that foundation. But today, most financial journalists and investment advisors who proffer advice centered on asset class allocation are?if I may judge from their writings?oblivious of this. And why shouldn’t they be? Theory is abstract and difficult to apprehend.
2013-11-13 GameStop and Our Long-Term, Contrarian Investment Approach by Jay Kaplan of The Royce Funds
Because our contrarian approach emphasizes a long-term time horizon, we tend to invest in companies that we believe have the financial wherewithal to withstand out of favor periods. GameStop used trying times to build conviction and expand its core business rather than abandoning its discipline to meet outside expectations.
2013-11-12 The Bomb Shelter Portfolio: Maximum Income with the Least Risk by Geoff Considine (Article)
Conservative investors are faced with unappealing choices. They can reduce risk and accept low yields and high exposure to rising rates, or they can push the bounds of their risk tolerance to increase yield. My analysis shows a way out of this predicament: a “bomb shelter” portfolio of ETFs, which offers attractive yield with minimal volatility and exposure to rising rates.
2013-11-12 Three Ways to Turn Casual Contacts into Clients by Dan Richards (Article)
Most advisors routinely cross paths with people who are attractive prospects, whether at their golf club, get-togethers with neighbors or through charitable activity in their community. The challenge is how to raise the possibility of working together without appearing to be one of those stereotyped hustlers who give salespeople everywhere a bad name.
2013-11-05 The Key Issues in Today’s Muni Bond Market by Hildy Richelson and Stan Richelson (Article)
Investing in high quality municipal bonds paying a predictable cash flow and returning your principal at the end of the investment is a well-trodden system for lifetime economic success. In this article we discuss some key issues in purchasing municipal bonds to help you make wise choices for your investing system.
2013-11-05 Combating Climate Change - And Responding to Skeptics by Michael Edesess (Article)
The climate-change threat is real, even if it is only a matter of probabilities. What action we should take, and how action should be brought about, are knotty problems. Harvard Business School’s Business and Environment Initiative (BEI) says they can be attacked with a business approach.
2013-10-26 A Code Red World by John Mauldin of Millennium Wave Advisors
The heart of this week’s letter is the introduction of my just-released new book, Code Red. It is my own take (along with co-author Jonathan Tepper) on the problems that have grown out of an unrelenting assault on monetary norms by central banks around the world.
2013-10-20 The Damage to the US Brand by John Mauldin of Millennium Wave Advisors
There is no doubt that the image what I will refer to in this letter as the "brand" of the United States has been damaged in the past month. But what are the actual costs? And what does it matter to the average citizen? Can the US recover its tarnished image and go on about business as usual? Is the recent dysfunction in Washington DC now behind us, or is it destined to become part of a bleaker landscape?
2013-10-15 Why Customized Content Beats Canned Content by Neil Rhein (Article)
If you’re communicating syndicated (“canned”) content that is similar (or identical) to what every other advisor is saying, you’re just adding to the noise.
2013-10-15 Letters to the Editor by Various (Article)
Readers respond to Robert Huebscher’s article, The Futility of the Endowment Model, which appeared last week.
2013-10-12 Sometimes They Ring a Bell by John Mauldin of Millennium Wave Advisors
Three items have come across my screen in the past month that, taken together, truly do signal a major turning point in how energy is discovered, transported, and transformed. And while we’ll start with a story that most of us are somewhat aware of, there is an even larger transformation happening that I think argues against the negative research that has come out in the last few years about the reduced potential for growth in the world economy.
2013-10-08 Four Lessons from Sport’s #1 Overachiever by Dan Richards (Article)
A New York Times article pointed out that this year’s baseball playoffs have more teams from the bottom 10 in payroll than from among the top 10 spenders. Here are four ways you can do more with less, drawing lessons from a baseball team that has outperformed despite being consistently outspent.
2013-10-08 Is Your Website Like a Toothbrush? by Wendy Cook (Article)
Like your website, a toothbrush is essential and comes in a range of sizes and options. Just as you should regularly replace your toothbrush well before its bristles have frayed, you should treat your website to a regular refresh to keep it relevant in the face of ever-advancing technology.
2013-10-01 The Looming Threat to China’s Economy by Marianne Brunet (Article)
The debate over China’s economic prospects centers on its real-estate bubble, excessive leverage and rising labor costs. But regardless of its short-term fate, China’s economic growth will ultimately be limited by the availability of a key resource. China ranks second lowest in the world for water availability per capita. Water-scarcity poses a threat to its future growth. The challenge is determining how severe this will be.
2013-10-01 The Eight Principles of Value Investing by Scott Clemons and Michael Kim (Article)
In any environment, but especially one characterized by uncertainty, eight principles of investing are critical. These bedrock beliefs help guide our thinking at the levels of asset allocation, security selection and identification of the third-party managers we engage to help manage our clients’ assets.
2013-09-28 The Renminbi: Soon to Be a Reserve Currency? by John Mauldin of Millennium Wave Advisors
Contrary to the thinking of fretful dollar skeptics, my firm belief is that the US dollar is going to become even stronger and will at some point actually deserve to be the reserve currency of choice rather than merely the prettiest girl in the ugly contest the last currency standing, so to speak. But whether the Chinese RMB will become a reserve currency is an entirely different question.
2013-09-24 Four Ways to Attract Affluent Clients by Dan Richards (Article)
Attracting HNW clients is all about credibility ? as a result, it’s typically lower key, takes longer and requires an upfront investment of time and effort to position yourself to interact with HNW prospects.
2013-09-21 Rich City, Poor City by John Mauldin of Millennium Wave Advisors
This week we will conclude our look at pension plans for the nonce with a 30,000-foot overview of the states and then take a deeper dive into one city: mine. This will give you at least one version of how to do your own homework about your own hometown. But fair warning, depending on your locale, you may need medical help or significant quantities of an adult beverage after you finish your research.
2013-09-17 How One Advisor Attracts HNW Clients by Dan Richards (Article)
Recently, a California-based advisor explained how she shifted her practice to focus on affluent clients. Her success was the result of a simple but thoughtful five-step plan.
2013-09-07 Unrealistic Expectations by John Mauldin of Millennium Wave Advisors
Two well-respected analysts of pension funds have produced reports this summer suggesting that pensions are now underfunded by more than $4 trillion and possibly more than $5 trillion. I would like to tell you that the underfunding is all the bad news, but when you probe deeper into the problems facing pension funds, it just gets worse.
2013-09-03 The Impact of Severe Drawdowns on Safe Withdrawal Rates by Lloyd Nirenberg, Ph.D. (Article)
A Google search for “safe withdrawal rates” produces 30 million results, but none answers a question that is critical to advisors and investors: How would a sudden market downturn ? a “return shock” ? impair a retiree’s forecast withdrawals?
2013-08-31 How Do I Hate Thee? by John Mauldin of Millennium Wave Advisors
I will list a number of reasons why I hate this market and then suggest a few reasons why that should get you excited. We will look at some charts, and I’ll briefly comment on them. No deep dives this week, just a survey of the general landscape.
2013-08-30 Survey Says... What? by Robert Isbitts of Sungarden Investment Research
During the past week, a survey caught my eye and dropped my jaw. It was published in Investment News, a leading online and print publication for the investment advisory industry last weekend. It covered a survey of individual investors by brokerage firm Edward Jones about the potential impact of rising interest rates on their investment portfolios. According to the article, written by award-winning columnist Jeff Benjamin, “two-thirds of the respondents don’t understand how rising rates will affect their investment portfolios.”
2013-08-25 France: On the Edge of the Periphery by John Mauldin of Millennium Wave Advisors
Charles de Gaulle said that "France cannot be France without greatness." The current path that France is on will not take it to renewed greatness but rather to insolvency and turmoil. Is France destined to be grouped with its Mediterranean peripheral cousins, or to be seen as part of the solid North Atlantic core? The world is far better off with a great France, but France can achieve greatness only by its own actions.
2013-08-20 Which Crowd? Mulling the Investment Wisdom of the Masses by Steven Grey (Article)
With every investment or trade, the profits that accrue with the passage of time eventually prove one party the wiser. But of what practical value is the notion of collective wisdom if investors can’t consistently identify the ’wise’ crowd before the fact?
2013-08-13 Why Clients Don’t Give You Credit for Your Hard Work ? And What to do About it by Dan Richards (Article)
Advisors work incredibly hard, but clients take that effort for granted. How can advisors get credit for all they do for clients?
2013-08-13 Quantitative Easing for Regular Folks: Three Lessons from the New York Times by Susan Weiner (Article)
Quantitative easing pops up regularly in economic and market commentary. The term conveys a lot to financial professionals who know the fine points of QE1 vs. QE3. However, it’s likely to make the average investor ask, “Huh?”
2013-08-06 Letters to the Editor by Various (Article)
A number of readers responded to Dan Richards’ article, Getting Past “Blah, Blah, Blah” When Talking to Prospects, which appeared on July 23. A reader responded to Michael Edesess’ article, The Great Debate on Inequality: Stiglitz versus Krugman, which appeared on June 25.
2013-08-06 Human Capital in the Digital Economy by Alan Winger (Article)
Human capital is a key asset that planners manage as they strive to maximize consumption throughout clients’ lives. Human capital, or lifetime income, often peaks in value early in their careers. Moreover, today’s digital economy means human capital is more volatile and less predictable than in the past, and that carries important implications for financial planners.
2013-07-30 A Strategy for Reducing Volatility While Increasing Returns by Steven Farber (Article)
The product on every advisor’s wish list would have the low volatility of fixed income while providing equity-like returns. Although such a product does not exist, equity options, when used properly, will give you the ability to achieve pre-defined goals and objectives.
2013-07-26 Investing In Bonds When Rates Are Rising by Tom Dalpiaz of Advisors Asset Management
How can investors “stay in the bond game” during these difficult rising rate environments? Here are some suggestions.
2013-07-23 The Limits of Flower Power by Amy Florian (Article)
It’s automatic: There’s a death in a client’s family, so you send flowers to the funeral home. Did you ever wonder whether that’s a good idea? Given that your aim is to be supportive and comforting to the grieving family, a lovely floral arrangement does not necessarily accomplish that goal.
2013-07-16 Letters to the Editor by Advisor Perspectives (Article)
A reader responds to the ongoing exchange of letters regarding socially responsible investing, and a reader responds to Joe Tomlinson’s article, Retirement Portfolios: Fears over Rising Rates are Overblown, which appeared last week.
2013-07-16 Deficit? What Deficit? by Brian Wesbury, Bob Stein of First Trust Advisors
Hope that title caught your attention, but, you should know, we are only half joking. In June, the federal government recorded a $116.5 billion surplus! Yep, you read that right surplus! the largest surplus for any June ever. Government spending fell to $170 billion for June, 47% below last year.
2013-07-13 The Bang! Moment Shock by John Mauldin of Millennium Wave Advisors
This week we resume our musings about Cyprus, to see what that tiny island can teach us about our own personal need to engage in ongoing critical analysis of our lives and investment portfolios. Cyprus is not Greece or France or Spain or Japan or the US or (pick a country). I get that. No two situations are the same, but there may be a rhyme or two here that is instructive.
2013-07-09 ENERGY MLPs: A Suitable and Sustainable Asset Class by Sponsored Content from ClearBridge Investments (Article)
Greater capitalization. More liquidity. The energy MLP market has grown steadily, with good reason: our constant demand for energy. While oil prices go up and down, volume has stayed consistent. Production is increasing. And the infrastructure is needed to support it. Add some risk, and you’ve got an investment which could fit in a diversified portfolio.
2013-07-02 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 "This Country is Different" by John Mauldin of Millennium Wave Advisors
Cyprus is a very small country, some 800,000 people. Among the leadership, everyone knows everyone. There is much to admire, as we will see. But Cyprus has had a gut-wrenching crisis, proportionately more dire than any in other European countries recently; and precedents are being established here for how future problems will be dealt with in the Eurozone and elsewhere.
2013-06-25 The Great Debate on Inequality: Stiglitz versus Krugman by Michael Edesess (Article)
Economics Nobel laureate Joseph Stiglitz is the chief alarmist warning that income and wealth inequality in the U.S. is a very serious threat to the economy. So it comes as a surprise that his fellow Nobelist Paul Krugman ? Stiglitz’s intellectual comrade-in-arms ? disagrees with him. Their disagreement goes to the heart of today’s economic problem.
2013-06-25 The Price Your Clients Pay for Using Safe Withdrawal Rates by David B. Loeper (Article)
Safe-withdrawal rates (SWRs) are perhaps the most extensively studied topic in financial planning literature. But applying a single SWR-driven methodology to all clients neglects their unique and individual needs. A better approach is for advisors to assist clients in defining their ideal and acceptable goals and the relative priorities among them. Then they can demonstrate through Monte Carlo simulation the likelihood of the recommended plan becoming over- or under-funded relative to those goals.
2013-06-25 Measuring the ROI of Advisor Marketing by Beverly Flaxington (Article)
Our practice has grown by word-of-mouth. A couple of my advisors want me to advertise and spend on expensive marketing programs. No one can show me the ROI for this. Is aggressive marketing a predictable way for advisors to get new clients? I just don’t see someone answering an ad who has $2 million (our minimum) to invest.
2013-06-18 GMO’s Montier on Why to Hold Cash by Robert Huebscher (Article)
Central bank policies have distorted markets to such a degree that investors are devoid of any buy-and-hold asset classes, according to James Montier. But according to Richard Bernstein, the flood of liquidity unleashed through quantitative easing (QE) now offers investors compelling opportunities.
2013-06-18 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.
2013-06-18 What Advisors Need to Know about Health-Care Planning by Dinesh Sharma (Article)
Guiding clients through the maze of the health-care choices retirees face is a way advisors can provide meaningful value. Here’s an overview of the Medicare and Medicaid programs to help advisors understand the key economic considerations that will impact their clients.
2013-06-15 Economists Are (Still) Clueless by John Mauldin of Millennium Wave Advisors
The economic forecasts of mainstream economists are quite positive, if not enirely optimistic, reflecting the current data. Should we not take heart from that? Alas, no. This week we look at some of our recent musings on that topic, triggered by a letter from a very serious economist who took umbrage when I wrote disparagingly about economists and forecasting a couple months ago.
2013-06-11 How Specialist Advisors Earn Twice as Much by Dan Richards (Article)
In any profession ? medicine, dentistry, law, accounting ? the average income for specialists is more than double that of generalists with the same years of experience. My experience with successful financial advisors who’ve built a niche practice confirms this, but first they had to overcome three common myths about developing a niche positioning.
2013-06-11 Bursting the Bond Bubble Babble by Andy Martin (Article)
Interest rates will eventually go up. The 50-basis-point spike in May on the 10-year Treasury bond may have been the beginning. But despite industry and media assertions, history shows that there is nothing to fear from rising rates.
2013-06-08 Banzai! Banzai! Banzai! by John Mauldin of Millennium Wave Advisors
In practice it may be harder for Japan to grow and generate inflation than it might be for other major nations. Today we’ll focus on Japanese demographics. While the letter is full of graphs and charts, it does not paint a pretty picture. The forces of deflation will not go gently into that good night.
2013-05-28 When Your Coworkers Don’t Measure Up by Beverly Flaxington (Article)
I work in a large financial organization. I’m frustrated that many of my coworkers don’t pull their weight. I work hard and am very committed, but those around me run out the door at 5 p.m. I want to talk to those in charge, but I am not sure how to go about doing it.
2013-05-07 Meredith Whitney ? State-issued GO Muni Bonds are Safe by Ben Huebscher (Article)
Meredith Whitney has softened her tone regarding muni bonds. The analyst who famously predicted disaster for the entire market on national TV now she says that new governors have been elected and states have begun reforming. There will be problems in four key states, but she is not predicting a disaster. In fact, she said investors will be safe in general obligation bonds.
2013-04-30 Best Practices for Following Up After a Prospecting Event by Beverly Flaxington (Article)
Based on your experience, what are the best practices for following up with prospects after an event that my firm sponsors?
2013-04-20 Austerity is a Consequence, not a Punishment by John Mauldin of Millennium Wave Advisors
Austerity is a consequence, not a punishment. A country loses access to cheap borrowed money as a consequence of running up too much debt and losing the confidence of lenders that the debt can be repaid. Lenders don’t sit around in clubs and discuss how to “punish” a country by requiring austerity; they simply decide not to lend. Austerity is a result of a country’s trying to entice lenders into believing that the country will change and make an effort to restore confidence.
2013-04-09 Tips for Building a Compelling Web Site by Wendy Cook (Article)
Is your current website still living in the “online brochure” days or even non-existent? Don’t dwell on what’s been holding you up. Let’s move your site ? and you along with it ? into the 21st century.
2013-04-02 Bernanke’s Motives Behind Quantitative Easing by Paul Franchi (Article)
We are at a turning point: away from one global monetary standard, to a yet-to-be-determined new form.
2013-04-02 A Q1 Letter to Clients: Why Warren Buffett is Bullish on Stocks by Dan Richards (Article)
Since 2008, I have posted templates to serve as a starting point for advisors looking to send clients an overview of the year that just ended and the outlook for the period ahead. This quarter’s letter draws on Warren Buffett’s most recent letter to shareholders, and why he is bullish on the US equity market.
2013-03-21 PMI What Does It Really Tell Us? by Adam Peck of Heartland Advisors
Recently we’ve been seeing positive readings from the Purchasing Managers’ Index (PMI), news that may seem as though it would be good for all stocks. In fact, though, a look at the performance of the S&P 500 and the PMI since 1995 shows that this is not necessarily the case.
2013-03-19 Putting GMO’s Ideas to Work: Protected Leveraged Investing by Geoff Considine (Article)
Fears of market overvaluation lead many advisors to seek to protect against downside movements while retaining as much upside potential as possible. Recent research from GMO illustrates a low-cost way to accomplish this: decreasing equity exposure and concentrating that allocation in high-beta securities.
2013-03-19 How My Firm Hires Great Employees by Teresa Riccobuono (Article)
Adding a team member is a big decision. If you are thinking the time is right to add to your roster, here are a few things to consider.
2013-03-12 America?s Criminal Crony Capitalism by Michael Edesess (Article)
Charles Ferguson believes that every prosecutorial tool at our disposal should be used to indict, fine severely, and imprison those whose transgressions contributed to the recent financial crisis ? not just their companies, but the executives as individuals.
2013-03-12 Bill Ackman on What Makes a Great Investment by John Heins (Article)
In addition to commenting on his high-profile current investments, Pershing Square Capital's Bill Ackman in a recent interview with Value Investor Insight describes the general company traits he looks for in both active and passive investments, why a high public profile is an important element of his strategy, whether his thesis on J.C. Penney has evolved, what lessons he's learned from a few prominent mistakes, and why his short conviction on Herbalife is as high as ever.
2013-03-12 Musings of a Psychopath by Mariko Gordon (Article)
Let's look at the positive characteristics of psychopaths (yes, I said 'positive'). In particular, we explore their uncanny ability to remain calm when others can't and the positive impact this has when making investment decisions.
2013-03-07 Three Dimensions of Discipline by Team of Franklin Templeton Investments
As New Year's resolutions fade into guilty memories, it's a bitter reminder that maintaining discipline, in life and investing, is just plain hard. Despite best intentions, bear markets can tempt investors to sell everything, while bull markets can whip people into a buying frenzy, both courses of action that rarely end happily.
2013-01-08 Energy and the End of Growth by Michael Edesess (Article)
Is economic growth coming to an end? That's been a hot topic of discussion, thanks to a paper by Robert J. Gordon. It had a simple but striking thesis: 'There was virtually no growth before 1750, and thus there is no guarantee that growth will continue indefinitely.' But before 1750 there were no fossil fuels either. Only once humans tapped the large deposits of coal and oil did economic growth truly awaken. The history of economic growth is, so far, the history of fossil fuels. This causes us to wonder whether economic growth will end when it is no longer powered by fossil fuels.
2013-01-03 Lessons Learned by Jeffrey Saut of Raymond James
Beginning of the year letters are always hard to write because there is a tendency to talk about the year gone by, or worse, attempt to predict the year ahead. Therefore, we are titling this year's letter in an attempt to share some of the lessons that should have been learned over the past few years.
2012-12-27 The Ten Most-Read Articles in 2012 by Robert Huebscher (Article)
As is our custom, we conclude the year by reflecting on the 10 most-read articles over the past 12 months. In decreasing order, based on the number of unique readers, those are?
2012-12-26 Gundlach's High-Conviction Investment Idea by Robert Huebscher (Article)
Count Jeffrey Gundlach among those who expect Japan's currency to collapse because it can't service its debt. Japan's challenges may parallel those that the US faces, and Gundlach feels strongly that they have created a compelling investment opportunity.
2012-12-26 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.
2012-12-18 Pulling Back the Lens in Emerging Markets by Western Asset Management (Article)
Emerging markets remain resilient, according to Western Asset Portfolio Manager Rob Abad. But in the face of so much global uncertainty, investors would be wise to consider the latest trends and dynamics impacting this maturing asset class.
2012-12-18 Comparing Long-Term Care Alternatives by Joe Tomlinson (Article)
Should clients buy expensive long-term care insurance they might never need, or go without insurance and risk a big hit to their life savings? For advisors whose clients face this critical dilemma, there's now a third option: life insurance and annuity products that also incorporate long-term care insurance.
2012-12-18 Three Takeaways from the Fed by David Rosenberg (Article)
The equity market likes the prospect of more money printing and the Fed's more forceful efforts to reflate the economy, and stocks are a far better inflation hedge than bonds.
2012-12-18 Better Angels by Michael Lewitt (Article)
If all else fails, President Obama should lock the members of Congress inside the Capital about a week before Christmas, post the military at the door, hang big-screen television in each chamber, tune them to CNBC, and turn up the volume up. Faced with listening to endless repetitions of the words "rising above" or "fiscal cliff" or "kick the can down the road," our legislators will have no trouble reaching a compromise quickly.
2012-12-18 The Case for Conservative Optimism by Clark M. Blackman II (Article)
Advisors should heed the wisdom from George Washington: Troubles pass. Tomorrow will be better. This kind of optimism is the key to finding success as an investor, as a businessperson, and in life.
2012-12-11 The Next Generation of Income Guarantee Riders: Part 3 (The Income Phase) by Wade Pfau (Article)
In this third and final installment in my series on guarantee riders, I'll focus on the post-retirement income supported by income guarantee riders for variable annuities (VA/GLWBs), stand-alone living benefit riders (SALBs), and an unguaranteed portfolio of mutual funds. I'll highlight how differences among these products affect their end results, while also investigating what roles guarantees can most appropriately play in a retirement portfolio.
2012-12-11 Fine Wine - Why it's for More than Just Drinking by Mark E. Ricardo, JD, LLM, AAMS (Article)
For many investors, an ideal asset class would combine superior long-term absolute and risk-adjusted returns with a hedge against inflation and stock market volatility. There's a way to get all of that, in an asset class you might never have thought of until now: fine wine. Investment-grade wine deserves careful consideration, particularly now that - unlike other collectibles, such as art and rare books - it can be traded on a regulated exchange.
2012-12-11 Dealing with Lazy Employees by Beverly Flaxington (Article)
We are doing everything by the book in terms of hiring and team development in our firm. We use a recruiter, have an on-boarding process, team-up new hires with existing staff members, and conduct regular performance reviews. So why are my employees still lackadaisical?
2012-12-04 Nate Silver's Message for Financial Advisors by Ben Huebscher and Michael Edesess (Article)
By now you are likely aware that Nate Silver of the New York Times correctly predicted the results for all 50 states (plus DC) in this year's presidential election and all but two Senate races. Silver's predictive capabilities across a range of disciplines have made him a near-deity among those whose livelihood depends on accurate forecasting - from poker players to counter-terrorism units. It's clear why: His methods work - at least in some cases. And their strengths and limitations carry important lessons for financial advisors.
2012-12-04 Surprising Choices in the Search for Safety Near-Certain Loss of Purchasing Power versus Short-Term by Jason Petitte, CFA (Article)
Risk, in its many guises, is unavoidable, and investors today are taking on significant amounts of credit risk, duration, and leverage to obtain high yields from many presumably safe bonds. But certain types of risk are often mispriced. By overweighting one's portfolio to those sectors that currently offer attractive risk-adjusted returns, investors will be better positioned to meet their long-term goals.
2012-12-04 Cliff Diving by Michael Lewitt (Article)
While there may be compromise to avoid the self-inflicted crisis of the fiscal cliff, the course of fiscal policy is unlikely to alter significantly. There is a great deal of bold talk about tax reform, but the odds of our current leaders replacing our profoundly flawed tax regime with one that would breed economic growth and productivity are low. Congress will be lucky to avoid the fiscal cliff; asking it to alter the economy's DNA is unrealistic.
2012-11-27 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.
2012-11-27 Over the Cliff: Alan Simpson and Erskine Bowles on the Looming Deficit Crises by Michael Skocpol (Article)
As President Obama and Congressional leaders hurtle Thelma-and-Louise-style toward a budgetary precipice, another deficit-tackling duo hit the road earlier this month to deliver a simple message: This all could have been avoided.
2012-11-20 President Obama?s Re-Election and the Impact on the U.S. Economy by Eaton Vance Distributors, Inc. (Article)
President Obama?s re-election resolves a major element of uncertainty that has hung over the political landscape. But what kind of impact will his victory have on the economy and the markets, especially with the House still in Republican control? We posed that question to a roundtable of five investment professionals from Eaton Vance Management, Hexavest and Richard Bernstein Advisors.
2012-11-20 Are Inflation-Adjusted Annuities Right for Clients? The Product and Its Prospects by Joe Tomlinson (Article)
Many economists and retirement experts favor inflation-adjusted SPIAs, but advisors and the investing public have never shared their enthusiasm. Detractors contend that the product is fundamentally flawed and will never gain broad acceptance. My own view is more optimistic, but significant obstacles will, nonetheless, continue to impede wider adoption.
2012-11-20 Letters to the Editor by Various (Article)
Readers respond to our articles, The Downside to Socially Responsible Investing, which appeared last week, and, Lacy Hunt on Our Economic Future, which appeared on November 6.
2012-11-20 The Fallacies in Today?s Retirement Plan Assumptions: Putting the Hedonic Pleasure Index to Work by Bob Veres (Article)
Are you dramatically underestimating your clients' retirement lifestyle expenditures when you use Monte Carlo software? If you stop and look at a number of important assumptions hidden in the current models, you'll suddenly have a lot less confidence in the retirement plans you?re mapping out for your clients.
2012-11-13 Harvard's #1 Strategy Guru on the Key Decision for Your Business by Dan Richards (Article)
Competition has brought many once-dominant names to the brink of survival - General Motors, Kodak, Sears and Xerox. Michael Porter, Harvard's top expert on strategy, explains why advisors ignoring the important lesson here do so at their peril.
2012-11-13 Voyages by Michael Lewitt (Article)
Anything short of drastic entitlement reform, serious cutbacks in defense spending, and serious tax reform that alters incentives away from speculation in favor of production will leave this country stuck on the dangerous path it is on today.
2012-11-13 Emerging Markets: Maintaining Perspective by Robert O. Abad (Article)
In this Q&A, Western Asset Portfolio Manager Robert Abad discusses the latest dynamics and trends within emerging markets (EM). Although EM continue to demonstrate resiliency, Mr. Abad believes that given the amount of global uncertainty today, it is important that investors evaluate opportunities alongside a manager equipped to guide them through the risks and rewards of this evolving asset class.
2012-11-13 Bank Loans: Looking Beyond Interest Rate Expectations by John Bell and Kevin Perry (Article)
Portfolio managers of Bank Loan Strategies, John Bell and Kevin Perry, outline the major advantages and risks of bank loan investing and the roles that a bank loan allocation can play in a fixed income portfolio.
2012-11-06 ClearBridge Advisors - Market Commentary Q312 by Harry ?Hersh? Cohen (Article)
Vibrant end demand is missing, as consumers have neither the wherewithal nor the will to spend as they did in prior periods.
2012-11-06 David Rosenberg on Hurricane Sandy: Missing the Boat by David Rosenberg (Article)
As I read and digest reports estimating the damage from the devastating storm, I sense that there are far too many economists who are relying too heavily on past major hurricanes as they draw their conclusions from the current experience with Sandy.
2012-11-06 Asset Location: Nine Tips to Create ?Tax Alpha? by Glenn Frank (Article)
With campaign season finally over, taxes are going to dominate the debate in Washington in the months ahead ? however things shake out at the polls today. It's going to be confusing; it's going to be uncertain. But many of the most critical questions advisors will ask can be answered with an analytical approach to deciding where to 'house' assets ? in taxable or tax-sheltered accounts.
2012-10-30 Building Portfolios that Beat their Benchmark: Measuring Nanometers with a Yardstick by Bob Veres (Article)
Using tools he co-developed with the Nobel-prize winning economist Bill Sharpe, one advisor has found that he can reliably outperform an appropriate benchmark. His work proves it is possible to build a portfolio knowledgably. You just need the right tools to get the job done.
2012-10-30 The Next Generation of Income Guarantee Riders: Part 1 - The Deferral Phase by Wade Pfau (Article)
Clients no longer need to move their assets to a variable annuity with a rider to guarantee lifetime withdrawal benefits, thanks to the RetireOne stand-alone living benefit (SALB) rider from Aria Retirement Solutions, which can be applied to a portfolio of mutual funds and ETFs. Despite this enticing promise, however, the SALB may not offer as much downside protection as advisors and clients expect.
2012-10-30 The Dangers of Mortgage REITs: Does Doubling the Leverage Make Them a Good Investment? by David Schawel, CFA (Article)
Levered mortgage-backed REITs are dangerous. Many of those who invest in the underlying REITs have little idea what is generating 10%+ yields, nor do they understand what scenarios could lead share prices to drop precipitously. These investors need to recall the lesson we all learned so vividly in 2008 - leverage may increase returns, but it does so by significantly magnifying risk.
2012-10-30 The Yield Hunt by Michael Lewitt (Article)
The high-yield market is not in danger of imminent collapse as some have argued. As long as defaults remain relatively low, and interest rates remain invisible, investors will continue to chase yield. But a few things could cause a sharp sell-off in the near future.
2012-10-30 Finding Hidden Revenue with Existing Clients by Dan Richards (Article)
Investor skepticism and an uncertain economy are challenging advisors to maintain revenue growth and practice profitability. That's why I was intrigued by an advisor who's used a simple strategy to achieve substantial growth in assets from existing clients, even though she already managed most of their money.
2012-10-23 Understanding the Central Issue behind Entitlements by Michael Edesess (Article)
How should our government assure that its citizens have enough to get by - enough food, enough shelter, good enough health, etc.? It is easy to forget that today's fiercest political battles ultimately revolve around this simple question.
2012-10-16 The New World of Credit by Michael Lewitt, Editor, The Credit Strategist (Article)
In an era in which economies are driven by the creation of fiat money by central banks, and where the base of hard money is dwarfed by the volume of outstanding debt, every form of capital is tied to credit. In 1919, William Butler Yeats famously wrote that 'the center cannot hold.' A century later, there is no center.
2012-10-16 Getting in Touch with Your Inner Rich Kid by Justin Locke (Article)
What does it mean to be wealthy? When I recently spoke at a gathering of wealth managers, I saw my chance to find an answer this question, which has bugged me for years. How much must you have before your 'money' is sudden transfigured into 'wealth'? This all fits into a larger, ongoing quest of mine ? to understand why rich and poor kids approach life so differently.
2012-10-09 Is Gluskin's David Rosenberg Right about Utilities? by Geoff Considine (Article)
They're not the sexiest property on the Monopoly board, but in today's market, there's plenty of evidence mounting that utilities are a great source of income. Indeed, Gluskin Sheff's David Rosenberg made the case for utilities in a recent commentary.
2012-10-09 Dividend Income: Music to Our Ears by ClearBridge Advisors (Article)
The hunger for income among investors is helping put dividends in the spotlight, say Hersh Cohen and Mike Clarfeld of ClearBridge.
2012-10-09 A Q3 Letter to Clients - Insights from a Wall Street Legend by Dan Richards (Article)
Here is a template for a letter to serve as a starting point for advisors looking to send clients an overview of the past 90 days and the outlook for the period ahead. In it, I draw upon investing principles articulated by the legendary Barton Biggs, who passed away earlier this year.
2012-10-09 High-Dividend Yield Strategy under the Microscope by Michael Nairne (Article)
High-dividend yield stocks have become the favorite recommendation of a host of advisors, but an undue focus on income alone obscures the irreducible fact that long-term investment success is based on the total return of a portfolio including both income and capital growth. This raises two questions. How has the total return of a high-dividend yield strategy fared relative to the market? How does its total-return performance compare to the returns of other possible stock-selection strategies?
2012-10-09 LinkedIn Endorsements: A New Feature to Bug Advisors by Wendy J. Cook (Article)
I've long been a fan of advisors using LinkedIn judiciously to network among colleagues, clients and potential resource providers (such as yours truly). But late last month LinkedIn released a shiny new enhancement - Endorsements - that is not the 'feature' they claimed it was, at least not for the advisor community.
2012-10-09 How to Manage an Overextended Team by Beverly Flaxington (Article)
I work for a large financial firm. I am continually frustrated by the fact that we generate lots of good ideas and talk about what we need to do, but rarely get things done. Many things stay open-ended, or up for discussion. I am part of the problem because I am so busy, as is my team. How can I be more of a doer and less of a talker?
2012-10-02 Confronting the Unemployment Crisis by Robert Huebscher (Article)
Policymakers seeking a path to economic recovery must first answer one crucial question: Is our persistently high unemployment structural or cyclical? If it's cyclical, then monetary and fiscal measures designed to boost consumer spending will restore the US to full employment in due course. But if we face a structural problem, then quick fixes won't work until we correct deeper imbalances that have left 12.5 million Americans without jobs.
2012-10-02 Woody Brock on Why to Own Stocks Now by Robert Huebscher (Article)
Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions and the author of American Gridlock. In a recent talk, he explained why investors should own stocks - particularly those with stable dividends - and why bonds are very risky in today's environment. This is the transcript; a video of this talk is also available.
2012-10-02 Connection is Key When it Comes to Women by Tony DiLeonardi and Barbara Kay (Article)
Men and women connect differently. Male relationships tend to be task-focused and independent, whereas women are relationship-focused and cooperative. For advisors seeking to build rapport with female clients, it's vital to understand their approach, and conduct yourself appropriately to win their trust.
2012-09-25 Investing in a Resource-Constrained World by Richard Vodra, JD, CFP (Article)
The potential consequences of stagnant oil production and climate change for society are written about frequently, but here is a simpler question that is important to our community: How are these and related facts likely to affect investment returns going forward? How can we even frame such questions usefully?
2012-09-25 How to Build a Portfolio by Adams Jared Apt (Article)
This is the first of a set of three articles intended for the educated layman, in which I will combine the core ideas presented in my preceding articles into a comprehensive description of how to put together a portfolio. In this one, I'll explain what is often called Modern Portfolio Theory.
2012-09-18 Campaign Rhetoric and Our Energy Future by Michael Edesess (Article)
At their respective conventions, both President Obama and Mitt Romney spoke to a centrally important topic for America and the world: energy. Their positions ? political posturing aside ? are broadly similar. But rather than a coherent, sustainable vision for the energy future of the United States, both men's rhetoric reflected the usual exercise in political base-touching, apple pie-polishing, and third-rail avoidance. And two important, perhaps crucial, pieces of the energy puzzle were hardly mentioned at all.
2012-09-18 Your Clients' Toughest Retirement Decision by Wade Pfau (Article)
Want to trigger an impassioned debate? Ask a group of advisors about the choice between systematic withdrawal plans and single-premium immediate annuities. Fee-only advisors are loath to cede control of client assets to an insurance company that might someday default, while annuity advocates fire back that only their strategies provide a lifetime income guarantee.
2012-09-18 Selling Your Practice ? After Negotiations Fall Apart by Beverly Flaxington (Article)
I was hoping to sell my firm to another financial advisor. When the time came to close the deal, he turned into a different person, trying to negotiate for all kinds of things and generally being very nasty. The deal fell apart. How do I find a suitable buyer who will treat me with respect and negotiate fairly?
2012-09-11 A Lesson in Damage Control (Ron Rhoades, This One's for You) by Wendy J. Cook (Article)
Mistakes. Bigger or smaller, sooner or later, we all make them. With meteoric speed, one goof-up can leave a gaping crater in a firm's otherwise stellar reputation. Ron Rhoades provided a case in point when he recently withdrew from becoming the next NAPFA chairperson after becoming entangled in a minor regulatory problem. Ron's actions provide a lesson for dealing with a situation where your judgment lapsed and the damage is done.
2012-09-11 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 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.
2012-09-04 Overcoming Client Inertia by Beverly Flaxington (Article)
I have clients with whom I have worked for some time, and they just don't make the decisions they need to. They will say they have a referral for me, for example, but never give me a name or contact info. They will say they are going to come to a client event, but then not bother to show up. What can I do to make them more active and responsive?
2012-08-28 Who?s Fooling Whom? by Michael Lewitt (Article)
Equity markets are exhibiting a remarkable degree of complacency. The VIX is currently at extremely low levels and it can maintain those levels for a long period of time. The worse things get in terms of the economic data, the higher the market goes on hopes of central bank stimulus. At this rate, the Dow will peak just as the world is coming to an end!
2012-08-21 The Profession's Faulty Assumptions: A Top Ten List by Bob Veres (Article)
In the financial planning profession, we make a lot of assumptions about the world in order to run spreadsheet models, retirement projections and sufficiency analyses, and generally determine how much a client should save and invest for the future. But many of the industry-standard inputs into our models are (how can I say this delicately?) garbage. Here are my top ten garbage inputs, with an explanation of how we might possibly improve on them.
2012-08-21 Secrets of a Great PowerPoint Presentation by Wade Pfau (Article)
Achieving your goals as a public speaker is never easy, and modern tools - especially Microsoft PowerPoint - can hinder as much as help, if used improperly. But a carefully prepared presentation with a clear underlying message, memorable visuals and a focus on making the message useful for the audience can strongly differentiate your speech and help you make a lasting impression.
2012-08-21 Hype and Reality in the Muni Bond Market by Hildy Richelson (Article)
Meredith Whitney's prediction last year of billions of dollars in municipal bond defaults stirred investors' fears. Earlier this summer, bankruptcies in three California cities reignited them, and last week a Federal Reserve study revealed that muni bonds have defaulted at a higher rate than previously reported. But no crisis has befallen the municipal bond market, and it is highly unlikely that one ever will.
2012-08-21 Is Too Much Vacation Bad for Your Business? by Dan Richards (Article)
Advisors face two big traps when it comes to vacations. The one that gets the most attention is not taking enough time off and burning out as a result; this is especially common in the early years of building a business. But there's a second, more subtle trap: Taking so much vacation that you compromise your ability to grow your business.
2012-08-14 How Safe are Annuities? by Joe Tomlinson (Article)
For many advisors, the possibility that insurance companies will run into financial difficulties makes recommending annuities a nonstarter. But annuities are the best way to mitigate longevity risk, which may pose a greater danger, and advisors can take steps to help protect clients from insurers' financial problems.
2012-08-14 An Imperfect Storm by Janus (Article)
Changing regulations have drained liquidity from the corporate bond markets, as growth in bond ETFs is distorting a shrinking market. These converging forces are likely to result in a more volatile environment, but we see opportunity for managers able to understand the fundamental risk and reward.
2012-08-14 How One Advisor Adds Three Clients a Month by Dan Richards (Article)
I've had several emails in response to last week's article on how investors are using LinkedIn to help select advisors. Indeed, one advisor told me of a systematic approach that is consistently yielding new business. Let's look at how this advisor is capitalizing on his online presence to attract an average of three new clients per month.
2012-08-14 Blind Faith by Michael Lewitt (Article)
Central banks are facing political and practical obstacles that will render it very difficult for them to deliver anything more than anodyne words and actions as summer moves into the always dangerous August holiday season. IPhones should be kept on alert at the beach through Labor Day.
2012-08-14 Advisor Website Calls to Action: Going the Extra Mile by Wendy J. Cook (Article)
To quote Ricky Minor's clever book title, "There's No Traffic on the Extra Mile." One way you can go that extra mile is by using your website as more than just a calling card, incorporating creative calls to action to more proactively invite site visitors to be in touch with you.
2012-08-14 Letters to the Editor - Bob Veres on AUM-based Fees by Various (Article)
Several readers respond to Bob Veres' article, The Alternative to AUM-Based Fees: The Total Profitability Retainer Formula, which appeared on July 31.
2012-08-07 Why Hedge Funds Destroy Investor Wealth by Michael Edesess (Article)
If all the money that's ever been invested in hedge funds had been put in Treasury bills instead, the results would have been twice as good. So claims Simon Lack - a former JPMorgan executive whose job was once to help steer billions into hedge funds - in his recent book, The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to Be True. You'd think hedge fund advocates would immediately pounce on this and refute it; but it's irrefutable.
2012-08-07 Robert Shiller on the Social Benefits of Finance by Laurence B. Siegel (Article)
It's a bad sign for the finance industry that one of its leading minds - the distinguished Yale economist Robert Shiller - has felt compelled to write a book in order to defend the idea that finance itself is a constructive pursuit, worthwhile to modern society. Have things really gotten that bad?
2012-08-07 The Game-Changer for Attracting Affluent Clients by Dan Richards (Article)
Until now I've been a skeptic on the value of social media for attracting affluent clients. You can use Facebook and Twitter to connect with investors in their 20's and 30's - but not the older, more prosperous clients advisors target. But last week, three separate conversations changed my mind on this.
2012-07-31 The False Promise of Gold as an Inflation Hedge by Michael Edesess (Article)
If you were a time traveler, hopping from one point in history 2,000 years forward or back, you'd best carry with you - if your time machine will allow it - a small stash of gold. Gold has been an effective hedge against inflation over the very, very long term. But that's about all it's good for. The other common reasons for owning gold - in particular, to use as a short-term or even a long-term hedge against inflation - are baseless.
2012-07-31 Expect Headwinds for Stocks If Hoisington is Right about Bonds by Keith C. Goddard, CFA (Article)
Might today's historically low interest rates in the U.S. persist for years to come? The latest Quarterly Review and Outlook from Hoisington Investment Management forces readers to consider that possibility, refuting the reversion-to-the-mean mindset that causes many people to expect higher interest rates in the not-too-distant future. If the Hoisington model for the economy turns out to be right, the implications for the stock market are unfavorable.
2012-07-24 High Yield and Low Risk: Finding the Best Closed-End Funds by Geoff Considine (Article)
Yield-starved investors have ventured into exotic - and often risky - assets, including hedge funds, non-traded REITs and private placements. But an asset class that has been around since 1893 offers a compelling combination of low risk and high income. A carefully selected portfolio of closed-end funds (CEFs) will yield 8% with less volatility than the S&P 500.
2012-07-24 Deciphering the Annuity Puzzle: Practical Guidance for Advisors by Wade Pfau (Article)
Economists love to try to explain why people may act irrationally; such 'puzzles' inspire numerous researchers to probe their possible solutions. The annuity puzzle, which ponders why retirees do not buy more annuities, is a classic example. After describing the basic theory behind why this is so puzzling, I will address a variety of potential explanations, and then turn to the practical guidance the puzzle offers for advisors and their clients.
2012-07-24 The Ultimate Death Cross - False Harbinger of Doom by Georg Vrba, P.E. (Article)
Skeptics and devotees of technical analysis took notice last week when Albert Edwards, the closely followed investment strategist at Societe Generale, warned the S&P 500 was 'on the verge of an ultimate death cross,' foretelling imminent major losses for the stock market. Edwards' sense of doom is misguided. An ultimate death cross is mathematically impossible unless the S&P were to suffer an immediate and precipitous decline. Moreover, the signal would provide a positive outlook, if it were to occur.
2012-07-17 Should You Wait to Buy a SPIA? by Joe Tomlinson (Article)
Advisors may be reluctant to recommend single-premium immediate annuities (SPIAs) with interest rates currently so low. It may be better to wait for rates to rise, which will bring more attractive SPIA pricing. But that leaves the question about how long we will wait for better pricing. In this article, I'll show how the decision to delay can turn out well or poorly, depending on the timing and size of rate increases.
2012-07-17 Can you Beat SPIAs with Long-Term Bonds? by Michael Edesess (Article)
While single-premium income annuities (SPIAs) guarantee a specific income as long as the purchaser lives, their rates of return generally compare unfavorably with long-term bonds over normal life expectancies. This makes SPIAs look like the inferior investment, notwithstanding their value as longevity insurance. But considering the low level of interest rates and the potential for future volatility, SPIAs are still a good choice for many retirees.
2012-07-17 Breaking Bad by Michael Lewitt (Article)
With our largest business and government institutions committing every conceivable act of legal or moral anomie, we have every right to ask who is going to protect the rest of us from those who have been entrusted with so much power and influence. The institutions that were supposed to be the lifeblood of our economy are the same institutions that inflicted the greatest harm on society. When the family has to be protected from the man who is supposed to protect the family, the family is in serious trouble.
2012-07-17 The Information Sources that Impress Clients by Dan Richards (Article)
Sending clients a regular email with a link to an article or video from a credible source has a consistently positive impact. Not only does this keep you top-of-mind, but it reminds clients of the ongoing reading and research you're doing on their behalf. But it works only if you use a source that enhances your credibility.
2012-07-17 Happy Clients - But No Referrals? by Beverly Flaxington (Article)
We have very satisfied clients. Our last client satisfaction survey showed a 98% 'high satisfaction' rate. However, we don't get many referrals. It's frustrating because we do everything to serve our clients well - and we ask for referrals. Why don't happy clients refer to us?
2012-07-10 Letters to the Editor by Various (Article)
Several readers respond to Bob Veres' article, The Profession's Faulty Assumptions: A Top Ten List, which appeared last week. Also, a reader responds to Joe Tomlinson's article, How Safe are Annuities?, which appeared on August 14, and a reader responds to Beverly Flaxington's column, Dealing with Gossip in a Small Firm, which appeared last week.
2012-07-10 Why Are Advisory Fees Lower Than They Have To Be? by Bob Veres (Article)
How much should you charge for your services? Is there any way to objectively calculate a fair price? Doctors, lawyers and accountants all charge relatively similar prices for their services. Why does the financial planning profession have fees that are all over the map?
2012-07-10 A Mid-Year Client Letter: Wisdom from Three Wall Street Veterans by Dan Richards (Article)
Here is a template for a letter to serve as a starting point for advisors looking to send clients an overview of the past 90 days and the outlook for the period ahead.
2012-07-10 Are You Ever Asking for It: Client Referrals by Wendy J. Cook (Article)
Are you in the habit of routinely asking for client referrals? If so, fantastic. Consider this a pep talk. If not, well, it's still a pep talk. But it's also a call to action.
2012-07-10 Insights into the First Half of 2012 by Ron Surz (Article)
U.S. stock markets at mid-year have earned a respectable 9.5% return. A euphoric first quarter 12.6% gain gave way to a 2.8% minor setback in the second quarter. Foreign markets have not fared as well, earning only 3.4% over the first half of the year. The graph below provides the details, and adds a look at gold's performance.
2012-07-03 Bond Funds: You Get What You Don't Pay For by Michael Edesess (Article)
Innumerable studies have shown that it's well-nigh impossible to beat the averages consistently investing in equity funds. But what about bonds? Bonds, after all, have more structure - perhaps there are ways an expert fund manager could exploit that structure and gain an edge over other investors. Is it possible to predict how well a bond fund will perform relative to other funds?
2012-07-03 The Value of Planning by Bob Veres (Article)
How much do you charge for your services? When you look hard at the value you provide, the answer may be: 'not enough.'
2012-07-03 The Behavior that Destroys Client Confidence by Dan Richards (Article)
A highly successful business owner recently told me what he thought about his financial advisor. On balance, he's happy with the job his advisor is doing, except for one small thing.
2012-06-26 Ensuring That Clients Feel Valued by Dan Richards (Article)
Ask advisors whether they value their clients - especially top clients - and care about their future success, and you'll get a funny look wondering what you've been smoking. The answer is so obvious that the question isn't worth asking. But ask clients the corresponding question and the response is often quite different.
2012-06-26 Ask Bev: Lessons from the Human Side by Beverly Flaxington (Article)
Here is the initial installment in what we hope will become a regular column from Beverly Flaxington, a practice management consultant. She answers questions from advisors facing human resource issues.
2012-06-19 Retirement Floors and Implications for Evensky's Cash-Reserve Strategy by Wade Pfau (Article)
Does sensible retirement planning call for funding basic needs with less volatile assets and investing more aggressively for aspirational goals? Or, with client goals clearly defined and prioritized, does sensible planning call for a total returns approach? Multiple schools of thought have emerged, but there is not yet any consensus about what constitutes a proper retirement income floor. These lingering unresolved disagreements reinforce the benefits of Harold Evensky?s and Deena Katz? popular strategy.
2012-06-19 Letters to the Editor by Various (Article)
Readers response to Richard Vodra's article, Energy and the Wealth of Nations, which appeared on June 5 and to John Hussman's commentary, The Heart of the Matter, which appeared on June 11.
2012-06-12 Investing for Retirement: SPIAs, TIPS, Stocks and the 4% Rule by Joe Tomlinson (Article)
Relying only on stocks and bonds to fund a decumulation strategy may no longer be feasible, given today's low interest rate environment and the prospect of muted returns from the equities market. Investors should instead consider using single-premium immediate annuities (SPIAs) to fund at least a portion of retirement needs.
2012-06-12 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.
2012-06-12 The Problems with Trying to Benchmark Unconstrained Portfolios by Ken Solow (Article)
Benchmarking unconstrained, 'go-anywhere' managers is difficult. Common methods to determine an appropriate benchmark - such as an ex-post regression of how the fund was invested - can obscure the actions of the manager. Is the only solution to simply select an arbitrary benchmark and proceed accordingly?
2012-06-12 Kingdoms of the Blind by Michael Lewitt (Article)
Recent events offer a rare illustration of the combined effects of the failure of monetary, fiscal and regulatory policy to coordinate a meaningful response. Rising budget deficits, record low interest rates, J.P. Morgan's proprietary trading blunder and the botched Facebook IPO process speak to abject policy failures in virtually every aspect of finance. It's not even a question of not having learned our lessons; our collective policy intelligence actually appears to have diminished.
2012-06-05 Finding the Best Dividend Fund by Geoff Considine (Article)
Assets are flowing into dividend-stock funds. But many experts are warning that those investors are setting themselves up for significant losses. Using an objective methodology that assesses tradeoff between yield and risk, we can determine those funds that investors should prefer - and a few they should avoid.
2012-06-05 Energy and the Wealth of Nations by Richard Vodra, JD, CFP (Article)
It is time for a new and different approach to understanding the economy, according to ecologist Charles Hall and economist Kent Klitgaard, who together are pioneering the discipline of biophysical economics. They advocate a novel methodology that properly accounts for the realities of global energy supplies and consumption.
2012-06-05 The Father of Efficient Markets: Is Warren Buffett Smart or Lucky? by Dan Richards (Article)
Eugene Fama is generally regarded the father of modern finance. His research has expanded upon the capital asset pricing model to identify the value and small-capitalization contributions to risk. Dan Richards spoke with him on May 1, the day before his guest talk at the CFA Institute annual meeting. This is the transcript of the interview.
2012-06-05 Letters to the Editor by Various (Article)
A number of readers respond to our article, Can Krugman Fix Our Economy?, which appeared last week.
2012-05-29 The Bargains in Europe's Great Oversell by Bob Veres (Article)
When was the last time we saw negative headlines drive valuations as low as they have in Europe? Evermore's David Marcus, who succeeded Michael Price as manager of the Mutual European Fund, says this period of obsession with Greek debt, bank restructuring and single-digit P/Es may be known as The Great Oversell.
2012-05-29 Letters to the Editor - An Attack on Paul Krugman by Various (Article)
Two readers respond to Michael Edesess' article, An Attack on Paul Krugman, which appeared on May 15.
2012-05-22 Life-cycle Finance and the Dimensional Managed DC® Pension by Wade Pfau (Article)
Pension plans are like cars, according to Nobel laureate Robert Merton. People want a car they can drive and a pension that will maintain their standard of living in retirement; they do not care about what goes on under the hood. Advisors, however, must care. So when a new pension-like option hits the market, as DFA's recently did, it's important to go beyond simply kicking the tires and carefully examine how it works as a retirement-saving vehicle.
2012-05-15 An Attack on Paul Krugman by Michael Edesess (Article)
A foundational principle of modern economics is that the creation of credit leads to economic growth. That precept underlies need for quantitative easing, and it is central to the question of what role monetary policy can and should play in stimulating a faster recovery from the Great Recession. It is also the subject of a debate between one of the world's most prominent economic scholars, Paul Krugman, and a feisty Australian economist, Steve Keen.
2012-05-15 Dividends: A Timeless Component of Equity Return by Loomis Sayles & Company, L.P. (Article)
With interest rates at historic lows and many dividend-paying stocks boasting yields comparable to or higher than US Treasurys, it is no wonder that dividends have recently been at the forefront of many investors' minds. But dividends have a long history as a significant component of total return, and today's buzz is just the most recent chapter.
2012-05-15 Optimizing Social Security Benefits by Wade Pfau (Article)
My dissertation was about Social Security reform, so I've read more of the Social Security Handbook than any human being should be forced to digest. Despite this background, William Reichenstein and William Meyer's new book, Social Security Strategies: How to Optimize Benefits, taught me a lot about how to strategize to get the most out of Social Security.
2012-05-15 Ponzi's Children by Michael Lewitt (Article)
Europe, whose economic condition is nothing less than terminal, is about to receive what physicians refer to as a 'zetz' of morphine in the form of M. Hollande. A 'zetz' is the final dose that doctors give to dying patients to hasten their passage to the afterlife. In Europe's case, however, the medicine is not going to be painless, and its administration is not based on mercy but on resentment and stupidity.
2012-05-08 Richard Bernstein: US Assets will Outperform over the Next Decade by Robert Huebscher (Article)
Prior to founding the firm that now bears his name, Richard Bernstein was the chief investment strategist at Merrill Lynch & Co. In this interview, he discusses why he expects US assets - both equities and fixed income - to be the outperformers among global markets over the next decade.
2012-05-08 Q2 Outlook: "Sell in May" May Not Work This Year by OppenheimerFunds (Article)
Chief Economist Jerry Webman explains why he believes the U.S. economic recovery is real and CIO Art Steinmetz talks about how stocks are as cheap compared to bonds as they have been in decades.
2012-05-08 Mohamed El-Erian and David McWilliams: The Key to Resolving Europe's Crisis by Robert Huebscher (Article)
Dealing with a crisis requires three things, according to Jack Welch, General Electric's former CEO. Define your reality - not as you would like it to be, but as it is. Do something about it. Then, third, acknowledge that the crisis wasn't half as difficult as you thought it was. Germany is the key player in Europe's crisis today, and it is still struggling to accurately define its reality.
2012-05-08 Letter to the Editor by Various (Article)
A reader responds to Bob Veres' article, How to Respond to the Bachus-McCarthy Bill, which appeared last week.
2012-05-01 Q2 Outlook: by OppenheimerFunds (Article)
Chief Economist Jerry Webman explains why he believes the U.S. economic recovery is real and CIO Art Steinmetz talks about how stocks are as cheap compared to bonds as they have been in decades.
2012-04-24 65+5+Dividends: The case for quality dividend stocks in the first five years of retirement by Legg Mason ClearBridge Advisors (Article)
Retirees are living longer than ever before, and for many, outliving their money is a real concern. A good reason to consider quality large-cap dividend stocks in the early years of retirement - which have historically offered higher returns than fixed income with lower volatility than equities overall.
2012-04-24 Bruce Greenwald on Structural Imbalances in the Economy by Eric Uhlfelder (Article)
Bruce Greenwald likes to say that he is constituted to disagree with everybody about everything, and he was true to his word at the recent Hyman P. Minksy Conference in New York. Taking immediate exception with the virtually unanimous characterization of the economic crisis as a balance-sheet recession, Greenwald, a professor of finance at Columbia University, argued that, far from being unusual, balance-sheet recessions can in fact be found at the heart of almost all business cycles.
2012-04-24 Why a 60/40 Portfolio isn?t Diversified by Alex Shahidi (Article)
Maintaining a balanced portfolio is critical, especially when predictions of growth and inflation vary as widely as they do today. Investors are always better off spreading risk than aggressively betting on one economic outcome, and that's especially true when the range of possible economic outcomes is so wide.
2012-04-24 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 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 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.
2012-04-17 The Unemployment Rate: A Coincident Recession Indicator by Georg Vrba, P.E. and Dwaine van Vuuren (Article)
For what is considered to be a lagging indicator of the economy, the unemployment rate provides surprisingly good signals for the beginnings and ends of recessions. We have developed a model that uses unemployment figures to produce these signals and to determine the probability of when a recession may start.
2012-04-10 Allocating to Real Assets: Why Diversification Matters by Cohen & Steers (Article)
One way to extend the long-term purchasing power of a traditional stock and bond portfolio is through an allocation to real assets. But individually, categories like commodities, natural resource equities and REITs can be volatile. Cohen & Steers meets the challenge with a focus on broad asset-class diversification.
2012-04-10 Super Macro - A Fundamental Timing Model by Theodore Wong (Article)
Rather than endure losses in bear markets - as passive investors must - I have shown that a simple trend-following model dramatically improves results, most recently in an Advisor Perspectives article last month. Now it's time to extend my approach by showing how this methodology can be applied to fundamental indicators to further improve performance.
2012-04-10 Advisor Networking for Fun and Profit by Wendy J. Cook (Article)
Over the years, I've seen what works well and what doesn't for advisors. I've noticed that even the best-intentioned, highest-minded advisor usually struggles if he or she operates in a vacuum.
2012-04-03 Fewer, Richer, Greener: Why Jeremy Grantham is (Partly) Wrong by Laurence B. Siegel (Article)
Is the human experience getting better or worse? This is a big question investors are rarely asked to confront, yet its answer has profound consequences for market returns.
2012-04-03 Senior Loans Attractively Priced Relative to High Yield by OppenheimerFunds, Inc. (Article)
By restoring confidence in the global financial system, the European Central Bank's Long Term Refinancing Operation has allowed global bond investors to participate in attractive opportunities around the world.
2012-04-03 Gassed Up but No Place to Go by Geoff Considine, PhD (Article)
When a great investor points to a vastly underpriced asset, a natural first reaction is to devise the best strategy for buying it. Sometimes, however, the impediments to that strategy prove too great, something anyone will soon discover who listens to Jeremy Grantham's assertion that 'everyone who has a brain should be thinking of how to make money' long-term on natural gas.
2012-04-03 A Q1 Letter to Clients: Bernanke, Buffett and Siegel on the Prospects Ahead by Dan Richards (Article)
Here is a template for a letter to serve as a starting point for advisors looking to send clients a summary of what's happened in the past 90 days and the outlook for the period ahead.
2012-04-03 Typically Boyish and Socially Unacceptable by Robert P. Seawright (Article)
When I was a teenager, the girls had a phrase they used often to describe certain members of the opposite sex: "typically boyish and socially irresponsible." Sadly, the two were often synonymous. Sadder still, the same can apply to married men and their finances, particularly as they age.
2012-04-03 The Easy Money Saloon by Michael Lewitt (Article)
When two of the world's soundest central banks (Israel and Switzerland) start investing their reserves in stocks (the Bank of Israel is run by the highly respected Stanley Fischer for God's sake!), one has to wonder what the world is coming to. Apparently the global saloon is expanding its boundaries. No doubt we will soon hear the ECB is merging with the London Stock Exchange.
2012-03-27 The Top Three Myths about Women Investors by Lisa Kueng (Article)
Successful marketing requires an understanding of your target market. Too often, however, advisors are misled by outdated industry ideas and strategies that have shifted over time. Advisors who target women investors should avoid myth-based errors that others have made.
2012-03-27 Questions of Character by Michael Lewitt (Article)
As a long-time investor in leveraged companies, the character of management has long informed my decisions of where to direct capital. There is no margin of safety when you invest in a company managed by dishonest or reckless managers, or a management team that has a history of placing its own interests before those of its shareholders or creditors. The same is true of choosing an investment manager.
2012-03-20 Bob Rodriguez on the Dangers in Today's Markets by Robert Huebscher (Article)
Bob Rodriguez is the managing partner and chief executive officer of Los Angeles-based First Pacific Advisors. In this interview, he discusses how the challenges faced by the US economy will impact the capital markets.
2012-03-20 The Wages of Denial by Michael Lewitt (Article)
Europe is insolvent, and hopelessly so. Her procurer - the European Central Bank (ECB) - can front her some money for a while, but in the end she is either going to have to repay him or suffer a very rough consequence. In the meantime, however, she can continue to entertain her customers, in this case those willing to extend her credit in one form or another. Sooner rather than later, however, these creditors are going to grow tired of her tricks and turn their attention otherwise. At that point, she will be left to deal with the ECB because nobody else will have her.
2012-03-20 A Look Back at the Performance of the Holy Grail by Theodore Wong (Article)
Back-tested results often look good on paper because stellar performance could have come from curve-fitting. If that were the case, then my 'Holy Grail' model would not have withstood the test of time. But in the 32 months that have passed since its publication, investors who heeded its advice would have outperformed the market on a risk-adjusted basis.
2012-03-13 How Do Spending Needs Evolve During Retirement? by Wade Pfau (Article)
Most people's spending patterns change over the course of retirement - expenses look very different at 90 than they do at 65. Yet most research on retirement withdrawal rates relies on constant inflation-adjusted withdrawals to develop a client's forward-looking budget. Such an unrealistic, one-size-fits-all approach can be disastrous if a client inadvertently retires with insufficient savings. Is there a better way?
2012-03-13 Europe's ?Back-door QE?: Good News for Global Bond Investors by OppenheimerFunds, Inc. (Article)
By restoring confidence in the global financial system, the European Central Bank's Long Term Refinancing Operation has allowed global bond investors to participate in attractive opportunities around the world.
2012-03-13 Europe Needs a Good Crisis by Michael Edesess (Article)
When it comes to economies in general and financial crises in particular, it's remarkable how little we actually understand. While global financial actors struggle to restructure Greece's debt and to avoid contagion throughout Europe's periphery, we should recall the lessons of the Asian-Russian crisis 15 years ago. As the writings of Joseph Stiglitz and Martin Wolf remind us - and those events illustrate - crises are part of an evolutionary process, and the afflicted economies often emerge with surprising vigor.
2012-03-13 Breakthrough Success Lies Outside your Comfort Zone by Dan Richards (Article)
Standout success is rare in every industry, including ours. That is the reality - by definition most companies are average performers. To achieve breakthrough results, you need to be willing to change your business model, as two top business strategists advocate.
2012-03-13 Concentrated Equity Triple Play Higher Returns, Lower Risk, Lower Correlations by C. Thomas Howard, Ph.D. (Article)
Concentrating a portfolio on a few choice assets dramatically increases an investor's chance of superior performance. Nonetheless, most advisors and investors shun portfolio concentration as unacceptably risky. To a great extent, this is driven by the myth that adequate diversification is impossible unless one holds many stocks - a myth I will debunk.
2012-03-13 The Gutenberg Economy by Michael Lewitt (Article)
As commentators near and far speculate on what 2012 will bring to the global economy and markets, there is little question that one factor will be decisive: the central banks' printing presses. Both the Federal Reserve and the European Central Bank (ECB) will keep printing dollars and euros around the clock until their presses run out of ink.
2012-03-13 Investor Communications: Are You Upbeat, or Upfront? by Wendy J. Cook (Article)
When discussing scary markets with your clients, how do you combine the upbeat inspiration they may want with the upfront, honest information they may need to hear? Striking the right balance makes all the difference.
2012-03-06 New Tools to Manage Longevity Risk by Joe Tomlinson (Article)
If you could guarantee yourself an inflation-protected stream of income for the rest of your life, would you take it? For many retirees, the answer is yes, and that is rightfully sparking new interest in deferred-income annuities (DIAs). By combining a DIA with a TIPS ladder or more aggressive equity-centric investments, retirees can obtain inflation-protected lifetime income. But they will face important tradeoffs, as I will explain.
2012-03-06 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.
2012-03-06 Learn Long and Prosper by Mariko Gordon (Article)
Business and investing share many things in common. And as my recent talk to a group of MBA students reminded me, one of them is this: There's a downside to experience.
2012-02-28 Woody Brock on Healthcare Reform and Trade Relations with China by Robert Huebscher (Article)
Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions, an economic research and consulting service. In the second part of this two-part interview, he discusses his recently published book, American Gridlock, and focuses on how to fix two of our nation's most pressing problems: the crisis in health care - made worse by ObamaCare - and our trade relations with China.
2012-02-21 Woody Brock on Solving America's Fiscal Problems by Robert Huebscher (Article)
Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions, an economic research and consulting service. In this interview, he discusses his recently published book, American Gridlock, and how America can grow its economy through 'good' deficit spending.
2012-02-21 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.
2012-02-21 A Simple Email to Save a Client by Dan Richards (Article)
A recent conversation got me thinking. Losing a client is a painful experience -even more so when you realize that something as simple as an email could have avoided that outcome.
2012-02-14 ?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 How to Measure Customer Loyalty by Dan Richards (Article)
Perhaps more than in any industry, advisors know the importance of customer loyalty and the role it plays in client retention and referral generation. But few advisors have ever tried to systematically measure the client loyalty in their practice. Here's a way to do that.
2012-02-14 The Dividend Yield Love Affair by Michael Nairne (Article)
Employee share-based compensation is now a significant expense deduction for public companies and hence, is already accounted for on the financial statements. Concerns that options-related stock issuance nullifies the impact of stock buybacks are accordingly overstated. This bolsters the view that you need to look at stock buybacks as an additional form of cash remittance to shareholders and not simply at dividends.
2012-02-14 Recession: Just How Much Warning is Useful Anyway? by Dwaine van Vuuren (Article)
In December 2011, ECRI dialled down the urgency of the timing of their call to 'within six months.' That raised the question of just how much recession warning is useful when it comes to forecasting equity market performance.
2012-02-14 Letters to the Editor by Various (Article)
A reader responds to Larry Siegel's article, Jeremy Siegel, Rob Arnott and Other Experts Forecast Equity Returns, and another reader responds to Joe Tomlinson's article, An Innovative Solution to Retirement Income, both of which appeared last week.
2012-02-07 An Innovative Solution to Retirement Income by Joe Tomlinson (Article)
Generating lifetime income is the ultimate goal of retirement planning. Why is it, then, that two of the most compelling mechanisms for doing just that are shunned by the investing public, despite overwhelming support from experts? I'm talking about immediate annuities and delayed claiming of Social Security, both of which are remarkably effective at securing retirement needs.
2012-02-07 A Conversation that Tripled Referrals by Dan Richards (Article)
Last fall, a veteran advisor contacted his retired clients with the suggestion that they meet to discuss one simple goal - to lay out detailed monthly cash flow forecasts matching funds coming in with cash going out. Not only did this exercise benefit those clients, he was able to leverage his efforts to triple his referrals.
2012-02-07 Neel Kashkari on PIMCO's Equity Strategy by John Heins (Article)
Bond titan PIMCO has been methodically building its equity-investing expertise. Here the architect of that effort, Neel Kashkari, and his first major hires describe their strategy and how they're uncovering value in today's market.
2012-02-07 Letters to the Editor by Various (Article)
Readers respond to past articles, including Robert Huebscher's article, The Misreading of Reinhart and Rogoff, our interview with Lacy Hunt, and Wade Pfau's article, Safe Withdrawal Rates: A Do-It-Yourself Approach.
2012-01-31 Lacy Hunt on the Roadblock to Recovery by Robert Huebscher (Article)
'The fundamental key to prosperity is not governmental financial transactions, or even private sector financial transactions,' according to Lacy Hunt, the widely respected economist at Hoisington Investment Management, with whom we spoke last week. 'The key to prosperity is the hard work and creativity of our individuals in businesses.'
2012-01-31 Barry Eichengreen on the End of the Dollar by Dan Richards (Article)
Barry Eichengreen is a professor of economics and political science at the University of California, Berkeley and a former senior advisor to the International Monetary Fund. In this interview, he discusses the future of the dollar as the reserve currency and the role of the IMF in the Eurozone crisis. This is the transcript of the interview.
2012-01-31 A 13-Point Plan for Top Clients by Dan Richards (Article)
Time is our scarcest currency. We must be cautious about taking on significant new commitments, and the only exception is when there's absolutely clear cut evidence of a substantial return. That's why a simple way to get your top clients to look forward to your meetings is incredibly important.
2012-01-24 Michael Lewis on the True Depth of the Crisis in Europe by Larry Siegel (Article)
Michael Lewis is a financial writer and author, most recently of Boomerang: Travels in the New Third World, in which he reported on the European debt crisis from several of the affected countries. In this interview, he discusses a range of topics, including the future of Wall Street and the challenges of great financial writing.
2012-01-24 Beyond Reinhart and Rogoff by Robert Huebscher (Article)
My article two weeks ago, The Misreading of Reinhart and Rogoff, elicited a number of challenges, both from those who argued that excessive debt imperils our economic growth and from those who claimed that my proposed solution was unworkable. Among those challengers was Lacy Hunt, who raised several valid concerns. I will explain why I disagree with Hunt and others, and why the dollar's position as the reserve currency increases our borrowing capacity. But our ability to borrow cannot be a license to spend unwisely, and I will conclude by expanding on the policy choices the US must pursue.
2012-01-24 Letters to the Editor by Various (Article)
Two readers respond to Robert Huebscher's article, The Misreading of Reinhart and Rogoff, which appeared on January 10, and a reader responds to Matthew Jarvis' letter to the Editor last week, which was in response to Wade Pfau's article, GLWBs: Retiree Protection or Money Illusion?, which appeared on January 10.
2012-01-17 Martin Wolf on the Eurozone and Beyond by Robert Huebscher (Article)
Martin Wolf is widely considered to be one of the world's most influential writers on economics. Since joining the Financial Times in 1987, where he is chief economics commentator, he has received numerous awards for excellence in financial journalism. In this interview, he discusses the Eurozone crisis and prospects for global economic growth.
2012-01-17 GMO: Something's Fishy in China by Robert Huebscher (Article)
A wide gulf separates the two most prominent views regarding China's future. Faced with slowing economic growth, one side says its leaders will deftly navigate a soft landing, while the other claims it will face an implosion similar to those that befell Japan 20 years ago and the US in 2008. Count GMO, a firm that has built its reputation on its ability to identify a bubble about to pop, in the latter camp.
2012-01-17 A Nobel Laureate?s View on the US A Debt Problem, but an Unemployment Crisis by Dan Richards (Article)
Peter Diamond is a professor emeritus at MIT and the winner of the 2010 Nobel Prize in Economics for his work on unemployment and labor market policy. In this interview, he discusses the degree to which US unemployment is a structural problem and whether it can be reduced through fiscal stimulus. This is the transcript of the interview.
2012-01-17 Letters to the Editor - the Misreading of Reinhart and Rogoff by Various (Article)
Many readers responded to Robert Huebscher's article, The Misreading of Reinhart and Rogoff, which appeared last week.
2012-01-10 Safe Withdrawal Rates: A Do-It-Yourself Approach by Wade Pfau (Article)
Reconciling the assumptions that underpin safe withdrawal rate studies with one's own capital market expectations and constraints is a daunting task, since those studies rarely reflect the practical realities of an advisory practice. But new research now provides a generalized framework for determining a safe withdrawal rate for a given retirement duration, acceptable failure probability, asset allocation and capital market expectations. Advisors no longer must be constrained by the assumptions and choices of others.
2012-01-10 Using the ECRI WLI to Flag Recessions by Dwaine van Vuuren (Article)
In September 2011, the ECRI proclaimed a new U.S recession would begin sometime in the coming year. It based its prediction on a host of its own internal long-leading indexes, together with its widely followed weekly leading index (WLI). I want to focus on the proper use of the WLI and examine its accuracy in recession dating, in order to put this current recession call into context.
2012-01-10 2011: The Famine That Followed the Feast That Followed the Fiasco by Ron Surz (Article)
Ron Surz provides his award-winning commentary on the US and global markets.
2012-01-03 How Top Execs Game Retirement Plans by Michael Edesess (Article)
Corporate executives and employee-benefits consultants have engineered a cascade of arcane methods to deprive ordinary retirees of benefits they thought they were promised, in order to fatten corporate profits and the benefit packages of top executives. That is the harsh message of Wall Street Journal reporter Ellen E. Schultz's meticulously-researched book, Retirement Heist.
2012-01-03 Motivating Older Clients by Dan Richards (Article)
Two advisors recently reminded me of the subtle differences it takes to successfully work with older clients. Both provide the highest quality of advice and have regular client events to stay in front of their best clients. Two years ago, however, they were frustrated by the difficulty of getting older clients to attend those events - until each came up with a solution.
2012-01-03 Ghosts of Christmas Past by Michael Lewitt (Article)
While Europe desperately needs the liquidity that the latest bailout scheme provides, nobody should mistake liquidity for solvency and think for a moment that the crisis is over. Much more work is needed to heal the wounds that European policy makers and business leaders have inflicted on their societies since the European Union was formed.
2011-12-20 Do-It-Yourself Equity-Indexed Annuities by Geoff Considine, Ph.D. (Article)
Equity indexed annuities offer retirees a compelling combination of guaranteed income and participation in the market?s upside. But EIAs are exceedingly complex and have been the subject of numerous regulatory challenges. For those who seek a simpler alternative with a comparable return profile, a combination of fixed-income securities and options is viable choice.
2011-12-20 Dennis Gartman Explains His Call on Gold by Robert Huebscher (Article)
Dennis Gartman has been publishing his daily commentary, The Gartman Letter, since 1987. He's been in the news lately because of a call he made last week on the price of gold. In this interview, he discusses the reasons behind that forecast.
2011-12-20 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.
2011-12-13 GLWBs: Retiree Protection or Money Illusion? by Wade Pfau (Article)
One of the most popular variable annuity riders is the guaranteed lifetime withdrawal benefit (GLWB), which offers downside protection through lifetime income, upside potential with step-ups based on market performance, and minimal surrender penalties. But, examining historical data, I have found that those riders carry a cost that will not be readily apparent to retirees: their cash flows rapidly decrease on an inflation-adjusted basis.
2011-12-13 Did Congress Cash In on Insider Stock Trading? by Michael Edesess (Article)
Are members of Congress profiting from insider information on companies their legislation affects, or is something more complicated - and less nefarious - going on? Those who watched the November 13 segment on 60 Minutes that accused members of Congress of insider trading are outraged at these public servants' behavior. But that outrage should be aimed at 60 Minutes itself, along with Peter Schweizer, whose new book, Throw Them All Out, provided the misleading data that was the basis for the broadcast.
2011-12-13 Five Steps to Succeed in the Retirement Market by Dan Richards (Article)
We've all seen the statistics on the number of boomers entering retirement. And every advisor has been told of the opportunities as new retirees shift from accumulating assets to accessing those savings. Tapping into the retirement is too important to be left to chance - you need a plan. Here are the five steps to make this happen.
2011-12-13 Has Financial Planning Made Itself Appealing Only To Risk Takers? by Michael Kitces (Article)
Financial planning advice may be so equity-centric, that people who don't want equity-style investment risk forgo the use of a financial planner altogether, as a recent Journal of Personal Finance article revealed.
2011-12-13 Letter to the Editor by Various (Article)
A reader responds to Michael Edesess' article, The Unspoken Truth about Hedge Funds, which appeared last week.
2011-12-06 The Unspoken Truth about Hedge Funds by Michael Edesess (Article)
The popularity of the endowment model among advisors has been driven by the belief that hedge funds have produced positive risk-adjusted returns. But the basis for that notion has been statistics gleaned from hedge fund databases, and new research shows returns from those databases are even more upwardly biased than previously thought; the supposed alpha never really existed.
2011-12-06 The Quality Conundrum by J.J. Abodeely, CFA, CAIA (Article)
We are witnessing the end of a remarkable and confounding era for stocks, best described by the 'quality conundrum' investors faced for much of the last two years. During that time the combined outperformance of low-quality stocks alongside the underperformance of high-quality stocks was unprecedented in the last 30 years. Now, we are embarking on an era where high-quality stocks will likely significantly outperform low-quality stocks, resolving this conundrum.
2011-11-29 Jeremy Siegel on Why Stocks are 'Extremely Attractive' by Robert Huebscher (Article)
Jeremy Siegel is the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania. His book, Stocks for the Long Run, now in its fourth edition, is widely recognized as one of the best books on investing. We spoke to him last week about equity valuations and the prospects for the economy.
2011-11-22 A Bond-Based Financial Planning Framework by Stan and Hildy Richelson (Article)
Plain vanilla bonds have proven themselves to be the best investments available, and we wholeheartedly agree with Andrew Mellon's prescient late-1920s observation that 'gentlemen prefer bonds.' We believe that ladies should, too.
2011-11-15 Are TIPS Really Safe and Worry-Free? by Wade Pfau (Article)
The Fed's aggressive monetary easing has many investors considering TIPS as a cornerstone of their retirement strategy. While TIPS' unique ability to protect against CPI-based inflation is undeniable, many investors neglect to consider the risks they pose, particularly for those who have not yet reached retirement.
2011-11-15 Michael Aronstein on Today's Key Macro Trends by Robert Huebscher (Article)
Michael Aronstein is the president and chief executive officer of Marketfield Asset Management. Since its inception in 2008, his fund has returned 31% while the S&P has been down 15%. I spoke with him about the key macroeconomic and strategic issues facing investors today.
2011-11-15 A Strategy with a 25-year Record of 25% Returns by Robert Huebscher (Article)
Indiana-based SBAuer Funds launched its inaugural mutual fund in December of 2007, after having established a successful track record with a separately managed account business. I spoke with Bob Auer, who has employed the same stock selection system used by the fund for the last 25 years, over which time returns have averaged 25% annually.
2011-11-15 It's All Greek to Me by Michael Lewitt (Article)
As one who has written that there is little chance of a long-term solution to Europe's problems without a radical rethinking of global economic policy, the Europeans still have little choice once they peer over the cliff to realize other than to step back and buy some time before taking the inevitable leap. For, in the end, they have no other options than to jump.
2011-11-08 An International Perspective on Safe Withdrawal Rates by Wade Pfau (Article)
Prospective retirees must consider whether they are comfortable basing retirement decisions on the impressive but perhaps anomalous numbers found in historical US data. What has been safe for US retirees in the past has been far less secure for their foreign counterparts.
2011-11-08 A Unique Way to Help Clients Close the Retirement Gap by Dan Richards (Article)
Clients facing a shortfall in retirement savings can bridge that gap in many ways. But one technique is often neglected: spending reductions - even small ones - in their everyday lives. A new web site gives clients the tools to quantify and manage those reductions.
2011-11-01 The Questions to Ask about Non-Traded REITs by Robert P. Seawright (Article)
The attraction of high yields comes at the expense of higher risk, a time-worn lesson that should be an ongoing focus for investors in non-traded REITs.
2011-11-01 Five Tips from Accountants on How to Get Referrals by Dan Richards (Article)
Over a recent lunch, three partners in a small accounting firm told me how financial advisors should go about getting referrals.
2011-11-01 Regulatory Armageddon by Bob Veres (Article)
Suppose you were somehow able to convince 40 advisors, who are all well-known thought leaders in the profession, to gather in the same room for a six-hour brainstorming session. The goal: to identify the single most important thing that the financial planning profession should be thinking about now. What do you think they'd come up with? Fasten your seat belts, because this may be the most important report you'll read all year.
2011-10-25 A Jeopardy Champion and our Economic Future by Robert Huebscher (Article)
Several years ago, a group of IBM scientists watched the television quiz show Jeopardy at a local bar and decided that they could develop the technology to beat a human contestant. They succeeded, and the system they built, Watson, is situated at the leading edge of a wave of breakthroughs in artificial intelligence that will lower health care costs and accelerate economic growth.
2011-10-25 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.
2011-10-25 Miccolis, Bengen and Evensky on the New Challenges in Portfolio Construction by Michael Skocpol (Article)
Conventional wisdom about the best way to construct a portfolio has been discredited, according to three industry thought leaders ? Jerry Miccolis, Bill Bengen and Harold Evensky. Each has distinct visions of the ways in which advisors should build portfolios in the wake of the financial crisis of 2008, but all three agree that traditional methods must be scrutinized.
2011-10-18 Gundlach: Markets Aren?t Cheap Enough Yet by Robert Huebscher (Article)
Prices for risky assets are straddling the extremes of two potential outcomes. A 'hurricane' may hit, in the form of a blow-up in Europe or a move to put the US federal government on an austerity program, driving prices lower. Or world economies will plod along, in which case optimistic pricing makes sense. But prices should be 'truly cheap' against those parallel problems, according to Jeffrey Gundlach, and that is not yet the case.
2011-10-18 A Response to Improving on Morningstar Style Boxes by C. Thomas Howard, PhD (Article)
A reader responds to Stephen Dodson's article, Improving on Morningstar Style Boxes, which appeared last week. Taking on the scourge of the active equity mutual fund industry, the style grid, is a laudable goal. I would like to build upon the arguments presented in that article.
2011-10-13 Why Is Financial Market Volatility Increasing? by Alan A. Fustey of Index Wealth Management
While price movements in financial markets are largely unpredictable, there are periods where volatility tends to cluster. The flash crash shows that high frequency trading does have the potential to heighten volatility given the right circumstances, however knowing when these circumstances are present can only be detected in hindsight. There are structural changes that are occurring in the global economy, technology and securities trading that have the potential to make the recent increase in market volatility a new permanent standard.
2011-10-11 A Critical Look at Obama?s Economic Team by Laurence B. Siegel (Article)
Confidence Men is an exposé, by the reporter Ron Suskind, of what he claims is incompetence, infighting, and insubordination at the highest levels of economic leadership in the Obama administration during the global financial crisis. Those accusations are largely misdirected. After all, there was no playbook for the administration's economic thinkers to work from - the rapidly unfolding crisis forced them to improvise.
2011-10-11 Thomas Friedman's View of the Future of the US by Michael Edesess (Article)
Andy Rooney once said, 'It's just amazing how long this country has been going to hell without ever having got there.' Our country's roughly 30-year march to perdition is the subject of Thomas Friedman's and Michael Mandelbaum's new book, That Used to Be Us. Rooney may still be right, though - the authors identify, albeit not all that convincingly, a path to salvation.
2011-10-11 Improving on Morningstar Style Boxes by Stephen Dodson (Article)
No one would ever confuse a short man with dark hair and a tall one with light hair. But this is precisely what investors do when they categorize stocks as either growth or value. Those style definitions, championed by Morningstar and others, are flawed, and I have a way to fix them.
2011-10-11 Managed Futures are not a New Asset Class by Michael Kitces (Article)
The focus on finding investments that have a low correlation to equities has grown to such an obsession that we're willing to name anything that has a low correlation as 'a new asset class.' While some alternatives truly have their own investment characteristics unique from stocks and bonds, other alternatives - like managed futures - simply represent an active manager buying and selling existing asset classes.
2011-10-11 The Global ?Old Normal? by Michael Nairne (Article)
Amidst a torrent of dismal economic news and plunging stock prices, investment horizons have become increasingly short-sighted. The new normal of faltering growth and painful deleveraging appears to be only too true. However, investors capable of taking a long-term, global view will find forces at work that will likely drive resurgent world growth akin to that which occurred in the decades right after World War II.
2011-10-04 Value Investing Lessons from Moneyball by Laurence B. Siegel (Article)
Is baseball a metaphor for life, as many literati have suggested, or for value investing? Michael Lewis' 2003 bestseller Moneyball argues the latter. More recently, the book has been adapted to make a thoughtful movie that will be of special interest to investors who believe in trying to find hidden bargains.
2011-10-04 The Energy Expert You Shouldn?t Trust by Richard Vodra (Article)
Daniel Yergin, a self-described 'leading energy expert,' has written The Quest: Energy, Security, and the Remaking of the Modern World, designed to provide information that policy-makers can rely upon in shaping energy policy for the decades ahead. This could be a dangerous reliance, for Yergin is an advocate for the fossil fuel community, not an honest broker of information.
2011-09-27 A Buying Opportunity in Investment-Grade Corporate Bonds by Chris Shayne, CFA (Article)
Given that yields on Treasury and high-quality corporate bonds are near 50-year lows, investors looking for relative value in fixed income should consider purchasing lower-rated investment-grade corporate bonds. As Gluskin Sheff's David Rosenberg said last Wednesday, 'if you have money to put to work, and are looking for a reward that more than compensates for the incremental risk involved at this juncture, credit is a good place to be looking.'
2011-09-27 Do Low Correlations Favor Active Managers? by FundQuest Investment Management & Research Group (Article)
There has been much debate regarding the challenges for active managers in market environments with persistently high correlations. Some argue that high correlations hinder active managers seeking to generate alpha through security selection. Indeed, in a recent study, we found that active managers were more likely to succeed in low-correlation environments.
2011-09-20 The Power of Dividends ? And What They Say About Future Returns by Lance Paddock (Article)
The return on equities is driven by dividends, since companies must ultimately distribute their hard-earned cash to shareholders. Given that reality, recent history of dividend yields portends a disappointing future for equity investors, one of sub-par returns relative to historical averages.
2011-09-20 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.
2011-09-20 Letter to the Editor by Various (Article)
A reader responds to Dennis Gibb's article, The Risks of Exchange-Traded Products, which appeared last week.
2011-09-13 The Handicap of Experienced Investors by J.J. Abodeely, CFA, CAIA (Article)
In the investment business, assets under management are concentrated with the largest and most established firms. Understandably, investors tend to allocate capital to managers after they've established a good track record. Unfortunately, for many, the analysis stops there. By failing to separate good results from identification of what makes a great investment manager, investors are primed for disappointment.
2011-09-13 An Uncritical Glorification of Hedge Funds by Michael Edesess (Article)
Sebastian Mallaby's book, More Money than God, sheds some light on interesting events in hedge fund history and is strewn with a few valuable insights. Mostly, though, it is a work of serial hagiography. It seems designed to attract worshipers like those who drive by celebrity homes in Beverly Hills.
2011-09-13 The Risks of Exchange-Traded Products by Dennis Gibb (Article)
Every major financial crisis has been foretold by timely but ultimately ignored warnings. At the end of mania, the rush to secure more fees, investment performance and status trumps common sense. In the last few months, the drumbeats of warnings from financial journals and regulators about exchange-traded funds have been sounding. Few seem to be listening.
2011-09-13 A Response to 'A Winning Endgame' by Guy Cumbie (Article)
A Winning Endgame, Robert Huebscher's review of John Mauldin's book Endgame, made some highly problematic claims about our energy usage. Moreover, Huebscher's claim is unfounded that an energy policy, such as the cap-and-trade policy he recommended, is the right step toward solving our economic crisis.
2011-09-06 Byron Wien Reflects on His List of Surprises by Laurence B. Siegel (Article)
Byron Wien is a senior managing director and vice chairman of Blackstone Advisory Partners, the largest alternative investment firm in the world with $140 billion under management. Each year, for the last 26 years, he has published a list of 10 'surprises' investors should expect in the capital markets and the economy. In this interview, he reflects on his list for 2011 and what see sees ahead.
2011-09-06 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 A Buying Opportunity for Retail Municipal Bond Investors by Chris Shayne, CFA (Article)
While market volatility over the last few weeks drove Treasury yields down, odd-lot municipal bonds yields remained intact. This creates a unique buying opportunity for individual investors.
2011-09-06 I'll Tell You When to Start Leading by Justin Locke (Article)
Far too much leadership advice relies on giving listeners a series of precise steps to follow instead of expanding their perceptions. Understanding the capabilities and motivations of one's charges is what distinguishes successful leadership.
2011-08-30 What to Tell Clients Today - Ten Tips for Effective Client Communication by Dan Richards (Article)
Given the recent market tumult, many advisors know they should be communicating with clients, but hesitate because of uncertainty about what to say and apprehension about making things worse rather than better. Here are five general guidelines for client communication in turbulent markets and five tips for crafting the message that you send today.
2011-08-23 The Simplest, Safest Withdrawal Strategy by Robert Huebscher (Article)
Few financial planning topics have garnered as much attention as safe withdrawal rates, but a key question remains unanswered: Can retirees sustain a 4% withdrawal rate with minimal risk? With the recent introduction of 30-year TIPS, the answer is now yes.
2011-08-23 Why Investors are 'Mad as Hell' ? And what you can do about it by Dan Richards (Article)
Last Friday, Jason Zweig of the Wall Street Journal wrote about fear and anger as the two dominant attitudes of American investors today ? fear about their future and anger at those they see as responsible for the latest crisis. Today's investor psyche has fundamental implications that will require changes in how you interact with clients. Before getting into how to respond, let?s look at what's driving today's mindset.
2011-08-23 A Fundamental Investment Strategy for Today's Environment by Robert Huebscher (Article)
We spoke with Tim Hartch and Michael Keller, who are co-managers of the Morningstar 5-star BBH Core Select Fund (BBTEX) from Brown Brothers Harriman. The fund's strategy is strictly bottom-up, with investments in established, cash-generative businesses that are leading providers of essential products and services with strong management teams and loyal customers.
2011-08-23 What You Don't Know About Stock Photos Can Hurt You by Kristen Luke (Article)
While the process of purchasing a stock image is easy, make sure you are purchasing the photos with the correct specifications and licenses to meet your needs. Otherwise, you could find yourself paying much more than you ever would have imagined.
2011-08-16 Gundlach - 'The Cusp of a Global Banking Panic' by Robert Huebscher (Article)
Don't interpret last week's volatility as merely a reaction to S&P's downgrade of US Treasury debt, according to Doubleline founder and chief investment officer Jeffrey Gundlach. Investors are actually fearful of a global banking crisis, he said, because many countries face a perilous choice - defaulting on their sovereign debt or inflating their way out of trouble.
2011-08-16 Matt Ridley Makes a Case for Optimism by Laurence B. Siegel (Article)
Matt Ridley's new book, The Rational Optimist, uses powerful examples from history and compelling logic drawn from economic theory to remind us that human achievement is cumulative, and the future looks bright, particularly for the less fortunate in the world. It is especially welcome at this discouraging moment in time.
2011-08-16 A Commentary on the Correction by Michael Nairne (Article)
Market corrections are always painful and this one particularly so because of the lingering anxiety from memories of the 2008-2009 market crash. I explore the history of stock market corrections and examines the dynamics of the recent downturn as well as actions that may be warranted, depending on individual circumstances.
2011-08-16 Tapping into 'The Power of Three' by Dan Richards (Article)
One area on which there's a growing body of evidence is the optimum number of examples to use and alternatives to provide when talking to an existing or prospective client. You want to provide enough examples to communicate that you've done your homework without having people feel overwhelmed.
2011-08-09 New Insights on the Role of Alternative Investments in High-Net-Worth Portfolios by Scott Welch, CIMA (Article)
Trends and developments over the past five years allow greater access to alternative strategies and dictate a different conversation with investors about the purpose and trade-offs of such strategies, as well as appropriate ways to incorporate them into well-diversified portfolios.
2011-08-09 Can American Become Greece? by Keith C. Goddard, CFA (Article)
Investors face four possible implications from the recent downgrade of America's long-term credit rating by Standard & Poor's: 1) Lower prices for financial assets; 2) Higher volatility in the asset markets; 3) Greater potential for trend-following investment strategies, and 4) Attractive opportunities in 'blue chip' stocks.
2011-08-09 How Conservative Investing Threatens Retirement by Dan Richards (Article)
Just as the Great Depression left a generation with a poverty mentality that still persists, the two bear markets of the last 10 years risk shaped an entire generation's attitude to investing. That's a key finding from a survey of affluent Americans commissioned by Merrill Lynch and released earlier this year, and it raises important implications for how financial advisors should deal with conservatively-minded investors.
2011-08-02 Improving on the Ultimate Income Portfolio by Geoff Considine (Article)
The Ultimate Income Portfolio, which was published in this newsletter July 6 of last year, has delivered the risk-adjusted returns that I projected. Here's a detailed look at how last year's portfolio performed and several ways it can be improved in today's environment.
2011-08-02 Hitting a Moving Target: Matching Portfolio Risk to Client Expectations by Scott Smith (Article)
Much of the angst faced by investors and advisors over the last several years was caused by mismatched perceptions regarding investors' appetite for portfolio risk. Advisors overestimated the amount of risk investors were comfortable being exposed to within portfolios.
2011-07-26 Comfort is Rarely Rewarded; Maverick Risk and False Benchmarks by J.J. Abodeely, CFA, CAIA (Article)
Conventional investment strategies, while affording the investor at least a temporary degree of comfort, are destined to produce mediocre results. Only by distancing themselves from the ordinary approach ? as Jeremy Grantham and Seth Klarman have ? can asset managers achieve superior performance and truly fulfill their fiduciary duties by acting as proper stewards of their clients? capital.
2011-07-19 Gundlach: A Debt Ceiling Impasse Could Drive Rates Lower by Robert Huebscher (Article)
Failing to raise the debt ceiling would be a 'huge financial calamity,' according to Federal Reserve Chairman Ben Bernanke and the general consensus view. But that opinion is 'exactly wrong,' at least as far as the Treasury market is concerned, DoubleLine's Jeffrey Gundlach said in a conference call with investors last Tuesday.
2011-07-19 Should You Use Google+? by Kristen Luke (Article)
The jury is still out on whether Google+ is going to be the next Facebook. So the question is, 'Should you use it?'
2011-07-19 You and the Internet, Part II - Places to Go, People to See by Wendy J. Cook (Article)
In my last article, How to Waste Time and Influence People, we covered productive ways to wander on the Internet. You also can benefit from harnessing the Internet as it relates to your advisory practice.
2011-07-12 Harold Evensky on the New Rules for Wealth Management by Robert Huebscher (Article)
If you don't have a copy of The New Wealth Management on your bookshelf, you should. From gauging the risk tolerance of your clients to measuring the performance of their portfolios, this book provides comprehensive guidance for virtually every aspect of a financial advisory practice. Harold Evensky, the lead author, spoke with me last week and highlighted some key themes in the newly released second edition.
2011-07-12 An End-of-Quarter Letter to Clients by Dan Richards (Article)
Given recent unrest in Europe and uncertainty about economic growth, many clients are looking to their advisors for direction. This template for an end-of-quarter letter is a starting point for your own letter to clients, one that can be a catalyst for a conversation about how to position portfolios.
2011-07-12 The Real Story behind Bond Yields by Michael Nairne (Article)
One of the most important questions that individuals should ask before making any investment is 'Am I being paid enough for the risk of this investment?' I analyze the returns available today from government bonds and answer this important question for this asset class.
2011-07-12 The Titanic Has Sailed by Michael Lewitt (Article)
It was entirely predictable that the U.S. equity market would rally on the news that Greek would not default this month, but it does little to convince me that the long-term outlook for European sovereign debt or the global economy has improved. Markets - particularly the equity markets - are trying to pretend that the global economy is experiencing a self-sustaining recovery. A hard look at the economic numbers would tell an objective observer that no such recovery is occurring.
2011-07-12 Letter to the Editor by Various (Article)
A reader responds to Doug Short?s commentary, A Short History of Dividend Stocks, which appeared on July 5.
2011-07-05 No More Stupid Forecasts! by Michael Edesess (Article)
Dan Gardner's book Future Babble takes the sport of expert prediction apart piece by piece, showing why it's phony, why people still pay close attention to it and why people (including the experts themselves) continue to believe in it. Along the way, the author fills his pages with enough interesting information and anecdotes to keep us reading with pleasure.
2011-06-28 Reducing Risk through Value-Oriented Tactical Strategies by Mark E. Ricardo, JD, LLM, AAMS (Article)
Conventional wisdom was that the best way to reduce portfolio risk is to adopt a diversified long-term strategic asset allocation. That paradigm was challenged - deservedly so - following the 2008 financial crisis. Fortunately, an improved paradigm has emerged: Investors should combine long-term strategic allocations with a value-oriented tactical rebalancing strategy.
2011-06-28 Six Crucial Tips for Presenting with Confidence by Beverly D. Flaxington (Article)
Thinking through a presentation is every bit as important giving it. It is imperative that you communicate who you are and sell others on your objectives or ideas. Whether motivating an employee in a one-to-one conversation or presenting to a $25-million prospect, here are six keys to confident and clear presentations.
2011-06-28 Letter to the Editor: Equity-Indexed Annuities by Various (Article)
A reader responds to our article, Fantasy-world Returns for Equity Indexed Annuities, which appeared May 31.
2011-06-21 Investing Based on Jeremy Grantham's Forecast for Diminishing Resources by Robert Huebscher (Article)
In his most recent commentary, Jeremy Grantham became one of the first mainstream investment professionals to publicly forecast a world economy threatened by diminishing natural resources. A survey of our readers showed that an overwhelming majority agree with Grantham's views. But constructing a portfolio positioned to capitalize on those themes is exceedingly difficult.
2011-06-21 The Greek Comedy by Michael Lewitt (Article)
It is no longer prudent to dismiss the possibility of a worst-case outcome for the Greek debt crisis. Greece is not only laying bare the flawed structure of the European Union, but the fragility of the global financial system. An interconnected and networked global economy cannot ignore problems on its so-called periphery because there is no longer any periphery. Derivatives and other counterparty relationships have seen to that.
2011-06-21 The Toughest Question from Clients And How to Answer It by Dan Richards (Article)
Many existing and prospective clients wonder whether they're getting their money's worth on the fees they pay. They may not say it out loud - but it's often there, casting a cloud of doubt about the advisor they work with.
2011-06-21 Understanding the Risk in Discounted Municipal Bonds by Evan Lamp (Article)
The market discount rule is one of those arcane regulations in municipal taxation that many investors and financial advisors ignore, either because they are unaware of its adverse consequences or because they don't know what to do about them. As the market discount rule grows in impact with the recent rise in interest rates, understanding this important topic is vital.
2011-06-14 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.
2011-06-14 The Consequences of Policy Failure by Michael Lewitt (Article)
Investment performance for the rest of the year will be determined by the macro-economic views of investment managers. While microeconomic factors are always extremely important in charting investment strategies, they are particularly important today as the U.S. and global economies continue to fight their way through the detritus of the global debt crisis. A compelling case can be made for weaker 2Q112 growth based on a combination of factors.
2011-06-14 A Proven Path to Business Breakthroughs by Dan Richards (Article)
In my conversations with advisors, implementing change often tops the list of business challenges and frustrations. To advance your business, one proven strategy that has demonstrated remarkable success over not just years but decades is tapping into the power of peer-performance groups.
2011-06-07 Why Jim Rogers is Bullish on Gold by Dan Richards (Article)
The veteran investor Jim Rogers explains why he is bullish on gold and the US dollar, and offers his thoughts on Asian economies why he chose to move his family to Singapore. This is the transcript of the interview.
2011-06-07 Letters to the Editor - On the WikiLeaks of the Economics Profession by Various (Article)
This is a follow-up to last week's exchange between Guy Cumbie and Michael Edesess, which concerned Edesess' article two weeks ago, Letter to the Editor On the Wikileaks of the Economics Profession.
2011-06-07 How to Waste Time Effectively by Wendy Cook (Article)
Ah, the Internet. Could there be a more usefully annoying, time-sucking, time-saver? It's always there, ready to transport us to that crucial bit of information we need - or to distract us far away from what we need to be doing. How do you harness the power of the Internet without letting it gallop off with your valuable time?
2011-05-31 Letter to the Editor On Absolute Return, Market Neutral and Long-Short Funds by Todd Huster (Article)
A reader responds to a market commentary, What is conservative about Absolute Return, Market Neutral, or Long/Short Mutual Funds?, by Kendall Anderson of Anderson Griggs, which appeared on May 23, 2011.
2011-05-31 Letter to the Editor On the Wikileaks of the Economics Profession by Guy M. Cumbie, CFP, CIMA (Article)
A reader responds to Michael Edesess' article The Wikileaks of the Economics Profession, which appeared last week. The article was a review of the book, What Caused the Financial Crisis.
2011-05-24 How to Build a Low-Risk High-Income Portfolio by Geoff Considine (Article)
Prominent investors, including Bill Gross and Warren Buffett, now say that the yields on long-term government debt do not justify the risks. But is this perception correct? I offer a way to answer that question - and to construct a low-risk high-income portfolio - using the prices of put options to derive the true risk levels of various asset classes.
2011-05-24 Robert Shiller: I'm Betting the Farm by Robert Huebscher (Article)
Yale's Robert Shiller, the economist who foresaw the implosions of the tech bubble in 2000 and the housing market in 2007, is now closely watching a different asset class. This time, however, it is one that is in an early stage of bubble formation, not of collapse.
2011-05-24 The WikiLeaks of the Economics Profession by Michael Edesess (Article)
What Caused the Financial Crisis presents the most comprehensive account I have seen of the regulations that, when considered as a whole, have incentivized unprecedented self-delusion and risk-taking in the subprime mortgage market. To put it in a manner that financial advisors will understand, the book shows that the policies and regulations greatly increased the Sharpe ratio of the financial industry - they increased the return for taking risk.
2011-05-24 Ownership in an Operating Business by David L. Blain (Article)
There was a time when the three legs of the retirement stool were Social Security, pensions, and personal savings, but those days are gone for good, and the stool needs new legs. Paper assets and real estate are classic asset classes that can help fill the void, but where else can investors turn for the stable income they need?
2011-05-17 Dylan Grice on Japan's Coming Hyperinflation by Robert Huebscher (Article)
The Japanese scenario haunts US policy makers, who recall that country's two-decade miasma of lethargic growth and escalating fiscal deficits with apprehension. What scares them most, perhaps, is the potential endgame Japan now faces: an insolvent government crippled by uncontrollable inflation. While Japan's current situation closely parallels the experience of other countries that went on to confront hyperinflation, according to Dylan Grice, we shouldn't expect a crisis in the near term.
2011-05-17 Four Steps to a Top-Performing Team by Dan Richards (Article)
Over the past 25 years, I've observed many high-performing teams and spent a lot of time talking to advisors and their support staff about the keys to their success. Here are four observations about what it takes to have a well-functioning team.
2011-05-17 The Smooth Illusion by Michael Lewitt (Article)
In retrospect, the Federal Reserve's interminable zero-interest policy and its quantitative easing programs are likely to be seen not only as ineffective but damaging to the prospects for sustainable long-term economic growth. A number of asset classes are beginning to exhibit bubble-like behavior, something that would be far less likely to occur were interest rates normalized.
2011-05-10 What Return can we Expect from Stocks? by Adam Jared Apt (Article)
What return can we expect from stocks over the long term? This sentence contains four problematic terms: 'return,' 'expect,' 'stocks,' and 'long term.' Intended for the educated laymen, this article considers each in turn.
2011-05-10 When You Can?t Say It Nicely ? But It Still Needs To Be Said by Wendy J. Cook (Article)
Perhaps because social media is so, well, social, I find it particularly painful to see someone go on a poorly rendered rant on the Internet. As Gilbert K. Chesterton says, 'A good novel tells us the truth about its hero; but a bad novel tells us the truth about its author.' How do you speak your mind about strongly help viewpoints without revealing a fool?
2011-05-03 Gary Shilling - Five Things that can Derail the Recovery by Robert Huebscher (Article)
Die-hard deflationists - those who foresee a continued bull market in bonds - are so few in number these days they could all share an elevator, according to Gary Shilling. One is Gluskin Sheff's David Rosenberg, whose views are considered elsewhere in this issue. But the loudest such voice belongs to Shilling himself, who has advocated for a long position in Treasury bonds continuously since 1980, a stance that has always proved prescient so far.
2011-05-03 Martin Barnes - How Safe is the Equity Market? by Robert Huebscher (Article)
When members of the Federal Reserve Board seek counsel on tough issues, one of the economists to whom they turn first is Martin Barnes. Speaking publicly last week, Barnes addressed two themes in the US economy and markets: the potential for a sustained bear market in equities and the likelihood of higher taxes. These two distinct questions are both critically important to investors.
2011-05-03 When to Bring up Referrals by Dan Richards (Article)
Advisors often ask me what should be the right frequency with which to raise referrals with clients. Some advisors are hesitant to introduce the topic of referrals at all. Balancing that reluctance, one advisor told me about a direct connection between how frequently he talks to clients about referrals and the chances that referrals will follow as a result - the more often he raises this, the more often referrals will follow.
2011-04-26 Why Mid-Cap? by RidgeWorth Investments (Article)
RidgeWorth Investments has published research detailing six distinct reasons why investors should consider a specific allocation to mid-caps. Specifically, it explores historical performance, evaluates current conditions that favor mid-caps as well as examines how mid-caps have performed during different points in market and economic cycles. Finally, the research looks at the incremental benefit of adding an allocation of up to 40% of mid-cap stocks to a portfolio of solely large and small cap stocks. We thank RidgeWorth Investments for their sponsorship.
2011-04-26 Ethics Among Thieves by Michael Edesess (Article)
'Inside Job' is a thoroughgoing indictment of the financial industry that has its virtues but relies on some unsavory vices. On the one hand, through interviews, congressional testimony, and other video, the film exposes cronyism, corrupt ethics, and excessive power at the core of the financial industry. On the other, the movie at times unfortunately feels more like a polemic than a hard-hitting, fact-finding investigative reporting piece.
2011-04-26 Long-term Failure with Short-term Bonds by Hildy and Stan Richelson (Article)
Fear of an impending rise in interest rates has many recommending short-term bonds. Such fears are misplaced, however, and investors can better position their portfolios by constructing a ladder of high-quality individual bonds, rather than moving assets into only short maturities.
2011-04-26 How to Take Advantage of the CFP Awareness Campaign by Kristen Luke (Article)
If you are a CFP, you will be directly affected by the Let's Make a Plan campaign, even if you take a passive role. Those who take a more active role can use the toolkit provided by the CFP Board to promote themselves in local markets. Here's what's entailed and what you can personally do to take advantage of the campaign.
2011-04-19 Managing Exposure to Extreme Markets by Geoff Considine (Article)
Volatility in the equity markets has subsided, courtesy of a strong bull market and fading memories of the 2008 financial crisis. Risks remain, however, ranging from the turmoil in northern Africa to sovereign debt instability in Europe. Investors can take advantage of the complacency in the equity markets by purchasing inexpensive insurance against adverse events.
2011-04-12 A Top Value Manager Looks Outside the US by Robert Huebscher (Article)
David Winters, manager of the Wintergreen Fund, began his career working for Max Heine, where Seth Klarman and Michael Price also worked. In this interview, Winter discusses the why he believes many of today's best opportunities are outside the US and how he is hedging against the threat of inflation.
2011-04-12 Been Down So Long It Looks Like Up To Me by Michael Lewitt (Article)
"The budget crisis is a crisis of leadership," writes Michael Lewitt in the latest issue of the HCM Market letter. "There is no intellectual mystery involved in cutting the budget - entitlement spending must be reduced through the adoption of tighter eligibility standards... The markets will also have to evaluate whether Congress and the Obama administration can make any meaningful progress on budget reform, which will mean tackling the entitlement issue. The failure to rein in federal deficits remains a profound threat to the dollar and interest rates."
2011-04-12 Dumb, Dumber and Dumbest by Barry M. Ferguson (Article)
The two stupidest characters ever to grace the big screen - Lloyd Christmas and Harry Dunne - were first introduced to the world in Jim Carrey's 1994 movie, Dumb and Dumber. If that movie were made today, its leading characters could easily be our government and the supposedly independent Federal Reserve Bank. Both of these institutions have foisted their misguided policies on the American public, who, in their passive acceptance, have proven themselves to be the dumbest of all.
2011-04-12 The Keys to Successful Client Appreciation Events by Jennifer Geoghegan (Article)
Even a couple of years ago, many firms would do a single client appreciation event in a year, writing it off as little more than a fun opportunity for clients and employees to get together, with no expectation of a return on their investment. Today, however, many advisors have told me that referrals through traditional pipelines are slowing. Instead, they have turned to events and found that they go a long way towards building trust with clients and prospects and driving new business.
2011-04-05 A Close Look at the PIMCO-Met Life Retirement Strategy A Marriage Made in Investment Heaven? by Michael Edesess (Article)
If you embrace their recently announced co-marketing strategy, when you're relatively young you use PIMCO's Real Income Funds for stable income in the near term. When you're older Met Life's Longevity Income Guarantee kicks in and takes it from there. You're set with secure income for life. We examine these products more closely and analyze whether they are good deals, either separately or together.
2011-04-05 Fiduciary Focus: The New 408(b)(2) Fee Disclosure Rule Under ERISA by RidgeWorth Investments (Article)
The U.S. Department of Labor (DOL) has now published the long-awaited rule on ERISA Section 408(b)(2). Read the article below from RidgeWorth Investments so that you can be equipped to answer questions and recommend solutions.
2011-04-05 Two Critical Lessons from Japan An End-of-Quarter Letter to Clients by Dan Richards (Article)
Given recent events in Japan and North Africa, many clients are looking to their advisors for direction on what they should do. This template for an end-of-quarter letter is intended to be a starting point for your letter to clients.
2011-04-05 The Future of Investment Manager Due Diligence (and a Look Back at Q1 Performance) by Ron Surz (Article)
Despite the continuing global financial crisis, the uprisings in the Middle East and the Japanese disaster, global stock markets delivered positive results in the first quarter of 2011, as described in this capital market review. In the second part of the article, you'll discover what due diligence procedures need to change and why.
2011-03-29 Fiduciary Focus: What You Know About the New Fee Disclosure Rule Under ERISA by RidgeWorth Investments (Article)
RidgeWorth Investments discusses what the new rule about Fee Disclosures encompasses and how it affects advisors. Their complimentary white paper is available for download through the link above.
2011-03-22 Dividend Dynamics: Assessing the Five Key Benefits of Dividend-Paying Stocks by RidgeWorth Investments (Article)
Increased market volatility has placed dividend-paying stocks back into the spotlight. These securities have been long valued for their defensive characteristics during down markets, but their attractive combination of steady income and capital appreciation potential has also delivered consistent, strong returns across full market cycles.
2011-03-22 Consensus: Groundhog Decade for Stocks by Ed Easterling (Article)
Just as Bill Murray woke up to the same thing day after day in the movie 'Groundhog Day,' it's likely that your outlook foretells a groundhog decade for the stock market that will repeat its near-breakeven returns from the past decade.
2011-03-22 Statistical Insights into Everyday Problems by Sam Parl (Article)
You know that the volatility of an investment matters as much as its overall return. But you may not know that research into this fundamental investment principle has been applied in many other disciplines to explain phenomena as unexpected as waiting times in lines at Disney World.
2011-03-15 Mason Hawkins and Staley Cates on Today?s Opportunities for Value Investors by Robert Huebscher (Article)
Southeastern Asset Management's Mason Hawkins and Staley Cates, two of today's most respected value investors, discuss their portfolio and the principles behind their Graham and Dodd methodology. They explain why they like certain commodity-based companies and why they disagree with Bruce Berkowitz on the opportunities in the financial sector.
2011-03-15 Running on Empty by Michael Lewitt (Article)
Despite the increasing undercurrent of negative news creeping into the financial markets, the stock market remains strong. HCM expects equities to continue to perform well for the foreseeable future (i.e. through the end of June) although most of this letter will discuss the reasons why it shouldn't. In some ways, this market is a lot like Charlie Sheen. It pretends to have tiger blood and the powers of a warlock, but deep inside it is suffering from an addiction to a substance (i.e. debt) that will ultimately kill it.
2011-03-15 How to Get the Best Photo for Your Web Site by Wendy J. Cook (Article)
If your photo is missing or misused on your website, social media profiles, brochures, and other introductory materials, then consider this your call to action. A few simple suggestions can help you literally put your best face forward in your corporate communications.
2011-03-08 The Clued-in, the Clueless, the Oblivious and the Conflicted by Michael Edesess (Article)
I?ve now read perhaps 10 books about the financial crisis. Maybe I?m a junkie, but each has given me new information or a fresh way of looking at events. 'All the Devils Are Here' offers a treasure trove of information about company behavior during the crisis, notably Fannie and Freddie, Goldman Sachs, Merrill Lynch, AIG, Countrywide, and Ameriquest.
2011-03-08 When Alzheimer?s Strikes: Five Ways to Respond by Dan Richards (Article)
Creating strong bonds with key clients means letting them know you understand their important issues, not just the ones related to their finances. Few issues are as important as your clients? health, and few health struggles are as challenging as Alzheimer?s.
2011-03-08 The Sweet Spot by Michael Nairne (Article)
Today?s low interest rates and lackluster stock valuations suggest portfolio returns going forward will be modest. Investors in search of higher return opportunities need to consider small-company value stocks. We explore how this asset class can improve portfolio performance for long-term, patient investors and deal with its risks and limitations.
2011-03-01 Subsuming the Efficient Market Hypothesis by Keith C. Goddard, CFA (Article)
A recent article highlighted important gaps in the efficient markets model (EMH) that limit its practical applications. It encouraged a search for a new theory of markets that builds upon EMH by rendering it as a special case within a broader, more general theory. Mordecai Kurz? Rational Belief Equilibrium is such a theory.
2011-03-01 Women?s Views of Wealth and the Planning Process by Kristan Wojnar and Chuck Meek (Article)
Women don?t think like men, especially when it comes to money. As women control a growing share of wealth in the years ahead, advisors will need a new paradigm in their practice, one that reflects an emphasis on values over goals.
2011-03-01 Understanding Variable Annuities with GMWBs by Robert Huebscher (Article)
It's very tempting: a variable annuity with minimum lifetime payout that can increase - but never decrease - based on market performance. That temptation comes in the form of an increasingly popular variable annuity rider known as a guaranteed minimum withdrawal benefit. We explain the flaws in a widely publicized study by Morningstar/Ibbotson, and provide our own analysis of the product.
2011-02-22 Bruce Berkowitz on the Exceptional Value in the Financial Sector by Robert Huebscher (Article)
Fairholme's Bruce Berkowtiz, US stock-fund manager of the decade, discusses his large position in the financial sector and why he believes the big bets he is making do not amount to Russian roulette. He also comments on his recent nomination of former Florida Governor Charlie Crist to the board of St. Joes.
2011-02-22 Are You Ready to Lose Control? by Justin Locke (Article)
We view control the same way we view pregnancy - it's an all-or-nothing condition. Either you are in control, or everything is out of control. We would all be wise to rethink this - to look at how to handle and even embrace some lack of control.
2011-02-15 Toward an Understanding of Risk 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.
2011-02-15 Assessing New Tools to Protect Against Tail-Risk Events by Jerry Miccolis (Article)
Protecting against sudden, severe market drops is as crucial as it is difficult. A plethora of approaches to this problem have been brought to market in last few years, and to evaluate them my firm developed a set of rigorous criteria. These criteria led us to a solution that works for us and for our clients.
2011-02-15 The Stuxnet Paradigm by Michael Lewitt (Article)
Michael Lewitt discusses the situation in Egypt, the economy, rising risk appetites in the market, sovereign debt and municipal bonds. 'It might be very easy,' he writes, 'to be impressed by the 'two years and thousands of man hours' that Ms. Whitney spent researching the fiscal condition of the 15 largest states. What in the world required so much time and effort? It shouldn't have taken nearly so long to determine that these states are in severe financial trouble and that their options for dealing with it are limited.
2011-02-08 Be a Problem Setter, not a Problem Solver by Justin Locke (Article)
It's not a good idea to solve every problem. Sometimes, as my experience as a professional musician illustrates, it's better to just make sure everyone knows what the problem is that you want solved.
2011-02-01 The Inflation the Fed Fears Most by Robert Huebscher (Article)
The term inflation is widely used but generally misunderstood. Economists, politicians and the general public understand it to mean one thing. Inflation, however, has a very different meaning to our central bank, as I will explain.
2011-02-01 Four Ways to Get Prospects Off the Fence in 2011 by Dan Richards (Article)
Dithering prospects - we've all been frustrated when someone who would be a really great client takes forever to make a decision. That's why getting prospects to make faster decisions should be your first resolution for 2011.
2011-02-01 Stop Using Outlook for Email Marketing by Kristen Luke (Article)
Unfortunately, many advisors confuse the ability to send hundreds of emails through Outlook with conventional email marketing. Advisors who do this don't know that they are putting themselves at risk of violating the federal CAN SPAM laws.
2011-02-01 Rubbing One's Smell on the Project by Justin Locke (Article)
When you give clients advice, sometimes they ignore it. Though vexing, it is an important reminder that you are their financial advisor and not their financial commander.
2011-02-01 Why Public Funding of Venture Capital Has Failed by Dan Richards (Article)
Josh Lerner is a professor at the Harvard Business School, with a joint appointment in finance and entrepreneurial management. In this interview, he discusses his research on why public-funded venture capital sometimes succeeds but other times fails. This is a transcript of the interview.
2011-01-25 The Power of Dividends by C. Thomas Howard (Article)
New evidence refutes long-held beliefs about the role of dividends. Research shows that the higher a stock portfolio's dividend yield, the greater its return. And just as surprising are new findings about the relationship of dividends to volatility.
2011-01-25 Should Advisors Care about Short-Term Volatility? by James Colon, John Gambla and Rob Guttschow (Article)
How can advisors construct portfolios that meet their clients' risk preferences across economic environments? You may be surprised to learn that tactical asset allocation has an important role to play.
2011-01-25 Beyond the Efficient Market Hypothesis by Michael Edesess (Article)
John Cassidy's 2009 book, "How Markets Fail," drives the final nail in the coffin of the Efficient Market Hypothesis. Well, perhaps the penultimate nail - as I'll explain. It is the most compelling argument I have read that we need a new and improved theory of markets, a theory that subsumes the efficient market hypothesis, much as Einstein's relativity theory subsumed Newtonian physics.
2011-01-25 Separating Prospects from Suspects by Dan Richards (Article)
What's the difference between a prospective client and someone who's just a suspect? An advisor I recently spoke to gave me the answer.
2011-01-25 How Emotions Undermine Your Investing Decisions by Dan Richards (Article)
In this interview, U.C. Davis professor Brad Barber discusses his latest research, which examines how investors' behavioral biases lead to costly mistakes. This is a transcript of the interview.
2011-01-18 Jeffrey Gundlach: The Greatest Investment Opportunity of 2011 and 2012 by Robert Huebscher (Article)
In June of 2007, against a backdrop of strong equity and corporate bond performance, Doubleline's Jeffrey Gundlach was one of the first to warn investors that sub-prime mortgages were 'a total unmitigated disaster, and they are going to get worse.' In an equally bold statement, last week he identified the asset class he considers the greatest investment opportunity for the next two years. Again, it was one for investors to avoid.
2011-01-18 Letters to the Editor by Various (Article)
A number of readers respond to Nancy Opiela's article, Tactical Asset Allocation and Market Timing: What's the Difference?, and one reader responds to Michael Lewitt's article, The Wages of Growth. Both articles appeared last week.
2011-01-11 Structuring 2011 Meetings for Maximum Effectiveness by Dan Richards (Article)
Last summer, I wrote about new research on the factors that shape how consumers recall interactions and experiences. What was found was that in every experience, two things play the most important role in what people remember - that's true whether it is a restaurant meal, a vacation or a meeting with an advisor.
2011-01-11 The Two Elephants Facing the US Economy by Michael Lewitt (Article)
The consensus has reached the conclusion that financial markets will enjoy a strong start to 2011. This is reason enough to approach the markets with caution as the year begins. When everybody is leaning to one side of the boat, the vessel is far more likely to tip over, particularly if it hits an unexpected wave.
2011-01-04 Building a Better Income Portfolio by Geoff Considine, PhD (Article)
One of the greatest concerns for income-oriented investors is the possibility that dividends will be cut. The financial crisis showed that traditional metrics, such as a stock's dividend history and its payout ratio, failed to warn investors of impending dividend cuts. By evaluating stocks based on volatility, however, investors can select securities that are more likely to maintain or improve their dividend rates.
2011-01-04 The Coming Decade of Sideways Markets by Robert Huebscher (Article)
'We are in the middle of a sideways market, and we still have another decade to go,' says Vitality Katsenelson. In this interview, Katsenelson shares his insights on the decade ahead and the many factors that may keep China from leading us out of the recession.
2010-12-28 The Squam Lake Report: Reforming the Financial System by Dougal Williams (Article)
Ken French and Robert Shiller were among a group of leading economists who, in the fall of 2008, convened what was to become known as the Squam Lake Group. Their recently released and much-talked about book offers its authors' collective best answer to a defining question of our day.
2010-12-14 The End of the Asian Bull Market by Robert Huebscher (Article)
A broadly diversified emerging market investor would have earned nearly 12% annually over the last five years, far outpacing investors in the US and other developed markets. Over the next five or even ten years, investors relying on emerging economies will not be as fortunate, however, according to Louis-Vincent Gave, CEO of the Hong Kong-based research and investment management firm GaveKal.
2010-12-14 Looking Back at a Year of Policy Mistakes by Michael Lewitt (Article)
As we approach the end of 2010, the global economy remains captive to a boom-and-bust cycle resulting from years of pro-cyclical monetary, fiscal and regulatory policies. With very limited exceptions, the same policies that contributed to the 2008 financial crisis remain in place. The only difference is that government balance sheets are far more leveraged than they were heading into that crisis.
2010-12-14 What the Music Business Taught Me about Selling by Justin Locke (Article)
You provide a service to each of your clients, some of whom may have similar needs but all of whom are unique. Asking your clients what more you could be doing for them is the only way to make sure you're offering the advice they truly want.
2010-12-06 The Dangers of Rebalancing by Michael Edesess (Article)
Every portfolio should be rebalanced to its targeted asset allocation, we are taught. Indeed, there may be no other precept as routinely and studiously practiced among financial advisors. But does rebalancing either increase expected return or reduce risk? If so, why? The answers to those questions reveal that it may be prudent to rebalance, but not for the reasons you think.
2010-12-06 Why You Aren't Getting Referrals - And What to Do About It (Part 2) by Dan Richards (Article)
In his previous column, Dan Richards discussed seven misconceptions that prevent advisors from getting referrals. Here, he concludes with eight more referrals fallacies.
2010-11-30 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.
2010-11-30 Why You Aren't Getting Referrals - And What to Do About It by Dan Richards (Article)
When it comes to attracting new clients, every advisor knows that nothing beats referrals from satisfied clients. However, many advisors hold fundamental misconceptions about what it takes to get quality referrals. As a result, they either don't talk about referrals at all or do so ineffectively.
2010-11-30 The Word that Defines Effective Communication by Dan Richards (Article)
Fairly or not, if clients initiate a call, many will believe that the conversation wouldn't have taken place otherwise ... even though it's precisely the same conversation, advisors get much more goodwill and credit if they take the first step in making that call happen.
2010-11-23 Will Municipal Bonds be the Next Disaster? by Dennis Gibb (Article)
It has been an article of faith that municipal bonds are safe investments, but this complacency about the safety of munis may soon be proven unwise.
2010-11-23 The Kings of Cash Flow: Investing in Tomorrow's Potential Winners Today by David Vincent and Kevin Collins (Article)
Companies generating a lot of free cash flow generally represent attractive investment opportunities over time. The 'Kings' - companies with the highest free cash flow yields - have historically outperformed companies with lower free cash flow yields and are currently experiencing what may be one of their longest and most drastic periods of underperformance in the last 50 years.
2010-11-23 Why Diversify? by Adam Jared Apt (Article)
Although diversification is commonly regarded as a good thing, there are nonetheless those who regard it as a guarantee of mediocrity. It isn't, but there are right ways and wrong ways to go about diversifying a portfolio. Let's explore how diversification works.
2010-11-16 Through the Looking Glass with Steven Rattner by Jack Falvey (Article)
Steven Rattner, the one-time 'Car Czar' and author of Overhaul, has been busy redefining terms while trying to put his considerable spin on history. He wants to convince us that the auto industry was magically transformed from a cash-bleeding rusting hulk to a paradigm of corporate profitability. The auto industry was not overhauled. In fact, Dismembered would have been a far more accurate title.
2010-11-16 Making Your Case to Prospects by Dan Richards (Article)
Dan Richards contacted six advisors to see if they would be interested in working with a prospective client who had approached him. The responses from those advisors varied greatly, and revealed some very important lessons in what advisors need to do to attract new business.
2010-11-16 Take Disciplined Action by Beverly D. Flaxington (Article)
Advisors struggle creating and executing a plan that supports their objectives. They don't lack great ideas, creative thinking or unfulfilled desires, but the actual steps to take - the work to be done and the assignment of who will do it - are often a big void.
2010-11-16 Letters to the Editor: Waiting for Superman by Various (Article)
Two readers respond to Charlie Curnow's November 9 article, Waiting for Superman: The Fate of Teachers' Unions.
2010-11-09 New Strategies in Alternative Investments by Robert Huebscher (Article)
Alternative investments, broadly speaking, and hedge funds, more specifically, have performed as intended over the last 20 years, modestly increasing returns and significantly reducing risk when added to a traditional stock-bond portfolio. Selecting the appropriate vehicle is the challenge, and that task has been made easier by the introduction of new exchange-traded strategies.
2010-11-09 How Modern Is Your Portfolio Theory? by Direxion Funds (Article)
After 58 Years, is there Another Way to Conquer the Efficient Frontier? In the past, active or "tactical" investment management referred to jumping in and out of stocks and bonds - market timing. With the introduction of sophisticated funds that help the masses harness the power of institutional managers and alternative asset classes and strategies, today, tactical management may help to renovate your portfolios - and help you retain and attract assets.
2010-11-09 Navigating Post-Financial Meltdown Reviews by Dan Richards (Article)
Recently, an advisor emailed me asking for suggestions on how to deal with clients who sold some or all of their portfolio near the 2008 lows. More specifically, he wanted to know if it's worthwhile educating these clients on where they would be had they not sold out.
2010-11-09 Keynesian Confusion by Michael Lewitt (Article)
Keynesian policies are inflicting untold damage on the U.S. and global economies today. Keynes did not have to be misread. The reason that the current recovery is below par is that the economy is experiencing a massive paradox of thrift. We doubt that reducing already low rates is going to stimulate much of anything other than more frustration on the part of savers. Sooner or later, everything being earned on the upside of this liquidity-induced rally will be given back in spades - the only question is when.
2010-11-09 Bogus Numbers by Michael Nairne (Article)
The crux of the difference between the 'cheap' and 'overvalued' market valuation views lies in the selection of earnings numbers, of which there are two basic sets. The broadest traditional measure is 'as reported' earnings which includes all charges except the cumulative impact of accounting changes, discontinued operations and extraordinary items. Is the market cheap by the appropriate measure?
2010-11-09 Finding Your Alternatives by Beverly D. Flaxington (Article)
In everyday life, you know that the first idea you think of to meet a need, or address a problem, may not always the best one. But when it comes to running a firm, far too many advisors never go through a proper brainstorming process to determine which option may be the best one for their firm.
2010-11-02 The SEC?s 12b-1 Proposal is Based on Misguided History, Flawed Economics by John H. Robinson (Article)
The SEC's stated aims of its proposed Rule 12b-1 reform are laudable: increasing transparency, reducing investor fees, and increasing competition among mutual funds. However, John Robinson's review of its 278-page proposal found major flaws, including a misinformed historical pretext and naïve economic analysis.
2010-11-02 Tax Location in Today?s Uncertain Environment by Glenn Frank (Article)
The tumultuous political climate in Washington has heightened anxiety around the country, and the uncertainty left when Congress adjourned without tackling any of the looming tax changes has left taxpayers and investors wondering just what is in store for 2011. Though the crystal ball remains cloudy, and while taxes may rise for no one, everyone, or just the wealthiest Americans, steps taken today can help tax planners and their clients be better prepared - no matter what the politicians do.
2010-11-02 Identify the Human Factor by Beverly D. Flaxington (Article)
One of the most overlooked steps in goal-setting and goal-achievement is the human element in the planning process. Once you have clearly defined your desired outcome, and once you have identified and categorized the obstacles you have faced or expect to face, you must turn your attention to the people involved. This is the third of five articles in the S.H.I.F.T. series
2010-11-02 Letter to the Editor by Various (Article)
In a letter to the Editor, a reader highlights a few generalizations in a recent article on that, he says, unfortunately cast the entire universe of 529 plans in a uniformly unpleasant light.
2010-10-29 BlackRock?s Rieder: The US Faces a Structural Dilemma by Roberth Huebscher (Article)
The U.S. economy faces a structural dilemma with high unemployment that cannot be addressed with conventional policy measures, according to Rick Rieder. Rieder is the CIO of Fixed Income for BlackRock. The 'bond bubble' will not burst, he said, and the high-yield market now offers attractive yields.
2010-10-26 Identifying - and Overcoming - Obstacles Second in a Series of Five Articles by Beverly D. Flaxington (Article)
Obstacles that haven't been identified and aren't removed will rise again and again for most people and firms, and will prevent you from achieving your goals. Here is a framework to identify and categorize the obstacles you face.
2010-10-19 S.H.I.F.T.ing to a Successful Practice by Beverly D. Flaxington (Article)
It's not easy for advisors to do many things well at once. Consultant Beverly Flaxington has had success juggling competing challenges, and a client recently asked her to formalize how she manages multiple priorities and what works effectively for her clients. In response, she created the S.H.I.F.T. Model for Success.
2010-10-19 Advising Boomers in a World of Higher Taxes by Janus Investments (Article)
Taxes may be rising in 2011. Are you prepared to answer client questions? Advisors need to have meetings now through year-end to help guide their clients to help mitigate potential tax risk. Learn more from Janus' materials on Advising Boomers in a World of Higher Taxes.
2010-10-12 Why Warren Buffett is Optimistic: A Quarterly Letter to Send Clients by Dan Richards (Article)
Dan Richard's quarterly letter is designed to balance some of the extreme pessimism among many investors. Negative sentiment is understandable given the real challenges facing the U.S. and European economies, but is also a function of the overwhelmingly negative media coverage to which clients are exposed. To balance today's disproportionately negative views, you need hard facts.
2010-10-12 Beggar Thy Neighbor, Beggar Thyself by Michael Lewitt (Article)
In the latest edition of the HCM Market Letter, Michael Lewitt argues that reported attempts by countries to devalue their currencies will only result in higher inflation and not economic growth. QE2 will similarly fail, and the necessary "heavy lifting" for the economy should be through fiscal, not monetary, policy. A continuation of Keynesian policies, as advocated by Paul Krugman, will also fail. Lewitt warns of dangers in ETFs and offers his investment recommendations.
2010-10-12 Does Your Marketing Match Your Business Structure? by Kristen Luke (Article)
Marketing strategies differ depending on the structure of a firm, writes Kristen Luke. Solos and silos focus on marketing the individual advisor while ensembles market the firm. Ensembles also tend to have more sophisticated marketing campaigns since they generally have larger marketing budgets and higher revenue streams.
2010-10-12 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.
2010-10-12 Letter to the Editor by Various (Article)
In this letter to the Editor, a reader responds to our article, The Misguided Promise of 529 Plans, which appeared last week. We were wrong, the reader says, to compare 529 plan performance to the 'market,' and solutions superior to our recommended zero-coupon muni bond strategy are available through actively-managed equity funds.
2010-10-05 Thinking Bond Market Bubble? Consider Short-Term Bonds by RidgeWorth Investments (Article)
The current market environment - characterized by historically low interest rates and money market reform - has created an opportune time to invest in short-term bonds. RidgeWorth believes investors with excess cash reserves earning near zero percent, as well as those invested in long-term bonds who may be most impacted by a rise in rates, will be well served to consider an allocation to short-term bonds. We thank RidgeWorth for their sponsorship.
2010-10-05 The Misguided Promise of 529 Plans by Robert Huebscher (Article)
Along with the overall market, 529 plans suffered disastrous returns in 2008, leaving many families with insufficient funds to pay their tuition costs. The real problem, though, is not with the past performance of 529s. A misguided promise underlies the vast majority of 529 plans - that their heavy allocation to equities will provide acceptable risk-adjusted returns for the time horizons over which most parents invest.
2010-10-05 Leadership Lessons from the Dance Floor by Justin Locke (Article)
The classic image of leadership is the symphony orchestra conductor, who, standing tall in front of his charges, ensures the perfect synchronization necessary to create the harmony, rhythm and melody that defines great music. That idealized artistic symbolism is not unique, though. An equally compelling example of leadership can be found on the dance floor, writes Justin Locke.
2010-10-05 The Myopic Bond Market by Michael Nairne (Article)
Many investors seem to believe that today's low bond yields are proof positive that inflation rates will stay low for many years. Michael Nairne assesses how successful the bond market has been in anticipating future inflation and how well bonds have performed historically in low yield environments. Bond strategies today need to reflect our findings.
2010-09-28 The Future of Oil by Robert Huebscher (Article)
No commodity impacts the global economy more than oil. When geopolitical threats loom, two questions often dominate discussion: Will the price of oil rise? And what will be the economic consequences? We review the key drivers of recent, current, and forecast oil prices, including a template for the necessary eventual alignment of supply and demand.
2010-09-28 A Better Alternative - Natural Resource Equities by RS Investments (Article)
Investors look to the commodity market to provide three primary benefits: portfolio diversification, inflation protection, and equity-like returns. However, empirical data shows that over the last decade, shifts in underlying fundamentals have undermined the role which commodities are expected to play in a diversified portfolio, particularly relative to natural resource equities. RS Investments reviews the return streams generated by both commodities and natural resource equities in the context of the benefits expected from each investment option. We thank them for their sponsorship.
2010-09-28 Lessons in Ethics: The Incredible Story of Patrick Kuhse by Charlie Curnow (Article)
Patrick Kuhse is the last person you'd expect to give a lecture on business ethics. As a deputy bond trader for Oklahoma's $9 billion general fund during the early 1990s, Kuhse arranged kickbacks for his superiors in the state Treasurer's office. In return, he received an increase in his commissions which, over time, netted him $3.89 million more than he would normally earn, according to court estimates. But today, business ethics are his specialty.
2010-09-28 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 Two Compelling Articles to Send Clients by Dan Richards (Article)
One of the most important roles for advisors is being an emotional anchor for clients ... preventing the highs from being too high and the lows from being too low. Dan Richards offers two recent articles that counteract the sense of pessimism about the economy ... driven in large measure by daunting headlines about housing prices, unemployment, deficits and political discord in Washington.
2010-09-21 A Bass Player?s Perspective on Leadership by Justin Locke (Article)
A fascinating phenomenon pervades major symphony orchestras. Whenever a new guest conductor steps onto the podium, a musician will know - within two seconds or less - if they will be an inspiring leader. Justin Locke shares his experience as a professional bass player and the insights he gleaned as to what makes for great leadership.
2010-09-14 Identifying Opportunities in the Municipal Bond Market by RidgeWorth Investments (Article)
Ridgeworth Investments shares its perspective on the muni bond market in a recent white paper entitled "Identifying Opportunities in the Municipal Bond Market" which outlines the historical benefits of municipal bonds, the changing market dynamics in 2009 as well as RidgeWorth's outlook for municipal bonds in 2010 and potentially beyond. RidgeWorth concludes that despite a challenging market environment, munis still offer attractive investment opportunities. We thank them for their sponsorship.
2010-09-14 The Centre Cannot Hold by Michael Lewitt (Article)
"A refusal to shed discredited monetary and fiscal policies and embrace creative and politically bold solutions is keeping our economy mired in high levels of structural unemployment and below-trend growth," writes Michael Lewitt in the latest edition of the HCM Market Letter. He also believes that "misguided faith in Keynesian solutions to debt crises, a near-religious belief that mild deflation must be avoided... and uninformed media hype about the alleged benefits of mergers and acquisitions" should be added to the list of bad ideas that lead economic policy and markets astray.
2010-09-14 Municipal Bonds : Much Healthier than Feared by Jim McDonald (Article)
Investors and advisors are growing increasingly concerned about investing in bonds. Historical levels of flows into the asset class have driven prices up significantly. The extended economic downturn continues to apply pressures to municipalities and states are struggling with their balance sheets. Despite these headwinds investment professionals maintain that municipal bonds should continue to play a role in client portfolios. We thank Northern Trust Investments for their sponsorship.
2010-09-07 Jeffrey Gundlach on Bonds, Stocks and Gold by Robert Huebscher (Article)
DoubeLine's Jeffrey Gundlach recently reduced his position from "overweight" to "small underweight" in Treasury bonds, and cited "divergent behavior across the yield curve." In this interview, he discusses that behavior and the rationale behind his move, as well as his thoughts on other asset classes, including equities and gold.
2010-09-07 A Modest Proposal to the SEC by Michael Edesess (Article)
The SEC is now considering reforming how 12b-1 fees are currently charged, how they would be set in the future, and how they will be disclosed to fund purchasers. In this guest contribution, Michael Edesess offers an alternative, radical proposal, should the SEC's reforms not be adopted.
2010-09-07 Mistake Management Symphony Style by Justin Locke (Article)
Mistakes happen - often. Eliminating them is impossible. The real question is: How do you manage the inevitability of making them? In this guest contribution, Justin Locke shares a few lessons he learned while playing the bass in a professional orchestra.
2010-08-31 The Riskiest Pension Assets (and the Implications for Muni Bonds) by Robert Huebscher (Article)
State finances are in trouble, in large part due to unfunded pension liabilities. To assess the depth of those problems, one can look at what is likely the riskiest component of states' pension assets - their exposure to alternative investments and, in particular, to private equity. We assess those risks and look at the larger question of whether unfunded liabilities can trigger municipal defaults.
2010-08-31 Why Mid-Cap? by RidgeWorth Investments (Article)
RidgeWorth Investments has published research detailing six distinct reasons why investors should consider a specific allocation to mid-caps. Specifically, it explores historical performance, evaluates current conditions that favor mid-caps as well as examines how mid-caps have performed during different points in market and economic cycles. Finally, the research looks at the incremental benefit of adding an allocation of up to 40% of mid-cap stocks to a portfolio of solely large and small cap stocks. We thank RidgeWorth Investments for their sponsorship.
2010-08-31 David Blitzer on How Indices Work by Dan Richards (Article)
Many investors read about the Dow Jones or S & P 500 index being up or down 200 points but don't really understand what this means. Today's interview with David Blitzer of S & P provides an explanation of how indexes work that can be shared with clients. This is a transcript of the interview.
2010-08-31 Five Steps to Choosing the Right Marketing Firm by Kristen Luke (Article)
Finding a marketing firm for your advisory practice can be a daunting task and hiring the wrong firm can be an expensive mistake. It is essential that you spend time doing due diligence to find the right partner for your growth. Kristen Luke provides five steps that will help you with this process.
2010-08-24 This is No Way to Run a Railroad by Michael Lewitt (Article)
In the latest edition of the HCM Market Letter, This is No Way to Run a Railroad, Michael Lewitt says the railroad known as the United States economy is chasing its own tail these days. Driven by misbegotten fiscal and monetary policies that ignore the lessons of history in favor of discredited financial and economic theories, the economy is trapped in a cycle of boom and bust. Lewitt also comments on the bond market, the European stress tests, GM, and the private equity industry.
2010-08-24 Build America Bonds Power the US States by Hildy Richelson, Ph.D. (Article)
A skeptical attitude toward new products has long served the best interests of advisors and their clients, almost without fail. However, in this guest contribution, Hildy Richelson argues that advisors should not be afraid to embrace one of the market's most prominent recent innovations: the Build America Bond (BAB).
2010-08-17 Misconceptions about Risk and Return Uncovered by Geoff Considine, Ph.D. (Article)
Our beliefs about risk and return determine how we construct portfolios and manage risk. Research over the last decade suggests that a number of the ideas on which many investors and advisors rely lead to portfolios that are too highly exposed to market risk. In this article, we review a number of ideas that determine how we select assets and how we determine what to expect from those assets.
2010-08-17 A Proven Path to Gaining Client Assets by Dan Richards (Article)
When Dan Richards talks to successful advisors about their business objectives, for most increasing assets is at the top of their list. Some advisors mistakenly believe, though, that winning a greater share of assets from existing clients is driven by performance.
2010-08-10 When Active Management Matters by Kenneth R. Solow, CFP and Michael E. Kitces, MSFS, MTAX, CFP (Article)
Financial planners have eagerly awaited any research that could finally, definitively prove - or disprove - the pesky notion that active management is effective. Though no one has yet risen to that challenge, past academic studies have been improperly interpreted to show that portfolio policy, or asset allocation affects portfolio returns far more than active management. As Ken Solow and Michael Kitces write in this guest contribution, the most recent study to tackle the active management debate, by Yale professor Roger Ibbotson, shares two weaknesses with previous research.
2010-08-10 Public Pension Showdown: Actuaries vs. Economists by Charlie Curnow (Article)
Public pensions are severely underfunded, at least according to the economists. Actuaries disagree, and at stake is nearly $2 trillion. We look at why these groups arrive at such different valuations, and which one is likely to be correct.
2010-08-10 Taking Exception: 'Fiduciary' is Much Ado about Something! by Scott MacKillop (Article)
All financial advisors who provide investment advice directly to clients or exercise investment discretion over client assets should be subject to fiduciary standards. In this guest contribution, Scott MacKillop takes exception to the article by John Lohr entitled 'Fiduciary': Much Ado about Nothing! that appeared here last week.
2010-08-10 Confessions of a First-time Manager by Justin Locke (Article)
When you have a certain degree of skill at a given task, people often assume that you will naturally be able to manage other people who do that same task. That's how Justin Locke because a first-time manager in the orchestral business, and he shares a few important lessons to apply when you receive that important promotion that elevates you above your coworkers.
2010-08-10 Is the Market Efficient? by Adam Jared Apt (Article)
After Marxism, no economic theory today may be as derided and despised as the hypothesis of market efficiency. The idea is often misunderstood, sometimes willfully. So what does "market efficiency" mean? In the latest installment of his series for the educated layman, Adam Jared Apt provides some answers.
2010-08-03 Woody Brock: How to Achieve Growth without 'Bad' Deficits by Robert Huebscher (Article)
Of all the challenges facing our nation, none is as daunting as trying to achieve economic growth and reduce unemployment without adding layers of debt to our already bloated deficit. Legislators and economists have debated the merits of stimulus measures, changes in tax rates, and monetary policies, but they are no closer to a consensus than they were at the onset of the financial crisis. H. 'Woody' Brock, however, says a genuine solution is possible.
2010-08-03 'Fiduciary': Much Ado about Nothing! by John Lohr (Article)
The most overused, misused and misunderstood word in the investment industry is 'fiduciary.' Independent advisors, trade organizations and self-styled 'expert' groups have called for stockbrokers to adopt the 'fiduciary' standard to achieve a grand leveling of the playing field for those who provide investment advice. This is nothing more than unnecessary marketing hype, says securities lawyer John Lohr in this guest contribution.
2010-08-03 Rebuilding Confidence in Stocks by Dan Richards (Article)
These days, there's a cloud of uncertainty over markets, with questions about economic growth, government deficits, the timing and impact of interest rates increases, unemployment levels and the housing market. As Dan Richards writes, this environment is when advisors can bring value, by providing perspective on both sides of the debate about the value that stocks provide at today's levels.
2010-08-03 Richard Koo: Lessons from Japan's Decline by Dan Richards (Article)
Richard Koo is the Chief Economist of Nomura Research Institute, and has served as an advisor to the Japanese government. In this interview with Dan Richards, Koo explains why Japan's recovery was thwarted by inadequate stimulus spending. This is a transcript of the interview.
2010-08-03 A Marketing Guide for RIAs: Part 9 ? Create a Drip Marketing System for Prospects by Kristen Luke (Article)
In her series on low-budget marketing for startup RIA firms, Kristen Luke discusses how to develop a drip marketing program.
2010-07-27 Rediscovering Your Listening Skills by Justin Locke (Article)
Listening may be the most critical part of your job, both for acquiring new clients and for maintaining current relationships. Everyone's listening abilities are unique, but many common fears and anxieties can interfere with your innate listening skills. In this guest contribution, Justin Locke identifies a few common problems and suggestions for how to work around them.
2010-07-27 Active Managers Add More Value in Bull than Bear Markets by Jane Li, CFA, CAIA (Article)
In this guest contribution, Jane Li of FundQuest argues that both active and passive investing have their strengths and weaknesses; it depends on the market segment in question and on the economic climate. Active managers tend to add value in bull markets, but their value is shakier in bear markets.
2010-07-20 Martin Leibowitz? Failed Defense of the Endowment Model by Michael Edesess (Article)
The latest book from Martin Leibowitz, one of the most respected thinkers in the investment industry, attempts to justify the endowment model of investing. As Michael Edesess writes in this review, Leibowitz's defense is highly problematic, and that should concern any advisor utilizing a Yale-like strategy.
2010-07-20 Cash Investing: Considerations for Investing in a Low Interest-Rate Environment by Northern Trust Investments (Article)
Northern Trust's chief economist, Paul Kasriel, forecasts that interest rates will remain low for the remainder of 2010. Investors are looking for guidance on how they should best position their cash and fixed income portfolios to take this environment into consideration, and should consider the tradeoff between liquidity and yield. We thank Northern Trust for their sponsorship.
2010-07-20 Beyond The Stars: Improving Active Fund Selection Based On Manager Skill by Michael Ervolini (Article)
After a brief review of known shortcomings of common fund evaluation methodologies, Mike Ervolini introduces a new approach based upon analytics that his firm has developed. Rather than relying on non-predictive metrics such as past performance, his approach looks at investment processes in relation to deeper skills that managers possess regarding buying, selling, and position-sizing.
2010-07-20 The Opportunity in Build America Bonds by Jeff Westergaard (Article)
While the unique aspects of Build America Bonds (BABs) and recent Treasury Department actions are meaningful, the risks to investors have been over-emphasized. BABs remain an attractive vehicle for investors and issuers, and the market for them is likely to grow.
2010-07-20 A Marketing Guide for RIAs: Part 4 ? Create Marketing Collateral by Kristen Luke (Article)
In her series on low-budget marketing for startup RIA firms, Kristen Luke discusses how to create your marketing collateral.
2010-07-20 A Marketing Guide for RIAs: Part 5 ? Become an Expert by Kristen Luke (Article)
In her series on low-budget marketing for startup RIA firms, Kristen Luke discusses how to become an expert in your market niche.
2010-07-20 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.
2010-07-13 Nouriel Roubini on Crisis Economics by Michael Edesess (Article)
There's good reason why Nouriel Roubini has been dubbed Dr. Doom. After reading his book co-authored with Stephen Mihm, Crisis Economics, one might despair for our economic system. Roubini makes the recent crisis seem inevitable, hard to stop, and very hard to keep from happening again.
2010-07-13 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.
2010-07-13 The Retirement Readiness Checklist by Dan Richards (Article)
Dan Richards describes a recent research report which offered a retirement readiness index. Attached to the report was a questionnaire that advisors can walk clients through to benchmark where they stand on each task and identify areas that need improvement.
2010-07-13 Deficits Monetary and Moral by Michael Lewitt (Article)
"The word 'deficit' has come to epitomize not only our economic dilemmas but also our moral and intellectual failures to address them in an era that should be boasting of new breakthroughs in the social and physical sciences," writes Michael Lewitt in the latest installment of his HCM Market Letter, Deficits Monetary and Moral. "Instead, our ability to solve complex problems is weighed down by flawed and corrupted government processes and the lack of courage to forthrightly change them."
2010-07-13 Chronicle of the Quarter by Bob Veres (Article)
Bob Veres provides one of his Client Articles, which is a service for advisors to send to their clients; it's a daily blog about what it felt like to watch the market during the past fiscal quarter. It communicates several points: perhaps most importantly, that what seems clear in hindsight (the markets gave back their first quarter gains) is not at all clear as it is experienced.
2010-07-13 Letter to the Editor by Various (Article)
In a letter to the editor, a reader questions Michael Nairne's article last week, And the Winner Is..., and we provide Nairne's response.
2010-07-06 How to Calculate Your Personal Safe Withdrawal Rate by Lloyd Nirenberg, Ph.D (Article)
Traditional approaches for determining safe withdrawal rates (SWRs) rely on back-testing portfolios with different asset allocations using historical data. Instead, in this guest contribution, Lloyd Nirenberg provide a new, transparent analysis that enables investors to explicitly update their SWR based on new beliefs about their future returns and inflation.
2010-07-06 A Marketing Guide for RIAs by Kristen Luke (Article)
Kristen Luke begins a series of articles that will provide step-by-step instructions on how to start marketing your new RIA firm. She assumes that your firm does not have tens of thousands of dollars to spend on marketing. Here is an overview of the series.
2010-07-06 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.
2010-06-29 Timber as an Asset Class: If a Tree Falls in the Forest, Should you Buy It? by Charlie Curnow (Article)
"If the sun shines and it rains, the trees grow about on schedule," wrote Jeremy Grantham, chairman of Boston-based investment firm GMO, in his quarterly newsletter in April 2007. Grantham's enthusiasm for timber, which remains true to this day, may be excessive, despite the fact that, on the surface, historical data seems to support his optimism. If a tree falls in the forest, should you buy it?
2010-06-29 Inflation Protection Investment Strategies by Vern Sumnicht (Article)
The value of the dollar is sure to erode, and investors will be left to grapple with the inflationary consequences. As Vern Sumnicht shows in this guest contribution, recent policies suggest steep inflation may be just around the corner. Fortunately, investors have some options to bolster their portfolios against the threat of inflation.
2010-06-29 Letters to the Editor by Various (Article)
In our letters to the editor, readers comment on two of last week's articles: Improving on Morningstar's Ratings: Moving Beyond Past Performance and The New Roth Rules: Are Your Clients Converting? Survey Results - April/May 2010.
2010-06-22 Inexpensive Protection Against Rising Rates by Geoff Considine, Ph.D. (Article)
As is too often the case, the biggest risks are those that we discount. The possibility of a surge in interest rates appears to be today's ignored risk, despite the warnings of many experts, including David Einhorn, Bill Gross, and Seth Klarman. We discuss an inexpensive strategy to protect your portfolios from the tail risk of rising rates.
2010-06-22 Three New Ways to Use LinkedIn to Market Your Business by Kristen Luke (Article)
LinkedIn is constantly evolving and has become a better marketing tool in the process, writes Kristen Luke. If you haven't logged in recently, here are three new ways you can use the site to market your business.
2010-06-22 The New Roth Rules: Are Your Clients Converting? Survey Results ? April/May 2010 by Michael Slemmer, CFA (Article)
Many fund companies are reporting high levels of Roth conversion activity, but to date there have been only anecdotal reports as to what investment advisors and wealth managers are experiencing with their clients and prospects. Here are the results from a survey we recently conducted that provides insights into trends in Roth conversions.
2010-06-15 Letter to the Editor by Various (Article)
In a letter to the Editor, a reader responds to our article last week, Five Strategies for a Rising Rate Environment.
2010-06-08 Why Wall Street Won't be Reformed by Robert Huebscher (Article)
Michael Lewitt, author of the highly respected HCM Market Letter, has just released a new book, The Death of Capital. In this interview, he identifies the challenges facing those who seek to regulate Wall Street, and why most of the proposed reforms are likely to fail.
2010-06-08 What?s Driving Investment Management Outsourcing? by Northern Trust Investments (Article)
Advisors who fully outsource their investment management want to free time for clients and grow their practice. But, as Northern Trust Investments' research explores, not all advisors are comfortable with full outsourcing. We thank Northern Trust for their sponsorship.
2010-06-08 Three Words to Blow Away Clients by Dan Richards (Article)
Every advisor's goal is to build deep relationships with key clients, partly to foster loyalty and increase the assets you have from them, partly to open the door to referrals. One way to do that is to have clients "wowed" by their experience in dealing with you, and Dan Richards says three key words will create that "wow" effect with important clients.
2010-06-08 Ten Ways to Improve Manager Selection by Nancy Opiela (Article)
Today's emphases on fiduciary responsibility, risk management and increased transparency require better due diligence when selecting managers. Especially in today's turbulent markets, advisors who spend more time and resources to do due diligence well can find themselves at a distinct competitive advantage. While these ten tips won't necessarily help you identify the next active management superstar, they can bolster your manager selection and due diligence program.
2010-06-08 The First Thing We Do, Let?s Kill All the Quants by Michael Lewitt (Article)
In the latest issue of the HCM Market Letter, Michael Lewitt draws the parallels between the Gulf of Mexico oil spill and financial reform - both, he says, demonstrate our inability to learn from our mistakes. Lewitt also comments on quantitative trading strategies, economic recovery and the capital markets.
2010-06-08 Barfing Your Way to Investment Success by Mariko Gordon (Article)
When it comes to air travel, turbulence is to be expected. If you're not of the same mindset with your investments, you may be in for a bumpy, barfy ride, says Mariko Gordon of Daruma Asset Management in this guest contribution.
2010-06-01 Municipal Bond Market Insights by Northern Trust Investments (Article)
Not surprisingly, the most profitable investment trends tend to be those with the most staying power. That could be particularly good news for investors in municipal bonds, since structural forces are in place that may make tax-free bonds - and the income they generate - even more valuable in the years to come. Northern Trust provides their secular outlook for municipals, and we thank them for their sponsorship.
2010-06-01 Europe: Value or Value Trap? by Dan Trosch, CFA (Article)
European equities seem much cheaper than in the US, says Dan Trosch of Fortigent in this guest contribution. Europe trades at a 26% Price to Book discount and a 20% Price to Cash Earnings discount to the US. Some European industries and stocks are deservedly cheap and value traps; other industries and stocks are attractive and will benefit from global growth in exports and other macro trends.
2010-05-25 Seth Klarman is More Worried than at Any Time in his Career by Robert Huebscher (Article)
The concern that the dollars he earns for his clients will lose their purchasing power is always on hedge fund manager Seth Klarman's mind. The possibility that the government will continue to print money to solve our economic problems has left him more worried than at any time in his career. We report on Klarman's remarks at last week's CFA conference.
2010-05-25 The Prospecting Approach that Works Today by Dan Richards (Article)
The problem with viewing a prospect conversation as an event is that you have to ask for a firm commitment at the end of any interaction - whether it is a request to meet when talking on the phone or asking for a decision to invest when meeting face-to-face, according to Dan Richards. All too often, that request will be premature - and if it's too soon in the process, the prospect feels under the gun. Richards offers a solution.
2010-05-25 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.
2010-05-18 Anthony Boeckh on the Great Reflation by Robert Huebscher (Article)
Tony Boeckh has been the guiding force behind Bank Credit Analyst, and in this interview he discusses his new book, The Great Reflation. Boeckh stakes out a deflationary forecast, and explains how the flow of liquidity in the financial system will determine asset class performance.
2010-05-18 The Number One Way to Stay Motivated Breakthrough Research from the Harvard Business Review by Dan Richards (Article)
In a multi-year study, researchers at the Harvard Business School asked 600 managers from dozens of different companies to rank the impact of five factors that are normally associated with motivation - recognition, incentives, support from managers and colleagues, clear goals and a sense of making progress. Dan Richards discusses their findings and the takeaways for financial advisors.
2010-05-18 Spain: After the Bubble by Charlie Curnow (Article)
Today, Barajas Terminal 4 one of the most visible artifacts of the profligacy that fueled Spain's property bubble and led to the country's current financial crisis. Spain, like several other European states, has continued to spend rapidly over the past two years, even as its economy has contracted. As a result, the Spanish government's debt has skyrocketed, raising fears of a possible sovereign default.
2010-05-18 Search Engine Marketing for Financial Advisors by Dan Sommer (Article)
How do you take advantage of search engine marketing as a financial advisor? The goal of search engine marketing is to ensure that your website appears on as many results pages as possible for queries that relate to your business, and in this guest contribution Dan Somer explains the details of Search Engine Optimization (SEO) and Pay-Per-Click (PPC) advertising.
2010-05-11 A Historical Perspective on the Slight Depression by Robert Huebscher (Article)
Armed with textbooks and formulas, economists attack a problem by drawing lines, forming equations and trying to fit data to the real world. Niall Ferguson, a historian by training, thinks you can learn more simply by analyzing what has already happened. So what's a historian's take on the current crisis? Ferguson says it has yet to run its course.
2010-05-11 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 God Is Dead: The Implications of the Goldman Sachs Case by Michael Lewitt (Article)
Michael Lewitt provides us with the most recent issue of the HCM Market Letter, where his discusses the implications of the Goldman Sachs case. Lewitt says Goldman faces a terrible dilemma, and should heed the lessons of the downfall of Drexel Burnham two decades ago. Lewitt also comments on the private equity industry, public pension funds, and bank capital requirements and the ratings agencies.
2010-05-11 A Coming Wave of M&A? by Seth P. Hieken, CFA (Article)
In this guest contribution, Seth Hieken of The Colony Group says to expect M&A transactions to accelerate over the course of the year. If correct, there are several important guidelines investors may wish to follow.
2010-05-11 Tagline, You?re It by Wendy J. Cook (Article)
Have you ever noticed that it can be easier to write a 6,000-word treatise than to come up with six perfect words, like, say, "You're in good hands with Allstate®"? As Wendy Cook writes, sometimes less is more - more frustrating, that is. How do you say a lot with a little in corporate taglines?
2010-05-04 Lacy Hunt: Keynes was Wrong (and Ricardo was Right) by Robert Huebscher (Article)
Underpinning the Obama administration's economic policies is the work of John Maynard Keynes, the legendary British economist who called for large fiscal and monetary interventions to counter the Great Depression. On this critical issue, Keynes was wrong, says Lacy Hunt, the internationally renowned economist with Texas-based Hoisington Investment.
2010-05-04 Timely market insights: Sector reviews and quarterly perspective on the financial markets by Janus (Article)
Janus provides sector reviews and reports on quarterly market performance in a new commentary. While economic recovery is in place, the firm says, its magnitude is uncertain. Topics covered include winners and losers in the energy sector, Chinese growth from within, the evolution of internet-related media and communications, and the financial impact of health reform. We thank Janus for their sponsorship.
2010-05-04 The Quants by Michael Edesess (Article)
In his review of the new book, The Quants, Michael Edesess says its author, Scott Patterson, mistakenly glorifies the accomplishments of the supposed quantitative "geniuses" on Wall Street. Those quantitative analysts are not disciplined for their lack of rigor and, as a result, produce results that are not justified by the underlying mathematics or by common sense.
2010-05-04 Alternative Centers of Influence by Kristen Luke (Article)
Just because you haven't had much luck generating referrals from traditional centers of influence (COIs), don't give up your COI marketing strategy all together. COIs don't have to be CPAs or attorneys, says Kristen Luke. They can be anyone who has the ability to influence a potential client to pick up the phone and call you.
2010-05-04 How Much is that Investment Worth in Real Money? by Adam Jared Apt (Article)
In the latest installment of his series of articles geared to the educated layman, Adam Apt looks at the topic of the time value of money, and how discount rates can be used to determine the value of a security. He shows the practical applications of present value calculations and its limitations.
2010-04-27 Writing in Plain Speak by Wendy J. Cook (Article)
Wendy Cook specializes in helping advisors write newsletters and create presentations, and in this guest contribution she shares a number of tips to improve your writing skills. Cook is passionate about writing, and her article covers topics such as the importance of brevity and how to tailor content to your audience.
2010-04-20 Investment Implications for Government Policy and Intervention by BlackRock, CFA Institute Reprint w/ Curtis Arledge (Article)
Government intervention has stabilized the economy, but policymakers must be careful to draw down their interventions before inflation occurs. Although residential real estate has seen its worst days, a wave of high-yield bonds and loans will soon mature, and the banking system must rebound enough to absorb that bubble. Despite these uncertainties, the range of yields and total annual returns among fixed-income sectors provide investors with multiple opportunities. We thank BlackRock for their sponsorship.
2010-04-20 Unconventional Wisdom: An Interview with Robert Shiller by John Heins (Article)
"Few macroeconomic prognosticators have been as publicly right as Yale's Robert Shiller,whose first and second editions of the book Irrational Exuberance laid bare, with remarkable timing, the speculative bubbles forming first in the Internet-crazed stock market and next in residential real estate," writes the highly regarded newsletter Value Investor Insight in its preface to this interview with Shiller and excerpt from his latest book. Value Investor Insight, which bills itself as the "Leading Authority on Value Investing, offers a no-obligation, one-month free trial subscription.
2010-04-13 Are Public Employees Bankrupting the Nation? by Charlie Curnow (Article)
While markets may be recovering, public debts are still mounting. Charlie Curnow reviews Plunder, the new book by Steven Greenhut, which blames public sector unions for a large portion of these debts. To Greenhut, we the taxpayers are helpless villagers, while corrupt public employee unions are barbarians at the gate, raiding government treasuries and leaving us with nothing but unfunded liabilities.
2010-04-13 Shameless by Michael Lewitt (Article)
The fiscal train wreck in the United States has not been set back on the tracks, and the global imbalances that led to the financial crisis have not gone away. Quite to the contrary, writes Michael Lewittin Shameless, the latest edition of his HCM newsletter. In fact, if progress isn't made with respect to these issues, and if intelligent financial reform is not enacted, future instability is guaranteed.
2010-04-13 James Heckman on the Drivers of Human Success by Dan Richards (Article)
"What we have come to learn from modern genetics, which has huge social implications, is that it's neither nature nor nurture. It's both combined," says James Heckman in this interview with Dan Richards. Heckman, who won the Nobel Prizein Economics in 2000, discusses the key drivers of success in human development.
2010-04-06 Liz Ann Sonders on the US Economic Recovery by Robert Huebscher (Article)
Liz Ann Sonders is Senior Vice President and Chief Investment Strategist at Charles Schwab & Co. In this interview, she discusses her positive outlook for the US economy, which she believes has been recovering since last summer.
2010-04-06 A Review of "The Big Short" by Michael Lewis by Michael Edesess (Article)
"The Big Short" tackles the financial meltdown as seen by four relatively minor, but colorful players. (Minor means running only hundreds of millions, not billions.) All of them were voices in the wilderness, writes Michael Edesess, our reviewer. All of them bet heavily against the subprime real estate bubble that, for a while, fueled huge gains.
2010-04-06 Emerging Markets: High Growth does not mean High Returns by Dan Richards (Article)
Recent research explores the return payoff of investing in emerging markets such as Brazil, Russia, India and China, writes Dan Richards. Contrary to popular beliefs, investing in high-growth emerging markets has produced inferior returns to those obtained from slower growth economies.
2010-04-06 Insights and Foresights into 2010 by Ron Surz (Article)
Ron Surz provides his award-winning market recap and analysis for the first quarter of 2010. The first quarter of 2010 did not start well, with US stocks experiencing losses in excess of 3% in January, but then we recovered most of those losses in February, setting the stage for 6%+ returns in March. All of the first quarter return was earned in March.
2010-04-06 Ten Steps to Get Started with New Media Marketing by Kristen Luke (Article)
For advisors not familiar with social media (Facebook, Twitter, LinkedIn, Viddler, BlogTalkRadio, and YouTube), Kristen Luke provides a 10-step plan to get started.
2010-03-30 America's "Failing" Infrastructure? by Charlie Curnow (Article)
In 2007, the spectacular collapse of the Mississippi River Bridge in Minneapolis killed 13 people and was the catalyst for calls for massive investment in infrastructure projects. Whether that catastrophe was truly symptomatic of systemic failure or simply an unfortunate but relatively isolated incident, however, remains up for debate. In fact, once one looks past the politics of infrastructure investment to the hard data, there's reason to believe the latter.
2010-03-30 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 Making the Sale by Michael Ervolini (Article)
Because investors are "hard-wired to like buying more than selling," writes Cabot Research CEO Michael Ervolini in this Value Investor Insight article, the sell decision-making process is typically less rigorous and analytical than the decision to buy. Ervolini explains the problems that can cause and offers a framework for how make better, return-enhancing sell decisions.
2010-03-30 Get More Bang for Your Charitable Buck by Kristen Luke (Article)
Whatever your level of involvement in charitable activities, you can probably still do more, writes Kristen Luke. This is especially true when it comes to incorporating your charitable support into a marketing strategy for your own business.
2010-03-26 narrative power by tom brakke of the research puzzle
The investment world illustrates the power of narrative. People up and down the informational food chain use stories to enlighten and deceive. For stock investors, many stories originate with companies and their officers, who learn that crafting a narrative that puts everything in the best light is part of their leadership role. Sell side analysts sometimes reinforce those messages by making the telling of certain stories part of their brands. Investors must therefore read widely and read well, and realize that understanding comes from taking nothing for granted and questioning everything.
2010-03-23 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 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.
2010-03-16 The New Investment Paradigm: Graham Meets Markowitz by Bob Veres (Article)
Broadly speaking, the financial services industry has been divided into two competing paradigms since roughly 1950. One, articulated by Harry Markowitz, suggests advisors add value through diversified portfolios optimized along the efficient frontier. The other, advocated by Benjamin Graham, says advisors add value by purchasing assets at prices less than their fair value. Bob Veres reconciles those views and describes the New Paradigm that has emerged.
2010-03-16 Greeks Bearing Gifts by Michael Lewitt (Article)
We are again privileged to publish the most recent edition of Michael Lewitt's HCM Market Letter, Greeks Bearing Gifts. Lewitt comments on Goldman Sachs' derivative transactions that helped Greece hide its debt and its larger implications for the financial system, for the European periphery and for Spain in particular. Lewitt also addresses the state of decline of the US economy and other topics.
2010-03-16 Rational Deficit: An Interview with Dan Ariely by John Heins (Article)
Through creative research and clever articulation of his ideas, behavioral economist Dan Ariely has established himself as one of the brightest thinkers today on the subject of human decision-making, particularly with respect to influences of which we are largely unaware. In this wide-ranging interview with the investment newsletter Value Investor Insight, Ariely describes the unwitting biases that can lead to bad decisions and what investors can do to guard against them.
2010-03-16 Paul Romer: What Drives Economic Growth? by Dan Richards (Article)
Paul Romer is a senior fellow at the Stanford Institute for Economic Policy Research, and the focus of his research is the drivers of economic growth. In this interview with Dan Richards, Romer identifies what sets apart fast growing countries, and which policies best stimulate economic growth. We provide a transcript and a link to a video of the interview.
2010-03-16 Letters to the Editor ? A Charity Challenge and the Cassandra Portfolio by Various (Article)
In our letters to the Editor, readers respond to recent articles on the challenge to passive investors and the "Cassandra" portfolio.
2010-03-09 Communicating with Ease by Beverly Flaxington (Article)
Advisors, like so many people in relationship-oriented businesses, depend on strong communication to maintain and grow their businesses. In this guest contribution, author Beverly Flaxington discusses her new book about how advisors can communicate with ease and strengthen their bonds with clients.
2010-03-09 Healthcare, Unions and the Next Bull Market by Robert Huebscher (Article)
In order to reduce health care costs, consumers must be empowered to shop for and select health care services in a competitive environment, according to Jack Ablin. Ablin, the chief investment officer of Harris Private Bank, delivered the keynote address at last week's Boston Security Analysts Society market forecast event, where he also spoke of the need to reform labor practices in the public sector.
2010-03-09 Letters to the Editor by Various (Article)
In our letters to the Editor, readers respond to a number of recent articles, including the charity challenges posed by Roger Schreiner and Dave Loeper, the active v. passive debate, Morningstar ratings, and our article on the PIMCO Total Return fund.
2010-03-03 Recommended Bond Allocation by Team of Bespoke Investment Group
Have analysts become more conservative, or will the recommended bond weighting continue to fall as the market goes up? Wall Street strategists currently recommend a 30.5 percent weighting in bonds. Before the run-up in treasury bonds during the financial crisis, the recommended bond weighting ranged between 15 and 20 percent. As bond prices rallied, strategists increased their recommended weighting. Bond prices peaked in December 2008, however, and have been drifting lower since the onset of the current bull market in stocks.
2010-03-02 Asset Allocation for Grantham?s Seven Lean Years by Geoff Considine, Ph.D. (Article)
Followers of Jeremy Grantham know his consistently accurate long-term forecasts well, as well as his ability to identify and avoid asset bubbles and steer clients into high-performing asset classes. Grantham's prescience is remarkable but not irreplicable. Geoff Considine shows that his Monte Carlo simulations nearly match Grantham's forecasts, and he reviews the implications for asset allocations.
2010-03-02 The Elusiveness of Persistence by Michael Nairne (Article)
In this guest contribution, Michael Nairne examines a manager's track record, and highlights the critical question of persistence in performance - whether a manager's past performance is predictive of future performance. Certainly, he says, considering the avalanche of media articles on top winning funds and the endless sales pitches to investors trumpeting "best in class" managers, one would assume that there is some reasonable level of persistence in performance...
2010-03-02 Robert Pozen on the Financial Crisis, Social Security, and the Mutual Fund Industry by Dan Richards (Article)
Robert Pozen is the chairman of MFS Investment Management and a senior lecturer at the Harvard Business School. In this interview with Dan Richards, he discusses the financial crisis, Social Security, and the mutual fund Industry. We provide a transcript and a video replay of the interview.
2010-02-23 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.
2010-02-23 Rethinking the Fundamentals of Client Communication by Dan Richards (Article)
Dan Richards says advisors need to fundamentally rethink both the information they communicate and - just as importantly - how they communicate. Changing these two key dimensions of your communication strategy - what you send clients and how you send it - will be critical to future success.
2010-02-23 An Analysis of the Risk and Return of Small/Mid-Cap Growth by David Vincent (Article)
In this guest contribution, David Vincent of Fred Alger says investors interested in gaining exposure to the small-capitalization growth equity style should consider the small/mid ("SMid") capitalization style as a way to capture the benefits of small-cap growth.
2010-02-16 Boom and Bust by Michael Lewitt (Article)
The US and global economies are "trapped in a cycle of boom and bust as a result of fiscal and monetary policies from which there is no easy escape," says Michael Lewitt of Harch Capital Management. Lewitt believes the S&P will rally to 1,200-1,250, but says the long-term prognosis is "somewhere between grave and terminal." We are privileged to provide this excerpt from Lewitt's monthly newsletter and encourage our readers to subscribe to it directly.
2010-02-16 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 Transforming Your Business with an Integrated Solution by Marie Swift (Article)
Marie Swift evaluates the various systems and processes that are kicked-off at a typical firm from one of the most common client interactions - an inbound call. Many firms work with disparate software systems and utilize far too many manual tasks - resulting in duplicate data entry and poor customer service. Conversely, Marie evaluates this same scenario utilizing an integrated software and services solution, Tamarac Advisor 9, and finds dramatic gains in efficiency, accuracy and overall firm profitability. We thank Tamarac for their sponsorship.
2010-02-09 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.
2010-02-02 Change ? The Only Constant by Christina Ho (Article)
The Institute for Private Investors serves families with over $50 million in assets. Their data show wealthy investors have increased their use of tactical asset allocation and are positioning their portfolios to defend against liquidity, concentration and inflation risk.
2010-02-02 Stuck in One Dimension by Tom Brakke, CFA (Article)
Tom Brakke writes about the lessons in the demise of Tiger Woods for those seeking "star" investment managers. Relying on funds run by a single individual can be perilous.
2010-01-26 Diversification Really Does Pay Off by Geoff Considine, Ph.D. (Article)
The last decade severely tested investors' belief in the value of diversification and strategic asset allocation, leading some in the financial media to assert that diversification and asset allocation failed and were worthless during the crash of 2007-2008. Now is an ideal moment to look back and assess the carnage.
2010-01-26 The Potemkin Market by Michael Lewitt (Article)
We are again privileged to publish the current issue of Michael Lewitt's newsletter, titled The Potemkin Market. Lewitt updates his forecast for the S&P 500, criticizes the current financial reform efforts and the ongoing GSE bailout and Fed Chairman Bernanke. Lewitt argues that risk is overpriced in many segments of the market.
2010-01-26 Punctuated Equilibrium by Dan Richards (Article)
Dan Richards says we're dealing with a more fundamental issue than the recent market turmoil. "We're going through one of those rare periods of ground-shaking change that have taken place throughout history, something that was in the works well before last fall's market excitement," he says, and explains how advisors should deal with more demanding customers, new technology and global competition.
2010-01-26 Buffett?s Gold by Emilio Vargas (Article)
Warren Buffett's valuation of Burlington Northern and his use of arguably cheap Berkshire Hathaway stock to purchase it have created a bit of a cacophony among analysts. It seems to some very un-Buffett-like to pay top dollar for an asset and to use precious equity currency to get a deal done. What does Buffett see that others do not? Oddly, the argument made by gold bugs for their asset of choice may hold the answer.
2010-01-25 What Husbands and Wives Search for on Google by Dan Ariely of Predictably Irrational
?A few days ago we looked at some telling search suggestions by Google when it came to what boyfriends and girlfriends searched for in their relationships. On the heels of this insight, I wanted to se
2010-01-19 Shiller PE's and Modeling Stock Market Returns by Joseph A. Tomlinson, FSA, CFP (Article)
One of the most popular assumptions used in investment modeling is that stock prices follow a random walk. However, a growing body of evidence shows that this is a bad assumption, and that stock prices go through periods of over-pricing and under-pricing that affect future returns. Joe Tomlinson, a Maine-based advisor, offers a model based on Shiller PE ratios to disprove the random walk hypothesis.
2010-01-19 John Cochrane on the Dangers of Current Economic Policies by Dan Richards (Article)
John Cochrane is a professor of finance at the University of Chicago and the incoming president of the American Finance Association. Cochrane is also author of the widely-circulated article, How did Paul Krugman get it so Wrong?. In this interview, Cochrane identifies the shortcomings and dangers of current economic policies.
2010-01-19 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.
2010-01-12 The Financial Crisis Post-Mortem: Suicide, Accident or Murder? by Michael Skocpol (Article)
Since the stunning collapse of America's financial system in 2008, questions have swirled around how we got here and who's to blame. The subsequent finger-pointing has yielded few answers, but now one economist has taken a cue from CSI's Gil Grissom and Law and Order's Jack McCoy. He performed an autopsy.
2010-01-12 Olivier Blanchard on Global Stability by Dan Richards (Article)
Olivier Blanchard is the chief economist at the International Monetary Fund, a position he has held since September 1, 2008. In Dan Richards' interview, Blanchard discusses the steps being taken to revive the global economy and what he believes is in store for beleaguered debtor nations - particularly Greece.
2010-01-05 Risk Management through Costless Collars by Geoff Considine (Article)
Nassim Taleb and Zvi Bodie are among those who advocate a wealth management strategy that includes options. Despite their evangelism, though, options are rarely a part of retirement portfolios. The costless collar, a straightforward options strategy, gives investors the upside of an asset class (such as equities) while absolutely limiting the downside risk.
2010-01-05 The Falling Dollar: Should We Worry? by Elisabeth L. Talbot, CFA (Article)
Over the past several months, it has become increasingly fashionable to refer to the decline of the U.S. dollar as another financial "crisis." Yet, given the current state of the global markets, declaring that the dollar's recent losses amount to a "crisis" is an overstatement, says Elisabeth Talbot in this guest contribution. To the contrary, current conditions surrounding the dollar are arguably supportive of - if not integral to - economic recovery.
2010-01-05 Perspectives on 2009 and Beyond by Ron Surz (Article)
We are again privileged to provide Ron Surz' award-winning market commentary. Surz examines global performance in Q4, 2009 and the prior decade.
2010-01-05 Capture Ratio as a Tool to Measure Investment Performance by David Vincent and Ray Pinelli (Article)
In this guest contribution, David Vincent and Ray Pinelli of Fred Alger examine the correlation of traditional up- and down-capture ratios to investment performance. They show that combining these two measures results in a metric with much higher correlation.
2009-12-29 End-of-Year Letter Templates by Bob Veres (Article)
Bob Veres is the editor and publisher of Inside Information, a publication focused on practice management and related issues for the financial planning profession. He just introduced a new monthly service, Client Articles, which will contain articles (and cartoons) that can be sent to clients, for example as part of your quarterly newsletters. He provides two sample letters.
2009-12-22 The Holiday Spirit and Better Networking by Nancy Opiela (Article)
If you aim to integrate the spirit of the holiday season into your practice, consider a networking strategy that emphasizes providing support without the direct expectation of receiving referrals. Nancy Opiela describes a new networking group that brings together people who serve the advisory profession and how the group's goals are unfolding.
2009-12-22 Stimulus II: A Modest Proposal by Jonathan Tardi (Article)
Our worthy public servants in Congress, not to mention in the White House itself, have worked tirelessly to solve the vexing problem of unemployment. They have courageously ignored their own ignorance in matters of commerce and finance and have unleashed a veritable cornucopia of well-intended solutions on a trusting public. In this guest contribution, Jonathan Tardi offers a modest proposal for reducing the rolls of the unemployed and, while he's at it, eliminating the national deficit.
2009-12-15 The Next Black Swan? Underfunded Public Pensions by Robert Huebscher (Article)
The plights of California and other states reveal an ominous threat our economy faces: underfunded public pension liabilities. We examine the size and scope of this problem, focusing on whether the underlying assumptions used to calculate liabilities are realistic.
2009-12-15 A Template for a Year-end Letter by Dan Richards (Article)
Many advisors have told Dan Richards they receive a positive response from the quarterly review letters they've sent over the past year based on the templates he has provided. Here's a template that can be a starting point for a year-end review letter.
2009-12-01 Ten Ways to Connect with Your Clients? Children by Nancy Opiela (Article)
When you work with a top client throughout his or her life, you have an opportunity to ensure that the client's family stays with your firm beyond the current generation. Financial legacies are often lost when wealth passes from generation to generation, so building intergenerational connections can ensure both a successful transfer of assets - and an advisory relationship that endures after your original client passes on.
2009-12-01 Allen Sinai: Jobless Recovery and the Failure of Current Economic Policies by Robert Huebscher (Article)
As the Democratic leadership in Congress has looked for ways to simultaneously create jobs and reduce the deficit, a key person they have turned to and continue to rely on is Allen Sinai. Sinai now fears the US is in the "mother of all jobless recoveries" and that the economic policies of the Obama administration are not working.
2009-12-01 To Roth or not to Roth, That is the Question by David B. Loeper, CIMA, CIMC (Article)
With the new Roth conversion rules about to be lifted next year and a "one-time special offer" available to allow investors to spread the tax bite of conversion over two years, more and more Roth conversion calculators are showing up every day. Be wary, says Dave Loeper of Wealthcare Capital. If you use one of these calculators, don't say he didn't warn you about how misleading the results can be.
2009-12-01 Think Like a Marine by David Raileanu (Article)
Retired Marine Patrick Gould has just published a book, Prudent Decision Making in an Imprudent World, and his theories prove useful for understanding decision-making in all arenas, not just those that involve life-and-death decisions. He applies many of his theories of risk, reward, preparation, security, and asset management to the financial world, working from modern portfolio theory and ultimately offering a practical decision method.
2009-11-24 Buy Bonds and Not Bond Funds by Hildy and Stan Richelson (Article)
Record inflows into longer-term bond funds in the last six months have provided investors purported relief from the near-zero returns in money market funds. Do not mistake those inflows or rising prices for an endorsement of bond funds, write Stan and Hildy Richelson in this guest contribution. Bond funds are inferior to individual bonds, as those who are now buying bond funds may soon discover.
2009-11-17 Disheartened by Michael Lewitt (Article)
We are again privileged to publish an excerpt from Michael Lewitt's HCM Market Letter. In this issue, titled "Disheartened," Lewitt argues that the powers-that-be are making limited progress addressing the structural problems in the economy, and that the greatest challenge is to achieve budgetary discipline.
2009-11-10 Roubini: Fed Policies are Destabilizing the Financial System by Robert Huebscher (Article)
Nouriel Roubini, the once-obscure economist who gained celebrity and the title "Dr. Doom" after correctly forecasting the financial crisis, believes that current Fed policies are destabilizing the markets and pushing the economy toward another collapse.
2009-11-10 Not by Return Alone: Judging Investment Performance by Adam Jared Apt (Article)
In the latest installment of his articles intended for an educated layman, Adam Apt addresses the relationship between risk and return, and shows that the connection between them is neither rigid nor obvious, and that we can be cheated of our money by disregarding risk and fixating only on return.
2009-11-03 Absolutely ? Maybe by Robert Huebscher (Article)
Since Putnam introduced its absolute return funds earlier this year, over 4,200 advisors and $650 million in assets have flocked to the new financial products. Putnam's four funds seek to beat inflation by 100, 300, 500 and 700 basis points, and their performance over their first nine months (3.1%, 6.4%, 8.4% and 12.2%, respectively) was encouraging for their investors. Impressive as those results may be, the question is whether they are sustainable.
2009-11-03 Alpha or Wealth? by Sam Bass (Article)
It is widely accepted that ETFs offer significant advantages over mutual funds, especially lower costs and taxes. But, as advisor Sam Bass argues in this guest contribution, the mutual fund industry may be all the more concerned that increasing numbers of investors are accepting the view that ETFs, and passive strategies in general, are better for wealth accumulation than active management - even if one assumes active strategies can generate positive alpha over extended periods of time.
2009-10-27 Leveraged Index Mutual Funds Evolve to Meet Market Needs by Direxion Funds (Article)
Until recently, leveraged index funds had daily objectives, rebalancing their leverage at the end of each trading day in order to match their stated exposure rate. This characteristic made it necessary for investors to monitor them daily in order to both track and manage the exposure rates applied to their investments in the funds. Direxion Funds has released the first monthly-rebalanced leveraged funds, and they explain how they operate. We thank them for their sponsorship.
2009-10-27 Letters to the Editor ? Fama-French and the Active-Passive Debate Redux by Various (Article)
Last week, two active management proponents responded to our article, Luck vs. Skill in Mutual Fund Alpha Estimates, on the latest research from Ken French and Gene Fama. This week, a reader takes on one of those responses and Michael Edesess, author of our article, says the debate between active and passive management is really a sidelight to the real issue - which is excessive fees.
2009-10-27 Stay the Course or Plot Another? by Ted A. Ponko, CFA (Article)
Is it reasonable for investors' objectives to change along with major fluctuations in their wealth? In these instances, sticking with the current portfolio may not be the best option - even for long-term investors. In this guest contribution, Ted Ponko of Klein Decisions argues advisors need a reliable way to determine when to stay the course and when to plot another.
2009-10-27 Guns N' Leeches by Mariko Gordon (Article)
No investor likes to see poor performance. But not all "bad returns" - even those of equal magnitude - are treated equally. In this guest contribution, Mariko Gordon takes a look at two common forms of underperformance and explains why one is often viewed much less favorably than the other.
2009-10-27 Should You Write Your Own Blog? by Kristen Luke (Article)
If you decide to include a blog in your marketing mix, you can use "canned" material from an outsource provider or you can write your own. Kristen Luke looks at the pros and cons of each approach.
2009-10-20 Life in and after the NBA Financial Planning for Professional Athletes by Robert Huebscher (Article)
During a 13-year career that began in 1987, Chris Dudley was called on to defend some of the greatest centers in NBA history - among them Shaquille O'Neal, Robert Parish, and David Robinson. While developing a reputation as an exceptional shot-blocker and rebounder, Dudley also devoted time to preparing for his post-basketball career - as a financial advisor - and he shares with us his thoughts about financial planning for the professional athlete.
2009-10-20 Finance After Auschwitz by Michael Lewitt (Article)
We are again privileged to provide an excerpt from Michael Lewitt's HCM Market Letter. In this installment, Finance After Auschwitz, Lewitt examines the dangers posed by Iran, whether the market is overvalued, the future of securitization, and what should be done about the private equity industry.
2009-10-20 Three Ways to Inspire Clients by Dan Richards (Article)
Given the beating their portfolios have taken and the general mood of skepticism, often your goal when meeting with clients is to have them leave feeling more optimistic and upbeat about their future prospects and in particular about your role as their advisor. Dan Richards offers three ways to uplift your clients' spirits, while confronting today's crucial issues and building your credibility.
2009-10-13 In Defense of Leveraged and Inverse ETFs by Tom Lydon (Article)
Leveraged and inverse exchange traded funds (ETFs) have been a lightning rod for controversy. Reasonable concerns underpin criticism of them, but these funds are largely misunderstood. Tom Lydon sets the record straight and identifies those investors for whom leveraged and inverse funds are appropriate.
2009-10-06 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.
2009-10-06 So Far so Good: The Decrepit Decade Winds Down by Ron Surz (Article)
Ron Surz provides his award-winning market commentary, covering performance in the US and global markets, broken down by style, sector, and other dimensions.
2009-09-29 Taste Testing Investment Style Sausages by Ron Surz (Article)
Equity indexes, like those offered by Russell and S&P are the investment-world equivalent of sausages - chopped up pieces of meat in tightly wrapped packages. Most shoppers buy sausages based on brand name, as do investors when they choose their benchmarks. In this guest contribution, Ron Surz dissects these index sausages and explains the real differences in their ingredients.
2009-09-22 Communicating in a Sound Bite World by Dan Richards (Article)
Advisors today operate in a very different world from twenty years ago. Dan Richards discusses one of the most significant changes - the shortening of attention spans - and the resulting shift in what it takes to communicate effectively.
2009-09-15 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 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.
2009-09-15 The 'Cash For Clunkers' Economy by Michael Lewitt (Article)
We are once again privileged to offer the latest edition of the HCM Market Letter, edited by Michael Lewitt, titled The 'Cash for Clunkers' Economy. Lewitt examines the drivers behind the current market rally, the health of the banking system and the housing industry, the the future for derivatives regulation. If you enjoy this newsletter, we encourage you to subscribe directly though the link provided with our article.
2009-09-15 Theoretical Support for the Moving Average Crossover by Keith C. Goddard, CFA (Article)
In this guest contribution, Keith Goddard matches an appropriate descriptive theory about how asset markets work with recently published normative theory using Ted Wong's moving average crossover as an indicator for timing portfolio changes in active portfolio management strategies. He proposes that the theory of "Rational Belief Equilibrium" in asset markets, developed by Stanford professor, Mordecai Kurz, helps to explain why moving average crossovers have demonstrated predictive value in the stock market, and why they might continue to offer predictive value in the future.
2009-09-15 The Key to Trading and Investing in ETFs by Paul Weisbruch (Article)
In this guest contribution, Paul Weisbruch argues that an ETF does not require a certain amount of trading volume in order to be liquid. The underlying securities of the ETF determine its liquidity. Many within the industry do not grasp this reality and are missing out on a lot of quality ETFs.
2009-09-01 Dougal Williams Responds: The Failure of Asset Allocation Funds by Dougal Williams, CFA (Article)
Dougal Williams' article two weeks, A Crash Course in Investing: Six Lessons from the Market Meltdown, also drew comments from a reader, who challenged the methodology Williams used when he argued that asset allocation funds have failed to deliver out-performance. Williams responds to those criticisms and offers new evidence of the failure in that fund category.
2009-09-01 Actively Managed TIPS ? A Correction by Robert Huebscher (Article)
Our August 18 article, Actively Managed TIPS?, contained a glaring factual error that we need to correct. In addition, a reader has challenged some of the assertions in that article, and we respond to those challenges.
2009-08-25 The New Normal and Asset Allocation Merriman?s Response by Larry Katz, CFA (Article)
Larry Katz, Director of Research at Merriman, Inc., responds to Geoff Considine's article two weeks ago, What the New Normal Means for Asset Allocation. He has multiple objections concerning much of Considine's logic, and would not recommend his alternative portfolio to their clients.
2009-08-18 Actively Managed TIPS? by Robert Huebscher (Article)
When PIMCO talks, the market listens. But we mustn't forget that the bulk of PIMCO's revenue comes from actively managing bond portfolios so, when they claim that alpha can be earned by actively managing TIPS, a healthy dose of scrutiny is warranted. Our article shows why that scrutiny is justified.
2009-08-11 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 How to Construct a Marketing Plan and Budget by Kristen Luke (Article)
One way to significantly increase the chances of marketing success is to develop a marketing plan and stick to it. Kristen Luke says forget the formal marketing plan and just outline your marketing activities and budget, and she provides a step-by-step guide for you to follow.
2009-08-04 How to Think about Return and Risk at the Same Time by Adam Jared Apt (Article)
In this guest contribution targeted to the educated layman, Adam Apt discusses the relationship between return and risk. Only when you can keep in mind at one and the same time these two concepts can you properly understand how to invest. And you will also understand why you should invest. Without the marriage of the concepts, you will be playing the market-or shunning it-as if it were a casino.
2009-08-04 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.
2009-07-28 Moving Average: Holy Grail or Fairy Tale - Part 3 by Theodore Wang (Article)
Buy-and-hold remains deeply entrenched in the financial planning community, despite many of the flaws Ted Wong's previous articles have illustrated. Although many financial advisors suffer dearly from their buy-and-hold practices, they are reluctant to change their approach. Who dares to challenge investment sages like Bogle, Siegel, and Malkiel who emphatically support this long-standing investment principle? Academic research studies overwhelmingly endorse buy-and-hold. How can they all be wrong?
2009-07-28 Three Powerful Words in Client Conversations by Dan Richards (Article)
Some words are particularly effective when talking to clients and prospects, says Dan Richards. For example, when it comes to advertising and direct mail, nothing beats the word "Free" in a headline. Among the words used by advisors, arguably the single most powerful phrase is "Tell me more."
2009-07-28 Which Social Media Tool is Right for You? by Kristen Luke (Article)
Kristen Luke's philosophy is that the best marketing activities are the ones that are in line with the advisor's preferences and interests. Social media offers a rich array of tools - all you have to do is choose the one that best fits your personality and preferences.
2009-07-21 The Retirement Portfolio Showdown: Jeremy Siegel v. Zvi Bodie by Geoff Considine, Ph.D. (Article)
When investing for retirement over long time horizons, advisors can choose from two apparently conflicting approaches. They can follow the advice of Wharton professor Jeremy Siegel, who has steadfastly advocated equity-centric portfolios, most notably in his highly popular book, Stocks for the Long Run. Or they can listen to Boston University professor Zvi Bodie, who says equities are simply too risky over the long term, and the core of a retirement portfolio should be Treasury Inflation Protected Securities (TIPS). Geoff Considine's article shows how to resolve this conflict.
2009-07-21 SIFMA?s Proposed by Ron Rhoades (Article)
On July 17, 2009, the Securities Industry and Financial Markets Association ("SIFMA") announced that its Private Client Group Steering Committee unanimously supports a new federal fiduciary standard for broker-dealers and investment advisors, embracing a proposal advanced by the Obama administration a week earlier in a draft of the "Investor Protection Act of 2009." Ron Rhoades looks at whether this shift in direction by SIFMA poses a radical change in business models, or whether the "new federal fiduciary standard" is something else in disguise.
2009-07-21 Letter to the Editor Compelling Evidence that Active Management Really Works by Various (Article)
In a letter to the Editor, a reader challenges some of the findings reported several weeks ago in an article, Compelling Evidence that Active Management Really Works.
2009-07-14 Some Signs of Life and Hope for a New Recovery by John P. Calamos and Nick P. Calamos (Article)
Calamos Investments' co-CIOs John P. Calamos, Sr. and Nick P. Calamos discuss the current market climate, implications of Fed and government actions, and investment opportunities in the shorter- and longer-term. Global governmental policies have restored a degree of confidence in the financial markets and many key financial metrics are back to pre-Lehman levels. Many investment opportunities will be available in the future. We thank them for their sponsorship.
2009-07-14 When the Referee Says ?Game Over? Too Soon by Robert Huebscher (Article)
Robert J. Gordon, an economist at Northwestern University, published a study in early May that found that the recession is all but over. Gordon's statement was remarkable for its audacity and, more so, because for the last three decades he has been a member of the prestigious Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) - the committee charged with setting the official start and end dates of recessions. We examine Gordon's claims.
2009-07-07 Marty Whitman: The Outlook for Distressed Securities by Robert Huebscher (Article)
Marty Whitman is the founder, Co-Chief Investment Officer, and Portfolio Manager of the Third Avenue Value Fund and a veteran value investor with a long, distinguished history as a control investor. In our interview, he discusses the opportunities in distressed securities created by the financial crisis.
2009-06-30 Moving Average: Holy Grail or Fairy Tale - Part 2 by Theodore Wong (Article)
Many renowned financial experts declare that passive investing in a diversified index like the S&P500 is the only sensible way to manage money. In a follow-up to his article two weeks ago, Moving Average: Holy Grail or Fairy Tale - Part 1, Ted Wong says that he respects their opinions but is unable to verify their claims. By examining the evidence, he shows that the Moving Average Crossover (MAC) system offers a superior risk-return profile to a buy-and-hold strategy.
2009-06-30 Letters to the Editor: The Road to Zimbabwe by Various (Article)
In the second set of our letters to the Editor, we publish responses to to our article, The Road to Zimbabwe.
2009-06-23 Compelling Evidence That Active Management Really Works by Ken Solow (Article)
The majority of academic studies conclude that active management does not add value for investors. However, a closer look at how many studies were conducted reveals several flaws in their methodology that are not as well-known as the accepted conclusion about active versus passive management. Guest contributor Ken Solow revisits work by two Yale researchers showing the value added through active management.
2009-06-16 New Target-Date Fund Research from Janus by Janus (Article)
New research shows widespread target-date fund misuse and misperceptions by defined contribution plan participants. Janus Investments' white paper shows that investors misunderstand the role of target date funds in their overall portfolio and rely heavily on their employer for investment advice. We thank them for their sponsorship.
2009-06-16 High-Yield Bonds A Potential Opportunity for the Risk Tolerant by Northern Trust Investments (Article)
High-yield bonds have recently offered investors historically high spreads relative to Treasury and investment-grade corporate bonds, presenting attractive current income potential in today's low-rate environment. The current recessionary environment also poses a heightened risk of default, underscoring the importance of security selection and intensive analysis of underlying fundamentals. We thank Northern Trust Investments for this contribution and their sponsorship.
2009-06-16 Moving Average: Holy Grail or Fairy Tale - Part 1 by Theodore Wang (Article)
Buying and holding a diversified portfolio works well during good times, but falls short when supposedly uncorrelated asset classes drop in unison in bear markets. Are there alternative investment strategies that work for all seasons? Ted Wong evaluates strategies using moving averages to determine their effectiveness.
2009-06-16 Tackling Today?s Number One Client Challenge by Dan Richards (Article)
Talk to advisors about the challenges they face today and you'll get a lengthy list - often headed by unhappy clients, reduced income and a struggle to stay positive and productive. While these are all serious issues, says Dan Richards, for most advisors they are dwarfed by the number one obstacle to getting business back on track - rebuilding investor confidence in our trust and integrity.
2009-06-09 Simon Johnson on Obama?s Achilles Heel by Eric Uhlfelder (Article)
While he agrees with much of what the US administration is doing to confront the economic crisis, Simon Johnson, the former chief economist of the International Monetary Fund, fears that present policy is not addressing a key issue: the overwhelming influence of the finance industry in US economic affairs. He likens this imbalance to what we see at the core of many emerging markets crises.
2009-06-09 Nassim Nicholas Taleb?s Prescription for a Black Swan-Proof Economy by Bruce W. Fraser (Article)
According to Black Swan author Nassim Nicholas Taleb, the U.S. economy is broken - but not beyond repair - and that repair will not be a snap. It does not necessarily need more regulation, but more intelligent regulation - plus the will to let entities like Citibank and General Motors fail once they become too big and cumbersome and act irresponsibly.
2009-06-09 Let?s Talk Stocks: Berkowitz, Marsico and Weitz by Robert Huebscher (Article)
Three of the industry's most accomplished value investors - Bruce Berkowitz of the Fairholme Fund, Tom Marsico of Marsico Capital Management and Wally Weitz of Weitz Funds - spoke at a panel discussion at the Morningstar Investor Conference on May 28. We present some excerpts of their thoughts on key questions raised during the panel.
2009-06-09 Changes in Asset Allocation by Robert Huebscher and Mary Pitek (Article)
Each quarter we review changes in the Advisor Perspectives (AP) Universe, which represents $50 billion in high-net worth assets managed by RIAs. Our analysis looks at changes in asset allocation, the mutual funds and ETFs that gained or lost market share, and the performance of the most popular actively managed mutual funds. This analysis focuses on changes in asset allocation.
2009-06-02 Jeremy Grantham's Warnings to Investors by Robert Huebscher (Article)
Of the thousands of investment letters penned in the industry, only one draws as much readership as Warren Buffet's annual letter to his shareholders: The quarterly commentary written by Jeremy Grantham. Grantham, the Chairman of the Boston-based investment firm Grantham Mayo Van Otterloo, was a featured speaker at Morningstar's Investor Conference last week, and he spoke at two breakout sessions. Those who, like me, attended both were richly rewarded, as he gave two distinctly different talks, addressing many subjects not covered in his commentaries.
2009-06-02 Market Perspectives from Janus' Seven Global Sector Teams by Janus (Article)
The last 18 months have challenged advisors, as they now wait for the market and economy to stabilize. Despite the generally bearish sentiment, Janus believes many individual investment opportunities in the market today offer compelling valuations and risk/reward profiles. We thank them for their sponsorship.
2009-05-26 What the ?Missing Out? Argument Misses by Theodore Wang (Article)
Market timing is discredited by passive investment advisors as a voodoo ritual. Buy-and-hold proponents argue most compellingly by citing the "missing out" scenario - they show a dramatic drop in return, to Treasury Bill levels, if investors are out of the markets for only a few good days. In this guest contribution, Ted Wong debunks the missing out argument, using 137 years of market data.
2009-05-26 Developing an Optimistic Outlook by Dan Richards (Article)
An optimistic outlook is the most important trait advisors can bring to the job. Overcoming a negative mindset is the necessary first step that makes everything else we do possible. Dan Richards shows how to put explicit strategies in place to stay motivated - for most of us, motivation doesn't happen unless we make it happen.
2009-05-19 Opportunities in TIPS by Robert Huebscher (Article)
TIPS offer a perfect hedge against inflation for US investors, but advisors need to understand their risks. We look at the history of TIPS prices and explain why this asset class is more volatile than you might think.