More on Related Themes
2015-01-06 Hurts So Good: When Exactly Are Falling Prices Bad? by Peter Schiff of Euro Pacific Capital
The sudden fall in the price of oil provides a unique opportunity to examine the widely held belief that deflation is economic poison. As many governments and central banks have vowed to fight deflation at all costs in 2015, the question could hardly be more significant. While falling prices may strike the layman as cause for celebration, economists believe that it can kick off a nasty, and often inescapable, negative cycle, which many believe leads inevitably to a prolonged recession, or even a depression.
2015-01-06 2015: More Investment and Profits, Higher Rates, Dollar and Stocks by Brian Wesbury, Robert Stein of First Trust Advisors
Contrary to popular opinion, business investment is a key factor behind the current recovery. Productive investments have boosted profits to record highs and, in turn, those profits have driven stock prices to record highs. They should continue to do so.
2015-01-05 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly average of daily closes for the past month, which is 2,054.27.
2014-12-29 Adventures in Forecasting by Scott Brown of Raymond James
Every December, economists are asked for their projections for the coming year. Whats GDP growth going to be? How many jobs will be added? Whats the Fed going to do? How will the financial markets react? We build models of the economy models that we know are not precise. There are simply too many variables.
2014-12-22 A Look Back at 2014 (and a 2015 Preview) by Robert Doll of Nuveen Asset Management
At the beginning of this year, we had three broad thoughts about what it would look like. First, we expected U.S. economic growth would accelerate moderately. Second, we believed Federal Reserve tapering would occur slowly and that global monetary policy would remain accommodative. And third, we forecasted that the U.S. equity market would grind higher due to central bank liquidity, modest economic acceleration, solid corporate earnings, contained inflation and an improving fiscal situation. These views formed the basis for the predictions we made in January. And at this point, we can offer a
2014-12-21 Your Time is Gonna Come: From Considerable Time to Patient by Liz Ann Sonders of Charles Schwab
Regardless of the obsession around the specific words used, the statement is somewhat par-for-the-course; and supports our consistent view that rates should begin rising at some point in mid-year 2015, that the US dollar will remain strong, and that the yield curve should continue to flatten (as a result of benign inflation keeping longer-term rates fairly low). Although our view is that the stock market will be at the mercy of more frequent mood swings, the secular bull market we believe began nearly six years ago should persist in 2015.
2014-12-19 Tempting TIPS by Anthony Valeri of LPL Financial
Lower inflation expectations as a result of falling oil prices have weighed on TIPS prices during the second half of 2014. TIPS underperformance has led to the lowest market-implied inflation expectations of the past four years. We do, however, find TIPS an attractive high-quality option and certainly more appealing than Treasuries as a result of recent underperformance.
2014-12-19 5 Things To Ponder: Variegated Contemplations by Lance Roberts of Streettalk Live
Yes, it is that magical week leading up to Christmas and the subsequent low volume push into the new year. For individuals, it is "magic time" as hopes are high that "Santa Claus" will come to WallStreet.
2014-12-18 Tempting TIPS by Anthony Valeri of LPL Financial
Lower inflation expectations as a result of falling oil prices have weighed on TIPS prices during the second half of 2014. TIPS underperformance has led to the lowest market-implied inflation expectations of the past four years. We do, however, find TIPS an attractive high-quality option and certainly more appealing than Treasuries as a result of recent underperformance.
2014-12-17 Are Bonds Really Less Risky than Equities? by Patrick Rudden of AllianceBernstein
Its practically an investing axiom that government bonds are much less volatile than equities. But that depends on how you look at it. In fact, our research suggests that income streams from stocks are actually much less volatile than those of government bonds.
2014-12-16 High Anxiety by Scott Brown of Raymond James
Federal Reserve policymakers meet this week to set monetary policy. The key concern is the timing of policy normalization. Officials may be anxious to begin lifting short-term interest rates, but they need to be very careful about managing market expectations. The risks of tightening too soon or too late are not symmetric and with the financial markets in turmoil, the Fed will not want to add to the level of anxiety.
2014-12-06 Draghi Crosses the Rubicon while Juncker Peddles "Europhemisms" by John Beck of Franklin Templeton Investments
The announcement by newly installed European Commission President Jean-Claude Juncker of a package designed to secure 315 billion of investment for the eurozone garnered a lot of press interest in late November. However, John Beck, director of Fixed Income, London, and portfolio manager, Franklin Templeton Fixed Income Group, believes a speech by European Central Bank (ECB) President Mario Draghi at a bankers conference in Frankfurt earlier in the month offers more practical insight for investors. Here he outlines lessons to take from Draghis speech in the lions
2014-12-05 Monetary Policy Outlook by Scott Brown of Raymond James
The minutes of the October 28-29 Federal Open Market Committee meeting suggested that there is still no consensus opinion among senior officials regarding when the Fed will begin raising short-term interest rates. There is strong agreement that monetary policy moves will be data-dependent. However, policymakers differ in their views on the amount of slack in the job market.
2014-12-03 Can Stocks Deliver the Goods in 2015? by Burt White of LPL Financial
We believe stocks will deliver mid- to high-single-digit returns in 2015. We expect earnings, and not valuations, to do the heavy lifting in producing potential stock market gains for investors in 2015. Monetary policy is in transit in 2015, when stocks will face a shift from the very loose monetary policy of the Federal Reserves (Fed) quantitative easing (QE) program to an environment in which the Fed begins to hike interest rates.
2014-11-27 Pick and Mix: Fresh Ideas for Diversifying Bond Exposure by John Taylor of AllianceBernstein
Policy backdrops and growth trajectories around the world are showing increasing signs of divergence. Yet many bond investors continue to congregate in a few selected pockets of the fixed income universe. In our view, its a perfect time to reconsider diversification tactics.
2014-11-25 Monetary Policy Outlook by Scott Brown of Raymond James
The minutes of the October 28-29 Federal Open Market Committee meeting suggested that there is still no consensus opinion among senior officials regarding when the Fed will begin raising short-term interest rates. There is strong agreement that monetary policy moves will be data-dependent.
2014-11-24 Equities Benefit as U.S. Growth Solidifies by Robert Doll of Nuveen Asset Management
The dominant news story last week was President Obamas announcement of new executive actions on immigration policy, but investors chose to look past any political risks and focused on the positives. Specifically, markets reacted well to signs that the European Central Bank would expand its monetary easing and to a surprise interest rate cut in China.
2014-11-21 3 Things Worth Thinking About, Including the Message from Commodities by Lance Roberts of Streettalk Live
Following the October swoon, stocks have vaulted to all-time highs. As I discussed previously in "Sentiment Is Off The Charts Bullish," there have only been few occasions where investors have felt so "giddy" about the financial markets. Such periods of exuberance have never ended well for investors as they were deluded by near-term "greed" which blinded them to the building risks.
2014-11-20 Outlook 2015: European Equities by Rory Bateman of Schroders Investment Management
Monetary policy remains loose in Europe but governments could do more to boost demand. Meanwhile, the weaker euro and stronger banking sector should help support European equities in the coming year.
2014-11-20 Japanese Recession and the Referendum on Abenomics by Team of Northern Trust
Early this week, Japanese Prime Minister Shinzo Abe announced that he will delay to April 2017 from October 2015 the next phase of his countrys consumption tax hike. In addition, he dissolved the lower house of Parliament and announced that elections will be held on December 14.
2014-11-20 The U.S. Labor Market - Show Me the Money by Marie Schofield of Columbia Management
The U.S. labor market data has improved in the last six months now that many measures have reached cyclical highs. For the Federal Reserve though, this is not enough. They want to see this data feed through to a broader rise in incomes and wages, and ultimately spending. This will be necessary to bend the economic trajectory toward sustainably higher growth.
2014-11-19 A Mixed Bag, But Optimistic on the Consumer by Scott Brown of Raymond James
Inflation-adjusted consumer spending growth, 70% of Gross Domestic Product, rose at a lackluster 1.8% annual rate in the advance estimate for 3Q14. That figure is likely to be revised higher, but the pace is expected to remain disappointing relative to job growth (this year, we are on track to post the largest increase in jobs since 2005). The main restraint on spending appears to be the weak trend in average wages. Until the job market tightens a lot more, were unlikely to see a significant pickup in wage growth.
2014-11-13 "Late Cycle" Markets by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup
Late in the summer we sold several fully valued stock positions and kept the proceeds in cash. We had trouble finding attractively valued alternatives, were alarmed about the falling prices in everything except large capitalization US stocks, and worried about the high degree of optimism in the stock market.
2014-11-10 Three Reasons Why Commodity-Related Debt May Hold Value Under Pressure by Kathleen Gaffney of Eaton Vance
In this timely Insight, Kathleen Gaffney discusses how a flexible multisector bond strategy can be a great way to gain exposure to, and take advantage of, potential value opportunities in hard-hit commodity related debt.
2014-11-05 QE Worked, But Not As Advertised by Zach Pandl of Columbia Management
Last week the Federal Reserve announced the end of its bond-buying program, which has been running with only brief interruptions for the last six years. Besides its ultimate size and duration, the striking thing about the Feds experiment with quantitative easing (QE) is that there is still not a firm consensus on exactly how it worked. Academic economists will be busy with this question for years. But from a bond investors point of view, theres enough evidence to make a few tentative conclusions.
2014-11-04 International Equity Commentary: September 2014 by Team of Thomas White International
International equity prices corrected in September as investors became concerned about slower global growth and the continued withdrawal of monetary stimulus by the U.S. Federal Reserve. Stronger than expected U.S. growth could support the global economy in the coming quarters, but has made investors anxious of early interest rate hikes. The Euro-zone economic recovery is faltering yet again as growth has slipped in most large countries.
2014-11-03 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly average of daily closes for the past month, which is 1,937.27. The ratios in parentheses use the monthly close of 2,018.05. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.
2014-10-31 Financial Markets Review Third Quarter 2014 by Team of AMG Funds
Similar to earlier this year, the third quarter featured further evidence of a multi-speed economic recovery across the globe. Central banks reacted in a less-than-coordinated fashion compared to years prior, with the European Central Bank (ECB) and the Bank of Japan (BOJ) loosening monetary policy while the U.S. Federal Reserve (the Fed) retained more of its status quo as detailed further here.
2014-10-30 Income Inequality and Fed Policy by Scott Brown of Raymond James
Income inequality has been an important topic this year, but it is one that is mired in politics. That means it is a potentially treacherous debate for the Federal Reserve chair to wade into. To be fair, Yellen said that the purpose of her recent talk on income inequality and opportunity was not to provide answers to these contentious questions, but rather to provide a factual basis for further discussion. She provided a mountain of evidence from the Feds triennial Survey of Consumer Finances, and then got out of the way, as appropriate.
2014-10-29 Greenspan: Price of Gold Will Rise by Axel Merk of Merk Investments
Any doubts about why I own gold as an investment were dispelled last Saturday when I met the maestro himself: former Fed Chair Alan Greenspan. Its not because Greenspan said he thinks the price of gold will rise I dont need his investment advice; its that he shed light on how the Fed works in ways no other former Fed Chair has ever dared to articulate. All investors should pay attention to this. Let me explain.
2014-10-28 Under the Magnifying Glass by Brian Andrew of Cleary Gull
Recent market volatility has investors trying to sort through the little things to determine what is most important to the future of asset prices. Securities markets move up and down on a daily basis based on many different factors, some more relevant than others. The markets during October have proven that little things can lead to greater volatility as investors attempt to sort out the most relevant facts from those with less meaning. Our objective, and that of our investment managers, is to sift through these details to discern what has relevance and what is noise during the trading day.
2014-10-27 Equities Recover Some Ground and Still May Have Room to Run by Robert Doll of Nuveen Asset Management
With global deflation and growth fears fading, U.S. equities snapped their four-week losing streak last week with the S&P 500 Index gaining 4.1%. This advance marked the largest weekly gain since January 2013. Following the correction from the mid-September to mid-October, the S&P 500 has now rallied 8%, leaving it only 3% from its all-time high.
2014-10-24 5 Things To Ponder: To QE Or Not To QE by Lance Roberts of Streettalk Live
Over the last few weeks, the markets have seen wild vacillations as stocks plunged and then surged on a massive short-squeeze in the most beaten up sectors of energy and small-mid capitalization companies. While "Ebola" fears filled mainstream headlines the other driver behind the sell-off, and then marked recovery, was a variety of rhetoric surrounding the last vestiges of the current quantitative easing program by the Fed. As I have shown many times in the past, there is a high degree of correlation between the Fed's liquidity programs and the advance in the markets.
2014-10-23 Risk and Uncertainty, Confidence and Fear by Scott Brown of Raymond James
In recent weeks, the financial markets appear to have been reacting less to weaker expectations of global growth and more to the increased downside risks that is, to the fear that things could get a lot worse. The downside risks to Europe are considerable, but America is much less dependent on exports than most other countries and the prospects for moderately strong growth into 2015 remain promising.
2014-10-23 3 Things Worth Thinking About: Inflation, the Current Rally and Faith in the Fed by Lance Roberts of Streettalk Live
What is quickly being realized on a global basis is that injecting the system with liquidity that flows into asset prices, does not create organic economic demand. Both Japan and the Eurozone's interventions have failed to spark inflationary pressures as the massive debt burden's carried by these countries continues to sap the ability to stimulate real growth.
2014-10-17 A Moody Market by Doug MacKay, Bill Hoover of Broadleaf Partners
For those that may not have noticed, stock market volatility has been on the rise in October, with more up and down 1-2% days and powerful intraday moves than we've seen since the Great Recession. Weak overseas economies, fears over what rapid declines in energy prices could mean, and Ebola are just a few of the factors that have been used to explain the disappointing action.
2014-10-14 Finally, a Five Handle! by Brian Andrew of Cleary Gull
Last Fridays jobs report was significant in that for the first time since July of 2008 the unemployment rate dipped below 6%. The September report indicated that the unemployment rate fell from 6.1% to 5.9%. While we have seen improvement in labor markets for some time now, the Fed still seems to want to take their time reducing stimulative policy.
2014-10-13 Venezuelas Spectacular Underperformance by Carmen Reinhart and Ken Rogoff of Project Syndicate
Venezuela is a major oil-exporting economy that is so badly mismanaged that real (inflation-adjusted) per capita GDP today is 2% lower than it was in 1970, despite a ten-fold increase in oil prices. Perhaps that is why its president is lashing out at academics who have the temerity to point that out.
2014-10-09 The Fed's Invisible Hand, and Other Things to Think About by Lance Roberts of Streettalk Live
I have not been a huge advocate of the Federal Reserve's QE programs for the simple reason that outside of inflating asset prices, it has done nothing for the broad swath of the American economy.
2014-10-03 Financial Repression (and How to Defend Yourself From It) by Mike Shedlock of Doug Short
I had the pleasure of being interviewed by Gordon Long last week. Gordon is publisher and editor of Gordon T Long Macro Analytics. The topic was "Financial Repression". What is financial repression? I defined it as "a set of fiscal and monetary policies for the expressed benefit of the ruling class: politicians, banks, and the already wealthy, at the expense of everyone else." In the video, I give numerous examples of repression, noting that central bank sponsored inflation is the epitome of financial repression. We also discuss what to do about financial repression.
2014-10-03 Is the Stock Market Cheap? by Doug Short of Doug Short
Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1993.23. The ratios in parentheses use the monthly close of 2003.37. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.
2014-09-22 A Lack of Surprises Helps Equity Markets Make Gains by Robert Doll of Nuveen Asset Management
Equity markets rose again last week, with the S&P 500 Index climbing 1.3% and reaching another record high. Bond yields and the U.S. dollar drifted higher, while emerging market equities and commodities struggled. Two major events that resulted in a continuation of the status quo helped market sentiment.
2014-09-19 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The choice for Europe: coming together or breaking apart; Scotland votes nay; The dollar has been the beneficiary of global uncertainty
2014-09-18 A New Fed Playbook for the New Normal by Peter Schiff of Euro Pacific Capital
While many economists and market watchers have failed to notice, we have entered a new chapter in the short and checkered history of central banking. This paradigm shift, as yet unaddressed in the textbooks, changes the basic policy tools that have traditionally defined the sphere of macroeconomic decision-making.
2014-09-18 Mind Your Language! by Scott Brown of Raymond James
The Federal Open Market Committee is widely expected to take another trip to Taper Town on Wednesday, reducing the monthly pace of asset purchases by another $10 billion, one step closer to ending the program in late October. The more interesting issue is whether well see any change in the Feds forward guidance on short-term interest rates specifically, whether the FOMC will jettison the considerable time language.
2014-09-17 Don't Be Surprised by Surprises by Michael Kayes of Willingdon Wealth Management
We live in a complicated world of heightened anxiety. Read why this is good for stock prices.
2014-09-04 What's Next for the Dollar and Gold? by Axel Merk of Merk Investments
One reason markets tend to get a little nervous in September is that its time for investors to ponder about their asset allocation for the remainder of the year and beyond. With the markets at or near record highs and the US dollar on a roll, what could possibly go wrong? Lets look at whats next for the dollar, gold, and currencies.
2014-09-04 Global: Recovery Continues, but Headwinds Persist by Keith Wade of Schroders Investment Management
Keith Wade, Chief Economist at Schroders, discusses why Schroders has trimmed global growth projections for 2014 and 2015.
2014-09-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,961.53. The ratios in parentheses use the monthly close of 2003.37. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.
2014-08-29 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
Flexible labor markets are key to recovering from recession; Wage trends present a challenge for the Fed; Bank settlements are sizeable, but the benefit to housing has been limited
2014-08-26 Yellen at Jackson Hole by Zach Pandl of Columbia Management
I must have heard it on the radio recently, because Janet Yellens speech at this years Jackson Hole conference brought to mind lyrics from one of my favorite Beatles songs.
2014-08-23 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Company
Sometimes, Im tempted to write same as last time. This is one of those times.
2014-08-21 Fed Revises Down Potential GDP In More Hawkish Minutes by Team of GaveKal Capital
In our latest quarterly presentation in July, we noted how spare capacity in the economy may be much smaller than is generally perceived. We found out today the FOMC came to similar conclusions in their latest FOMC meeting.
2014-08-14 Global Policy Divergence - Really?? by Axel Merk of Merk Investments
If you own dollars, the euro or gold, you might want to pay attention to this one.
2014-08-12 What a Credit-Shy Consumer Means for Growth by Kristina Hooper of Allianz Global Investors
Consumers have been cautious about running up credit-card debt since the financial crisis. But is that necessarily bad for the economy? Kristina Hooper breaks it down.
2014-08-07 Banking on the Trends by Pamela Rosenau of HighTower Advisors
As the Fed has continued to roll back (taper) its bond purchase program, which will end in October 2014, the question remains: when will the central bank hike rates and what will the impact of monetary tightening be on the broader markets? This uncertainty has contributed to some of the recent market volatility.
2014-08-06 What Asset Class Rallied Last Week amid the Sell-Off? by Luciano Siracusano III of WisdomTree
Last Thursdays sell-off in U.S. stocks (the Dow was down 317 points, the S&P 500 Index was down nearly 2%) marked the biggest stock market decline in nearly four months. The S&P 500 Index closed at 1,930 after it broke its 50-day moving average for the first time since April.
2014-08-05 Mixed Signals by Brian Andrew of Cleary Gull
Over the weekend I had the opportunity to take in baseball tryouts. I know you are thinking it is August so what tryouts would be taking place in the middle of the season? These tryouts were for U-8 boys. For the uninitiated, this is when boys aged 7 and younger try out for next seasons teams. My son spent two days at a baseball camp and then finished yesterday with team tryouts. During tryouts there were six stations covering the fundamentals of the game.
2014-08-05 So, What Did We Learn? by Scott Brown of Raymond James
The busy week of economic news left investors uneasy. The 4.0% GDP growth figure contributed to concerns that the Fed may be forced to raise short-term interest rates sooner rather than later. However, while the economic data reports, and even the Fed policy statement, had something for everybody, the outlook for monetary policy should be essentially unchanged.
2014-08-04 Mounting Pressure Weighs on Equities by Robert Doll of Nuveen Asset Management
U.S. equities experienced a sharp pullback last week, with the S&P 500 Index falling 2.7%, its largest weekly decline in over two years. A number of factors contributed to the downturn, including rising geopolitical tensions, concerns over Federal Reserve policy, Argentinas debt default, a slowdown in the housing recovery and a sense that the market rally has been getting tired. Not all of the news was negative, however, since we also saw some strong economic and earnings data and increasing merger and acquisition activity.
2014-07-31 Calling the Feds Bluff by Anthon Valeri of LPL Financial
Futures continue to indicate the bond market believes the Fed does not have an ace up its sleeve and that ultimately they will not raise rates as high as they project. A host of top-tier economic data may influence bonds more this week given the absence of new forecasts and a press conference following this weeks Fed meeting.
2014-07-19 Bull Stumbles by Liz Ann Sonders, Brad Sorensen & Michelle Gibley of Charles Schwab
Any near-term correction would be healthy in the context of an ongoing secular bull market. Trying to time the market is always difficult, even though the market is in a potentially weak phase, both in terms of the annual and election cycles. And while sentiment is elevated in the United States, both Europe and China provide opportunities to invest where the mood is decidedly less enthusiastic.
2014-07-17 Constraints of Convention - Does a Portfolio Design Have to Be Static? by Jeff Knight of Columbia Management
There was a charming story from the world of youth sports featured in Malcolm Gladwells book "David and Goliath: Underdogs, Misfits and the Art of Battling Giants."
2014-07-09 Gut Wrenching by Scott Brown of Raymond James
The greater-than-expected downward revision to first quarter GDP was a shocker (even more of a surprise than Spain, Italy, and Portugal not making it out of group play in the World Cup). However, investors were willing to dismiss the bad first quarter performance. An inventory correction and a wider trade deficit subtracted 3.2 percentage points from 1Q14 GDP growth.
2014-07-08 Blowout Jobs Data Wont Trigger Quicker Rate Hike by Kristina Hooper of Allianz Global Investors
The markets are digesting a stellar jobs report, which may fuel debate over when the Fed will start raising rates. But its important for investors to understand the Feds holistic approach in order to avoid a kneejerk reaction, writes Kristina Hooper.
2014-07-01 LPL Financial Research Mid-Year Outlook 2014: Investors Almanac Field Notes by Jeff Kleintop of LPL Financial
At this years halfway point, we are pleased to offer the LPL Financial Research Mid-Year Outlook 2014: Investors Almanac Field Notes containing key observations and updates to our outlook for 2014. Similar to a farming almanac, our Investors Almanac is a publication containing a guide to patterns, tendencies, and seasonal observations important to growing. The goal of farming is not merely to grow crops, but to sustain living thingsinvesting shares the same goal.
2014-06-25 The Feds Outlook: Optimistic? Or Just Hopeful? by Scott Brown of Raymond James
As expected, Federal Reserve policymakers left short-term interest rates unchanged, did not alter the forward guidance on the federal funds target rate, and trimmed the monthly pace of asset purchases by another $10 billion (to $35 billion beginning in July). In its policy statement, the FOMC was a bit more optimistic about a pickup in growth. Fed officials forecasts of 2014 GDP growth were revised lower, but implicitly, forecasts for the final three quarters of 2014 remained strong.
2014-06-24 A Mosaic Approach to Raising the Fed Funds Rate by Kristina Hooper of Allianz Global Investors
The Federal Reserve is using a wide swath of economic data and anecdotal evidence to determine when to raise its benchmark interest rate. While prudent, it may stir up anxiety and volatility for equity investors, writes Kristina Hooper.
2014-06-19 The Euro Goes Negative by Dickson Buchanan Jr. of Euro Pacific Precious Metals
The European Central Bank's (ECB) decision to charge a negative interest on overnight deposits is not going to lead to a higher targeted inflation rate, despite ECB President Mario Draghi's insistence that it will. Like all cases of central planning, this decision will have unintended and costly consequences - some of which are already starting to play out. In this particular case, instead of stimulating business lending or higher prices, the decision will only stimulate the increased buying of insolvent government debt - leading us all one step closer to the economy's eventual unravelling.
2014-06-14 ECB Leaves the Door Open for Further Action by David Zahn of Franklin Templeton Investments
he European Central Bank (ECB) delivered a robust package of monetary policy measures on June 5 and promised more to come if needed to help stave off deflation and support the eurozones fragile economic recovery. Among the moves announced were interest rate cuts, including a negative interest rate on excess deposits that banks hold with the ECB, and new facilities to support bank lending to small businesses. We asked David Zahn, portfolio manager for the Franklin Global Government Bond Fund, for his thoughts on what these latest measures could mean for investors.
2014-06-13 ECB Leaves the Door Open for Further Action by David Zahn of Franklin Templeton Investments
The European Central Bank (ECB) delivered a robust package of monetary policy measures on June 5 and promised more to come if needed to help stave off deflation and support the eurozones fragile economic recovery. Among the moves announced were interest rate cuts, including a negative interest rate on excess deposits that banks hold with the ECB, and new facilities to support bank lending to small businesses. We asked David Zahn, portfolio manager for the Franklin Global Government Bond Fund, for his thoughts on what these latest measures could mean for investors.
2014-06-10 The Central Bank Divide: 3 Implications for Investors by Russ Koesterich of BlackRock
Major central banks are no longer moving in lockstep. While the Fed is pulling back, other central banks are maintaining very easy monetary policy. Russ explains three implications this new dynamic has for investors.
2014-05-27 Economy Begins to Accelerate While Equities Push Higher by Robert Doll of Nuveen Asset Management
U.S. equities finished higher last week as the S&P 500 advanced 1.3%, snapping a two-week losing streak and ending at a new record high. Markets seemed to lack conviction, but the path of least resistance appeared skewed to the upside as momentum for the economic recovery was positive.
2014-05-16 Concerned Optimism by Scott Brown of Raymond James
In her congressional testimony, Fed Chair Janet Yellen chose her words carefully. She indicated that if the economic outlook evolves as anticipated (growth picks up, the labor market tightens, and inflation moves toward the Feds 2% goal), then the Feds asset purchase program (QE3) will likely end in the fourth quarter. However, she refused to be pinned down on when the Fed would begin raising short-term interest rates. Global concerns and the housing sector will bear close observation.
2014-05-16 And That's The Week That Was by Ron Brounes of Brounes & Associates
Strike up the band! The Dow is now in positive territory for the year AND even set a record close. Who would have thunk that after the dismal January and the pessimism that reigned from the winter? The recovery continued as earnings season offered more surprises and the economic numbers show a country moving beyond the thaw of winter. Now if only China (Europe and Russia) could follow suit.
2014-05-13 Equity Markets Remain Mixed as Fundamentals Slowly Improve by Robert Doll of Nuveen Asset Management
U.S. equities finished mixed last week as the Dow Jones Industrial Average was the only major index to end in positive territory. The overall macro narrative appears favorable despite the lack of market direction. Scrutiny of beaten-down momentum stocks resurfaced, although broader market spillover remained muted.
2014-05-06 Weekly Market Update by Team of Castleton Partners
US Treasury yields declined across the entire maturity spectrum last week, as renewed geopolitical risk more than outweighed a strong employment report. With inflation remaining well below the Fed?s target rate of 2%, long dated Treasury yields continued to decline at a faster rate than shorter dated yields, further flattening the yield curve.
2014-05-02 Throw Deep?! by Jeffrey Saut of Raymond James
Back in the late 1980s a newspaperman visiting the Raiders football training camp in California had just returned from the Jack London Historic Monument. He read a sample of London?s prose to the Raiders? colorful quarterback, Ken ?The Snake? Stabler:
2014-04-30 Valuing Legends by Michael Kayes of Willingdon Wealth Management
Some time ago a sportswriter asked legendary quarterback Johnny Unitas what he thought he was worth relative to the enormous salaries being paid to today's best quarterbacks. Unitas said, "Maybe about $750,000." The sportswriter was incredulous and said, " Mr. Unitas, the top quarterbacks today make several million dollars a year." To which Unitas replied, "Well, you have to understand, I'm 75 years old." I love that story. It tells you so much about one of the greatest players in NFL history, but it also serves as a reminder that the process of valuation is far from an exact science.
2014-04-24 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Company
Most of the economic and market trends we've been discussing for the past few years remain in place. Russia's action in the Ukraine/Crimea may have long-term implications, particularly for Europe, but the near-term economic implications are modest. It remains to be seen whether this gets added to our long-term worry list or not.
2014-04-24 And That's The Week That Was by Ron Brounes of Brounes & Associates
After a week of panic, investors focused on the positives and went bargain hunting throughout. Thus far, earnings are not as bad as expected; Chinas woes could mean new stimulus; labor and manufacturing seem to be in full fledge thaw. Hope the holiday season brings more good news.
2014-04-15 Equity Market Insight by Thomas Faust, Jr. of Eaton Vance
After a powerful rally in 2013, the first quarter of 2014 saw the bull market demonstrate a measure of resilience in the face of several headwinds. In the latter half of January, stocks fell sharply on emerging-market concerns, with volatility spiking to more "normal" post-financial crisis levels. The market bounced back strongly in February and went on to record a new all-time closing high on March 7. Performance was choppy in the final few weeks of the quarter, as investors digested mixed economic reports, geopolitical issues and the latest U.S. Federal Reserve (Fed) meeting.
2014-04-14 Economic Insight: Fed Policy Goes Back to the Future by Thomas Luster of Eaton Vance
We fully expected the strength the economy showed in late 2013 to carry over into 2014; however, that simply was not the case. Instead, we saw weaker-than-expected economic data across a wide range of economic indicators. Not surprisingly, interest rates fell modestly during the quarter rather than continuing their trend higher from last year, while U.S. stocks (as measured by the S&P 500) reacted similarly ? barely advancing after a 32% gain in 2013.
2014-04-12 In the End, Time is Everything by Doug MacKay of Broadleaf Partners
While some will claim that valuations are to blame for the large selloff in growth stocks, high growth stocks almost always have premium valuations. In some sectors of the market, weve found that it makes more financial sense to pay up for a company of the future than to pay down for one in the past. As Warren Buffet has said, "Price is what you pay, but value is what you get."
2014-04-11 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Co.
Most of the economic and market trends we?ve been discussing for the past few years remain in place. Russia?s action in the Ukraine / Crimea may have long-term implications, particularly for Europe, but the near-term economic implications are modest. It remains to be seen whether this gets added to our long-term worry list or not.
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.
2014-03-31 Will Jobs Benefit From a Spring Thaw? by Kristina Hooper of Allianz Global Investors
The upcoming jobs report, a bellwether for the health of the US economy, could reveal that the harsh winter has created a coiled spring in the labor market, writes Kristina Hooper.
2014-03-28 Fed on Target to Raise Interest Rates in the Spring of 2015 by Kevin Mahn of Hennion & Walsh
Last Wednesday, Janet Yellen presided over a press conference as the new Chairman of the Federal Reserve (Fed) following the conclusion of the Federal Open Market Committees (FOMCs) two day meeting and their release of the official FOMC statement. Markets hung on every word and some confusion was created afterwards as Yellen offered a more transparent look at the Feds timeline for raising interest rates.
2014-03-28 What Investors Should Know About Fed Forward Guidance by Zach Pandl of Columbia Management
Last week, at Janet Yellen?s first meeting as Fed Chair, the FOMC revised its forward guidance for the funds rate, dropping its reference to 6.5% unemployment and instead stressing the committee?s qualitative assessment of the economy. The change was a symbolically important step, but did not alter the broader outlook for policy rates, in our view.
2014-03-26 Yellen Speaks, Do the Financial Markets Listen? by Scott Brown of Raymond James
No surprise, the Federal Open Market Committee tapered the monthly rate of asset purchases by another $10 billion and altered the language in its forward guidance on the federal funds rate. In its policy statement, the FOMC indicated that ?it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends.?
2014-03-25 A Slip and Fall? by Jerry Wagner of Flexible Plan Investments
Despite last week?s vernal equinox, signaling the first day of spring on Thursday, another arctic blast is hitting the Midwest yet again this week, and cabin fever has become an epidemic. So many of my friends and family are singing the same refrain; ?When will this winter be over??
2014-03-24 Stocks Rise as Economic Backdrop Slowly Improves by Bob Doll of Nuveen Asset Management
U.S. equities finished higher last week, with the S&P 500 increasing 1.4%. Ukraine seemed to be receding in investors? minds. Despite the volatility and sharp increase in bond yields on Wednesday, the hawkish takeaways from the FOMC meeting were not a lingering overhang.
2014-03-19 What if Grantham is Right? by Roger Nusbaum of AdvisorShares
There were two articles recently both exploring the same possible outcome; that investor returns from capital markets could be much lower in the coming years. No matter what markets end up doing, advisory clients and do-it-yourselfers still have financial plans that likely require some amount of growth over time in order to have a chance of succeeding without something, such as desired lifestyle or working longer than hoped for, having to give.
2014-03-17 And That's The Week That Was by Ron Brounes of Brounes & Associates
Remember when tiny Greece was a market mover? Well, now its tiny Crimea. With the growing global tensions and concerns about Crimeas secession from the Ukraine to Russia, investors chose to take a week off (for the most part) and take some equity profits, while moving back into the safe haven of treasuries. With little news on the domestic economic calendar, investors looked abroad and didnt care much for what they saw in China. (Still, the yuan must be better than the ruble these days.)
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.
2014-03-09 The Problem with Keynesianism by John Mauldin of Millennium Wave Advisors
Keynes himself would appreciate the irony that he has become the defunct economist under whose influence the academic and bureaucratic classes now toil, slaves to what has become as much a religious belief system as it is an economic theory. Men and women who display an appropriate amount of skepticism on all manner of other topics indiscriminately funnel a wide assortment of facts and data through the filter of Keynesianism without ever questioning its basic assumptions. And then some of them go on to prescribe government policies that have profound effects upon the citizens of their nations.
2014-03-07 ECB Officials' Inflation Forecasts by of GaveKal Capital
The ECB announced that interest rates would be maintained at current levels earlier today, citing staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 1.0% in 2014, 1.3% in 2015, and 1.5% in 2016. Though few economists predicted a rate cut, there were rumors that Europe's central bank might discontinue the sterlization of bond purchases under its Securities Markets Program (SMP)-- an action consistent with the adoption of a more accomodative and active policy.
2014-02-28 Is an Avalanche Waiting to Hit the U.S. Stock Market? (The Slippery Slope of Stupidity) by Dawn Bennett of Bennett Group Financial Services
The U.S. economy as we know it is headed for a huge correction. The only questions remaining are when will it start and what will be the trigger that starts the cascade? Financial and economic implosion is always a slow and stealthy process that grows over time behind the scenes.
2014-02-28 Bounce Back by Liz Ann Sonders, Brad Sorensen & Michelle Gibley of Charles Schwab
US stocks have bounced and the markets still attractive and in the midst of a secular bull market. But there are likely to be bumps along the way; notably given that this is a midterm election year; which are known for first-half pullbacks. A diversified portfolio is important and both European and Chinese stocks appear to have upside, while Japan continues to frustrate with a two-steps forward, two-steps back sort of approach. And a final reminder not to replace fixed income assets with equities in search of higher income without recognizing the risk profile of a portfolio has changed.
2014-02-20 The Fed: Yellen's Tapering Tightrope by Milton Ezrati of Lord Abbett
In reducing quantitative easing, the Federal Reserve chairwoman faces a big challenge: preventing asset bubbles at home without pressuring developing economies.
2014-02-18 Equity Markets: How Much Energy Does the Bull Have Left? by Kurt Feuerman of AllianceBernstein
After another big year for stocks in 2013, many investors are questioning how much longer the bull market can run before it collapses from exhaustion. This doubt has intensified with the early 2014 selloff. However, based on what we see, its not time to worry about the markets stamina yet.
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.
2014-02-13 Equity Markets: How Much Energy Does the Bull Have Left? by Kurt Feuerman of Alliance Bernstein
After another big year for stocks in 2013, many investors are questioning how much longer the bull market can run before it collapses from exhaustion. This doubt has intensified with the early 2014 selloff. However, based on what we see, its not time to worry about the markets stamina yet.
2014-02-10 Growth and Policy Uncertainty Cause Choppy Markets by Bob Doll of Nuveen Asset Management
U.S. equities closed with modest gains last week, as the S&P 500 overcame Monday?s decline, the largest one-day percentage loss since June 2013. The weaker-than-expected ISM manufacturing and vehicle sales data drive the sell-off on Monday, exacerbating the focus on slowing momentum for the U.S. recovery. The impact of adverse weather complicates the picture. Also, although January non-farm payroll missed expectations, there were more upbeat indications for the household survey.
2014-02-08 International Equity Commentary - December 2013 by Team of Thomas White International
International equity prices saw marginal gains in December as investors weighed the improved global economic outlook against the reduction in monetary stimulus from the U.S. Federal Reserve. Economic trends have become more positive across most regions, helped by the improving business environment and consumer sentiment in the U.S. as well as in Europe. Japan continues to see stronger export gains as demand revives in its major markets and the cheaper yen remain supportive.
2014-02-05 The Fed's Forced Feeding Will End Badly by Dawn Bennett of Bennett Group Financial Services
This financial market reminds me of when we were kids sitting at the dinner table and the one thing almost all of us heard back in the 1970s was "that plate better be clean by the time I get back or else." This left us with images of torture that would follow the "or else."
2014-02-05 The Importance of Taking a Long-Term Perspective by Jeffrey Knight of Columbia Management
For asset allocation decisions, we find great value in maintaining a long-term outlook for major asset classes. Twice a year, in fact, we conduct an extensive update of our five-year return forecasts for several asset classes. The purpose of this exercise is two-fold. First, taking a longer term perspective helps us to set strategic asset allocations and design portfolios for diverse investment goals.
2014-02-03 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1824.35. The ratios in parentheses use the monthly close of 1782.59. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.
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.
2014-01-30 FOMC Sticks With the Tapering Plan by Team of Northern Trust
The Federal Open Market Committee (FOMC) at the conclusion of its meeting today announced a further $10 billion reduction in its monthly rate of asset purchases. The increment was similar in size and composition to the first tapering step taken in December.
2014-01-30 The Path to Becoming an Emerging Market by Henry D'Auria, Morgan Harting of AllianceBernstein
Why have some equity markets in the developing world flourished more than others? Its a pivotal question for investors hoping to stake an early claim to the potential emerging-market (EM) success stories of the next decade.
2014-01-28 Emerging Market Issues Weigh on U.S. Equities by Bob Doll of Nuveen Asset Management
U.S. equities finished lower last week as the S&P 500 declined 2.6% and suffered the largest weekly pullback since June of 2012. U.S. stocks are down approximately 3.0% both year to date and from all-time highs. In 2014, lack of direction in the market has been a focus, and the waning influence of macroeconomic news caused a notable shift late last week.
2014-01-23 Economic Growth is Likely to Improve in 2014 by Derek Hamilton of Ivy Investment Management Company
We believe a global economic upturn is likely in 2014, although the overall growth rate will remain sluggish. We think developed countries will show the largest improvement, which in turn will help support growth rates in emerging markets.
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.
2014-01-16 A Flight to Quality by Ben Fischer of Allianz Global Investors
CIO NFJ Ben Fischer delivers his 2014 outlook, focusing on the Feds tapering of its bond-buying program and how high-quality, dividend-paying stocks should respond.
2014-01-16 Let the taper begin! Fixed Income Investment Outlook by Team of Osterweis Capital Management
At the December meeting, the Federal Reserve (the Fed) decided to reduce its purchases of Treasury and mortgage securities (a.k.a. quantitative easing/QE) beginning in January 2014. This answered the question of when the taper would begin, and the markets reacted predictably. Two questions remain, however: How long until the Fed completely winds down QE; and when will short rates begin to reflect the improving economy? We feel it may be sooner on the former and could be quite some time on the latter.
2014-01-15 The Haves and the Have Nots by Scott Migliori of Allianz Global Investors
CIO Equity US Scott Miglioris 2014 outlook calls for moderate growth, an accommodative Fed and a stock-pickers market, favoring areas of the economy that are insensitive to growth.
2014-01-15 Investment Insights from a Road Warrior by Frank Holmes of U.S. Global Investors
As part of our investment process, we often take the explicit knowledge learned from our statistical models and overlay them with global travel.
2014-01-13 Stocks Rise Modestly in First Full Week of Trading by Bob Doll of Nuveen Asset Management
U.S. equities finished mostly higher for the first full week of the year, with the S&P 500 gaining approximately 0.6%. There were no meaningful directional drivers behind the price action, which is a dynamic that has been prevalent so far in 2014.
2014-01-13 Equity Bubble? No. by Richard Bernstein of Richard Bernstein Advisors
The US stock market performed very well during 2013. The S&P 500s total return of nearly 33% far outpaced the returns of most asset classes. A growing contingent of market observers is fearful that the US equity market is in some sort of a bubble. We disagree completely with this notion. A strong market rally that many investors have missed is hardly sufficient grounds for a financial bubble.
2014-01-10 Yellen's Inheritance: Monetary Policy in Flux by Joseph Carson, Darren Williams of AllianceBernstein
Evolving economic challenges are transforming central banking around the world. The new monetary-policy doctrine is likely to put greater emphasis on asset-price developments. But, without a true monetary anchor, central banks could still risk a repeat of the recent boom/bust cycle.
2014-01-07 Dow 19,500, S&P 500 2,150 by Brian Wesbury, Bob Stein of First Trust Advisors
Last year was the best for equities since 1997. The Dow Jones Industrial Average rose 26.5%, the S&P 500 was up 29.6% and the Nasdaq was up 38.3%. Despite these outsized gains, and in spite of all the talk of a bubble, we still think stocks are cheap.
2014-01-07 The World of Thinking Machines by Bill O'Grady of Confluence Investment Management
The New York Times recently published an article that discussed a new version of a computer chip that will be released later this year that is expected to automate tasks that currently require direct programming. In this report, we will open with an examination of the philosophy of learning. We will then discuss the potential dangers of such machines, including the ability to perform humanlike actions without a moral sense. We will also examine the potential economic and social side effects. As always, we will conclude with potential market ramifications.
2014-01-06 2014 Housing Predictions by Logan Mohtasham of AMC Lending Group
A tale of 2 halves with lingering questions characterizes what we can say was the story for housing for 2013. In the first half of the year, rates were low as the 10 year note was well under 2%. People were still refinancing, as home prices rocketed. Multiple bids were common, and pundits like Ivy Zelman cheered the improving market with praise like "Housing is in Nirvana".
2014-01-04 Forecast 2014: The Human Transformation Revolution by John Mauldin of Millennium Wave Advisors
It is that time of the year when we peer into our darkened crystal balls in hopes of seeing portents of the future in the shadowy mists. This year I see three distinct wisps of vapor coalescing in the coming years. Each deserves its own treatment, so this year the annual forecast issue will in fact be three separate weekly pieces.
2014-01-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1807.78. The ratios in parentheses use the monthly close of 1848.36.
2013-12-31 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don’t always get the readership they deserve. We’ve posted the 10 most-widely read articles for the past year. Below are another 10 that you might have missed, but I believe merit reading.
2013-12-24 Fed Taper Brings Us Back to the Future by Kristina Hooper of Allianz Global Investors
A return to normal economic conditions is now more palpable following the Feds decision to start unwinding QE and early signs of a revival in consumer spending, growth and jobs, writes Kristina Hooper.
2013-12-23 Risk Assets Take Fed Taper Announcement in Stride by Roger Bayston of Franklin Templeton
The US Federal Reserve (Fed) delivered an early holiday surprise to some market participants, announcing at its December 18 policy meeting it would start slowing its asset purchase program known as quantitative easing in January. For some thoughts on what this may mean for the markets in the new year, we turned just after the announcement to Roger Bayston. He believes the markets should be able to take the Feds tapering in 2014 in stride, although investors should prepare for the proposition of higher Treasury yields.
2013-12-21 Start Me Up: Fed Announces a Much-Anticipated Taper by Liz Ann Sonders of Charles Schwab
The Fed decided to begin tapering its QE-related bond purchases with a reduction of $10 billion; split evenly between Treasuries and mortgage-backed securities. In a sign that tapering was already priced in, the stock market surged on the announcement; while bond yields remained quite tame. The Fed announced slightly sunnier economic forecasts, suggesting quantitative easing could wind down within a year.
2013-12-21 What Has QE Wrought? by John Mauldin of Millennium Wave Advisors
Now that we have begun tapering, we will soon see lots of analysis about whether QE has been effective. What will the stock market do? The US economy seems to be moving in the right direction, but the Fed has forecast Nirvana (seriously) - do we dare hope they can finally get a forecast right? Or have they jinxed us?
2013-12-19 A Dovish-Bullish Taper by Brian Wesbury, Bob Stein of First Trust Advisors
They finally did it. At Chairman Bernankes next to last meeting, the Federal Reserve announced a modest tapering of quantitative easing, reducing its monthly purchases of Treasury securities and mortgage-backed securities by $5 billion each ($10 billion total) to $75 billion starting in January. As a result, the size of the Feds balance sheet will continue to rise, but slightly more slowly than before.
2013-12-19 Is Your Inflation Protection Really Protecting You? by Thomas Luster, Stewart Taylor, Kevin Dachille of Eaton Vance
Many investors who own Treasury Inflation-Protection Securities (TIPS) and TIPS mutual funds don’t realize that they may be taking a significant amount of interest-rate risk in exchange for their inflation protection, which may result in losses when rates begin to rise rapidly. Shorter-maturity TIPS carry the same inflation adjustment as longer-term TIPS, but have less sensitivity to interest rates, which may be helpful in times of rising interest rates like what investors experienced in spring 2013.
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.
2013-12-17 2013 A Pretty Good Year by Mike Temple of Pioneer Investments
This time last year we were bullish about equities and positive on the slow but steady strengthening of the economy. The market did not disappoint. The economy was almost heroic, you might say, with its performance enduring government sequestrations and higher taxes almost a 2% drag on GDP but comporting with our expectations of 2 - 2.5% growth. 2013 is ending with GDP and the markets coming fairly close to what we thought theyd achieve. Now the year is almost out, so lets take stock of 2013 but look ahead to 2014.
2013-12-17 5 Takeaways from the Mini-Budget Deal by Kristina Hooper of Allianz Global Investors
The bi-partisan budget agreement inked last week has real implications for investors, including its impact on consumers, the stock market and the Fed, writes Kristina Hooper.
2013-12-17 Taper Time? by Scott Brown of Raymond James
There are many arguments for and against an initial reduction in the Feds monthly rate of asset purchases, but the balance has shifted toward a December taper. It appears to be a very close call, but even if the Fed decides to delay again, we all know (or should know) that QE3 is going to wind down in 2014.
2013-12-17 Housing Market Index Is Up, Should Help Buoy CPI by Team of GaveKal Capital
The NAHB Housing Market Index increased to 58 to post the highest number since August, which is also the highest level of the recovery. The HMI correlates pretty well with house prices.
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 Fiscal Policy and Monetary Policy - Update by Scott Brown of Raymond James
Market participants expected the November Employment Report to be the deciding factor on whether the Federal Reserve would begin to slow its rate of asset purchases this month. However, officials arent going to react to any one piece of data. The best argument for tapering is that it has to start sometime. However, the key factors that delayed the tapering in September and October are still with us to some extent.
2013-12-09 Pessimists Get Desperate by Brian Wesbury, Bob Stein of First Trust Advisors
Payrolls keep growing. Economic data stays positive. The stock market makes new highs. Its been consistent for nearly five years. And so has the pessimism. In fact, the pouting pundits of pessimism get more determined each month, trying to prove that things are really bad out there.
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.
2013-12-06 Weekly Economic Commentary by Team of Northern Trust
The U.S. employment report puts taper onto the table. Dont expect further rate cuts from the ECB or the Fed. Auto sales have been a bright spot amid sluggish consumer spending.
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 Looking Out on the Horizon for Equities by Bob Doll of Nuveen Asset Management
U.S. equities finished higher for an eighth consecutive week as the S&P 500 increased 0.1%, representing the longest positive streak since 2004. Inertia may have carried markets forward in a relatively quiet trading week without major headlines. Retail news appeared fairly positive in anticipation of a strong start to the Thanksgiving shopping weekend. Economic data was mixed.
2013-12-03 High Quality and Time-Horizon Arbitrage by Bill Smead of Smead Capital Management
At Smead Capital Management, we love to acknowledge financial journalists who really demonstrate an understanding of the underlying truths associated with high-quality and long-duration common stock investing.
2013-12-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1783.54. The ratios in parentheses use the monthly close of 1805.81. For the earnings, see the table created from Standard & Poors latest earnings spreadsheet.
2013-11-28 Five Reasons Inflation Is Still Missing by Chun Wang of Leuthold Weeden Capital Management
Apart from a couple of market-oriented drivers that could reverse course on a short-term basis, we are not seeing convincing evidence of an imminent pick-up in inflation. Let us be clear. There is most definitely inflation in the financial markets, but that does not seem to benefit the average person in the U.S. The liquidity injected by various central banks went mostly into the financial markets first and foremost; only a small fraction of it trickled down to the average person. That is why all this money printing has not been reflected in various inflation measures.
2013-11-25 Solving the Income Puzzle by Christopher Remington, Michael Cirami, Kathleen Gaffney, Scott Page of Eaton Vance
Income needs may be as high as they’ve ever been, while the yield potential from many traditional investment classes has dwindled to generational lows. Investors who remain in high-priced, low-yielding core bond strategies could experience loss of principal (and mounting retirement shortfalls) if interest rates revert toward their mean. We advocate creating an integrated, multi-pronged income plan that may offer yield potential that meets investor needs, while managing key risks found in the typical core fixed-income allocation.
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.
2013-11-22 What is the Current Market Reality? by Giordano Lombardo of Pioneer Investments
At this years Global Investment Forum, the discussion among Pioneer investment professionals was generally positive. Of course, everyone was conscious of the current market reality: that the major force behind recent positive, though benign, market trends is the unprecedented creation of liquidity and extremely loose stance of monetary policies around the world. Monetary policy alone cannot be the only conduit to a new economic model of income growth and job creation.
2013-11-22 Dividend Season Scorecard by Don Taylor of Franklin Templeton
As consumers gear up for the upcoming holiday shopping season, many investors in individual equities are eagerly anticipating another season that, instead of draining their wallets, might actually fatten them-dividend season. Don Taylor, portfolio manager of Franklin Rising Dividends Fund, is on the lookout for companies which not only have a track record of paying regular dividends, but increasing them. Here are some of Taylors thoughts on the early dividend season scorecard.
2013-11-21 Looking Beyond Inventories by Team of Northern Trust
Inventories have the habit of offering surprises in reports of real gross domestic product (GDP). The third quarter GDP report was one such occurrence, with inventories making an unexpectedly hefty contribution. A reversal of this event is most likely to influence the headline GDP number in the final three months of the year.
2013-11-20 Yellen: Farther To Go by Scott Brown of Raymond James
Janet Yellen gave a balanced assessment of how monetary policy will be conducted during her tenure as Fed chair. However, the financial markets perceived a dovish tilt. She stressed that conditions in the labor market are still far from normal and noted that inflation has been running below the Feds goal of 2% and is expected to do so for some time. However, Yellen noted that there were risks of removing support too late as well as too soon. QE3 cant go on forever.
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.
2013-11-19 Research from Yale on Commodities by Robert Huebscher (Article)
Many would consider the practice of placing assets in a commodity fund to be speculation rather than investing. That perception was amplified by a recent Bloomberg article, which reported the dismal performance of many managed-futures funds and commodity-trading advisors (CTAs). Contrary to that image, Geert Rouwenhorst, a Yale University professor, claims he has found a way to construct a commodity-based fund that earns a significant premium over inflation.
2013-11-19 A Glimpse of a Yellen-Led Fed by Kristina Hooper of Allianz Global Investors
Kristina Hooper highlights some key takeaways from incoming Federal Reserve chair Janet Yellens testimony before the Senate last week, including when the Fed is likely to taper its bond-buying program.
2013-11-17 The Unintended Consequences of ZIRP by John Mauldin of Millennium Wave Advisors
Two recently released papers make an intellectual and theoretical case for an extended period of very low interest rates and, in combination with other papers from both inside and outside the Fed from heavyweight economists, make a strong case for beginning to taper sooner rather than later, but for accompanying that tapering with a commitment to an even more protracted period of ZIRP. We are going analyze these papers, as they are critical to understanding the future direction of Federal Reserve policy. Secondly, we’ll look at some of the unintended consequences of long-term ZIRP.
2013-11-13 Fed Research on Policy Rules by Zach Pandl of Columbia Management
In a paper for last weeks IMF annual research conference, William English (head of the Federal Reserve Boards Monetary Affairs division) discussed current monetary policy strategy, with a focus on threshold rules and forward guidance. The paper caused a stir in markets but we do not think it signals a fundamental change in Fed communication. Small changes to the so-called Evans Rule are possible, but the basic framework will probably remain in place even as QE tapering begins.
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 Markets Vacillate Between Stronger Economy and Fed Accommodation by Bob Doll of Nuveen Asset Management
U.S. equities finished mostly higher last week as the S&P 500 increased 0.6%, ending higher for the fifth straight week. The return of central bank action was a primary concern. The European Central Bank (ECB) surprised investors with a 0.25% rate cut, while the debate over the Federal Reserves impending tapering decision continued in earnest.
2013-11-12 Taper Talk by Brian Wesbury, Bob Stein of First Trust Advisors
Taperingplease bring it on. We wanted it yesterday, or last month, or even years ago. We never thought QE helped the economy and certainly dont think keeping it around is a good idea. Its created uncertainty at an unprecedented level.
2013-11-12 Will 39% Hike in Minimum Wage Tank The Economy? by Gary Halbert of Halbert Wealth Management
President Obama called for a whopping 39% increase in the minimum wage from $7.25 to $10.10 per hour last Thursday. There is already a bill working its way through in the Senate to do the same thing. If this legislation passes, the minimum wage will be increased 95 cents each year for the next three years starting this year, to bring it to $10.10 by 2015.
2013-11-11 Surprise, Surprise, Surprise! by Scott Brown of Raymond James
The economic data were mostly stronger than anticipated last week. GDP growth exceeded expectations, although the details were a bit troublesome. With everyone anticipating some impact from the partial government shutdown, nonfarm payrolls accelerated in October. Moreover, revisions to August and September, painted a much stronger picture of job growth. What does this mean for the Fed and its decision to taper?
2013-11-08 Weekly Economic Commentary by Team of Northern Trust
The ECBs rate cut signals concerns about deflation. The U.S. job numbers provide an upside surprise. How reliable are the U.S. employment data?
2013-11-05 Letters to the Editor by Various (Article)
Several readers respond to Bob Veres’ article, Why Deficits Don’t Matter, which was published last week. A reader responds to Adam Apt’s article, Is Gold Overpriced?, which was published Oct. 15, and a reader responds to the commentary, Scrooge McDucks, by Bill Gross of PIMCO, which appeared Oct. 31.
2013-11-05 Even Economists Get Stuck Looking in the Rearview Mirror by Bill Smead of Smead Capital Management
Will the US economy grow in an above-average way in the next ten to twenty years or do we need to resign ourselves to an era of anemic economic growth? Two pieces of information came out this week, adding to existing information on the subject and speak to this core debate in the US stock market. The first piece was called Slowing to a Crawl by Jonathan Laing from Barrons.
2013-11-04 More #PlowHorse in Q3 by Brian Wesbury, Bob Stein of First Trust Advisors
Despite the shutdown, the sequester, talk of tapering, and meteors in the night sky, the US economy just keeps plowing along. Reported later this week, we expect Q3 real GDP grew right on trend at a 1.9% rate another, #PlowHorse report.
2013-11-01 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
ere is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1720.03.
2013-10-31 A Bit More Hawkish, All Things Considered by Brian Wesbury, Bob Stein of First Trust Advisors
Todays statement from the Federal Reserve was almost a carbon copy of the last one in September. No changes to the pace of quantitative easing or interest rates, which is exactly as the consensus expected. The Fed made only minor changes to the text of the statement, making it slightly more hawkish in one spot and slightly more dovish in another.
2013-10-29 Is This the New Normal'? by Sam Wardwell of Pioneer Investments
Markets Settle into a New Normal All sorts of economic data were released last week, but volatility has dropped: rightly or wrongly, market forecasts about the pace of quantitative easing (QE) and earnings growth in the U.S. appear to have coalesced around an outlook for slow growth with ongoing QE.
2013-10-26 A Code Red World by John Mauldin of Millennium Wave Advisors
The heart of this week’s letter is the introduction of my just-released new book, Code Red. It is my own take (along with co-author Jonathan Tepper) on the problems that have grown out of an unrelenting assault on monetary norms by central banks around the world.
2013-10-23 Investment Bulletin: Global Equity Strategy by Team of Bedlam Asset Management
The portfolio enjoyed another index-beating month with a gain of 0.9% versus 0.6%, so improving further the long term numbers. As noted in previous Bulletins, correlations between growth and equity market returns are low. Investors remain fixated otherwise, but some confusion is reasonable given that growth in earnings per share is also slowing. Yet strong equity markets can be justified by the Free Lunch Theory.
2013-10-21 Europe Turning a Corner? by Brandon Odenath of J.P. Morgan Funds
Since late last year, investors have seen periods of strong outperformance by assets from the most impacted parts of Europe, leaving many observers wondering if Europe is turning a corner. Intervention by the ECB and the ability of those liquidity injections to stop the bleeding in the economy has helped. The reduction of austerity and drag coming from fiscal policy should be the key to faster economic growth.
2013-10-16 Economic Assessment Without Government Reports by Team of Northern Trust
The very near-term economic outlook is unclear and will remain so until the political impasse in Washington over the government shutdown and debt ceiling is settled. If differences are resolved in a day or two, the damage could be about 0.2 percentage points to fourth quarter real gross domestic product (GDP). A failure to raise the debt ceiling would more of a calamity, which we hope not to encounter.
2013-10-15 Is Gold Overpriced? by Adam Jared Apt (Article)
New research, based on an econometric model of gold prices, has attempted to answer the question, “Is gold overpriced?”
2013-10-08 Listen to the 10th Man by Kristina Hooper of Allianz Global Investors
Theres no shortage of short-term risks in todays market or conventional wisdom on how they will play out. But prepping for the unexpected could limit the number of surprises and better insulate investors portfolios, writes Kristina Hooper.
2013-10-04 The Fed and Its Big Thumb by Ron Muhlenkamp of Muhlenkamp & Co.
Weve seen what happens when prices get ahead of the economy reality. The bubbles in the dot-coms in 2000 and the housing market in 2007 were such effects. We fear that the apparent Fed desire to continue to manipulate interest rates may engender more bubbles.
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.
2013-10-01 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Click to viewHere is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1687.17. The ratios in parentheses use the monthly close of 1681.55. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.
2013-09-25 Surprise! No Tapering and More Budget Progress than Meets the Eye by Sam Wardwell of Pioneer Investments
On Monday, Larry Summers exited the pool of candidates for the next Federal Reserve (Fed) chairman. (Only the timing was really a surprise.) On Wednesday, the Fed didnt taper and de-emphasized several of the targets theyd set earlier. (Big surprise versus consensus - not central bank best practices). Municipal bond offerings by Puerto Rico, California, and Illinois were met with strong investor demand.
2013-09-25 More Than a Sugar High by Pamela Rosenau of HighTower Advisors
The recent decision by the Fed to delay any tapering may be a preview of what to expect by a Yellen Fed. As the Fed appeared to remove virtually every yardstick or goal post that they have provided recently, one thing is certain, they seem determined to keep the accelerator nailed to the floor as they drive the economy at full speed. According to Cornerstone Macro, based on the Feds move, it appears increasingly likely that growth is more likely to reaccelerate.
2013-09-24 William Bernstein ? “Stocks for the Long Run” by Michael Edesess (Article)
William Bernstein’s reading of history is that if you want to build a nest egg and protect against the “four horsemen” that threaten it over the long term, the best thing to do is invest in a globally diversified stock portfolio.
2013-09-24 Why Retirees Should Choose DIAs over SPIAs by Wade Pfau (Article)
Retirement portfolios can be constructed from a mix of asset classes, including stocks, bonds and annuities. In the past, I’ve shown that retirees achieve some of the best outcomes by allocating a portion of those assets to SPIAs. In this column, I extend my analysis to show that DIAs work even better than SPIAs, by providing more liquidity and better longevity protection at a lower cost.
2013-09-24 Why Bond Funds are Toxic for Your Portfolio by Raul Elizalde (Article)
Thirty years of rate declines have convinced many that bonds are safe. Indeed, a conservative portfolio has come to be synonymous with one that is heavy on bonds. But a rising interest-rate cycle is taking hold, and bond investors are now exposed to unfamiliar risks in their conservative portfolios. Bond funds will not provide the safety that investors seek. Holders of individual bonds will fare much better.
2013-09-23 Loose and Looser by Brian Wesbury, Bob Stein of First Trust Advisors
Larry Summers took his name out of the hat and wont be considered for the top spot at the Federal Reserve. And while nothing is a slam dunk, it looks very much like current Vice Chair Janet Yellen is going to get the call from President Obama to step up and replace Bernanke.
2013-09-20 Will Europe's Improving Economy Push Interest Rates Higher by Giordano Lombardo of Pioneer Investments
Gross Domestic Product (GDP) increased in the second quarter after six straight declines. Data expectations were on the optimistic side, but investors appeared to become more confident before the release, thanks to encouraging evidence from supposedly reliable forward-looking indicators.
2013-09-19 When Doves Cry, "Not Yet" by Liz Ann Sonders of Charles Schwab
The Fed surprised markets and the consensus by maintaining its full QE bond buying program; while both stocks and bonds soared on the news.
2013-09-18 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Depending upon where you reside, or on which side of the issues you fall, it was a good week last week. We averted a military strike on Syria by the U.S., at least temporarily; we had reasonable adjustments to economic growth statistics; and most made some money in their portfolios. While cyclical dynamics are relatively benign, the broader secular outlook continues to build a solid foundation for recovery.
2013-09-17 Investing for Real People by Sponsored content by Oppenheimer Funds (Article)
Investor goals are the same, but solutions have changed. Today, aiming to meet basic needs requires new solutions. Laser focus on investor goals will help uncover appropriate investment opportunities. Expanding the opportunity set beyond the usual suspects will be critical to long-term success.
2013-09-10 The Party's Over. Why Own Commodities? by Jon Ruff, Seth Masters of AllianceBernstein
Commodity prices soared during the first decade of this century. But now the partys over: new sources of supply are coming on line just as demand from China is slowing, leading to expectations of price declines. So should investors shun commodity-related investments?
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?
2013-09-03 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Click to viewHere is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1670.09. The ratios in parentheses use the monthly close of 1632.97. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.
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.
2013-08-28 On Tapering, All Signs Point to “Maybe” by Scott Brown of Raymond James
Investors looking to the July 30-31 Fed policy meeting minutes for clear clues on future moves were left disappointed. Nearly all senior Fed officials expect that a reduction in the pace of asset sales is likely to be warranted by the end of the year. However, they appear evenly divided on whether that will be sooner (September) or later (December). The economic data remained mixed, suggesting that the decision will be a close call.
2013-08-28 A New Leg In The Commodity Decline? by Doug Ramsey of Leuthold Weeden Capital Management
For more than two years weve discussed the supply-side risks to commodity producers stemming from capacity built during the manic Third Act of last decades Three Act Play in commodities. Commodity-oriented equities have indeed underperformed since 2011 (chart 1), but to date, most pundits have laid blame squarely on the demand side (i.e., the sharp deceleration in Chinese economic growth). We dont have a strong opinion on the short-term direction of the Chinese economy, but the capacity overhang looks like a multi-year story to us, independent of China
2013-08-27 The Price Clients Pay for Worst-Case Forecasts by Bob Veres (Article)
Clients and the world at large give inordinate attention to downside scenarios, and nobody is calling our attention to the much larger upside of our business and investment landscape. The human brain amplifies this effect, because it is hardwired to notice threats much more than opportunities. I recently spoke with Dennis Stearns ? an advisor who happens to be an expert in scenario planning ? about the role planners need to play to counteract media-driven negativity.
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 Target-Date Funds: Why Higher Equity Allocations Work by Joe Tomlinson (Article)
Following the 2008 financial crisis, target-date funds (TDFs) were criticized for exposing investors nearing retirement to excessive equity allocations. Were those criticisms justified? How well do TDFs stack up against the venerable strategy of matching one’s bond allocation to one’s age? My research has yielded surprising answers to those questions and to the proper role of single-premium immediate annuities (SPIAs) alongside TDFs.
2013-08-20 Tapering Uncertainty Means Volatile But Range-Bound 10-Year Rate by Chun Wang of Leuthold Weeden Capital Management
The U.S. 10-year yield was pretty much trapped within a 25 bps range between 250 and 275 in July (Chart 1), but intra-day volatility has picked up noticeably. In the last three months, there were 21 days of greater than 5 bps daily moves and 7 days of greater than 10 bps daily moves on the U.S. 10-year yield, the most in the last one and a half years.
2013-08-20 The Speed of Fed Rate Hikes by Zach Pandl of Columbia Management
For the last several months, talk of tapering has dominated the Fed debate. Although there remains some uncertainty around the detailssuch as how large the initial step might bemost observers now expect the Federal Reserve to begin slowing the pace of quantitative easing (QE) at the September 17-18 meeting. Attention is now turning to another major issue on next months agenda: the publication of Fed officials forecasts for the funds rate in 2016. The Fed rolls forward the Summary of Economic Projections (SEP) by one year each September.
2013-08-19 A Bear Market Is Here: In Bonds! by Brian Wesbury, Bob Stein of First Trust Advisors
While it certainly hasnt made the headlines that it should have, the bond market has been kicked in the teeth. After bottoming at 1.61% on May 1, the yield on the 10-year Treasury Note hit 2.84% on Friday, its highest level in two years the worst bear market move in bonds since the end of the 2008-09 financial panic.
2013-08-19 A Warning Regarding Broken Speculative Peaks by John Hussman of Hussman Funds
We presently observe what might best be called a broken speculative peak a strenuously overvalued, overbought, overbullish, rising yield syndrome followed by a breakdown in market internals.
2013-08-19 The Tick-Tock on Tapering by Scott Brown of Raymond James
The Feds September 18 decision on whether to begin reducing the pace of asset purchases will depend on the economic data (the job market figures, in particular), but theres a growing consensus that were likely to see a modest initial step, as a compromise between Fed officials who want to end the program sooner and those that want to see it continued. There are other things for policymakers to consider. One is the possibility of an adverse reaction in the financial markets. Another concern is the low underlying trend in inflation.
2013-08-17 Signs of the Top by John Mauldin of Millennium Wave Advisors
The investment media seems obsessed with the question of whether the Fed will taper. The real question should be not about "tapering" but about credibility. What happens when fundamentals become the narrative as opposed to what the central bank is doing? What happens if the Federal Reserve throws a liquidity party and nobody comes? Today we look at some of the fundamentals. The market is in fact overvalued, but that doesn’t mean it can’t become more overvalued. Is this August 1987 or August 1999?
2013-08-13 So Now What? by Scott Brown of Raymond James
What did we learn last week? The Fed may not be in any hurry to begin reducing the rate of asset purchases. The economic data suggest a mixed picture.
2013-08-10 We Can't Take the Chance by John Mauldin of Millennium Wave Advisors
What would it have been like to be a central banker in the midst of the crisis in 2008-09? You’d know that you won’t have the luxury of going back and making better decisions five years later. Instead, you have to act on the torrent of information that’s coming at you, and none of it is good. Major banks are literally collapsing, the interbank market is nonexistent and there is panic in the air. Perhaps you feel that panic in the pit of your stomach. This week we’ll perform a little thought experiment to see if we can extrapolate what is likely to happen in when the nex
2013-08-08 Coming Soon: September Volatility by Russ Koesterich of iShares Blog
Since spiking earlier this summer, market volatility is now back to spring lows. Investors, however, shouldnt expect this calm to continue come September. Russ has four reasons why.
2013-08-07 Who has the Edge in Race to Head the Fed? by Zach Pandl of Columbia Management
One of the most common mistakes policy analysts make is what I like to call normative biasallowing personal opinions to affect perceived odds of certain outcomes. Saying The Fed is unlikely to introduce quantitative easing because it would lead to high inflation is an example of normative bias. Fed officials do not think quantitative easing (QE) leads to high inflation, and whether you think it does has no bearing on the probability. Personal perceptions are irrelevant for policy analysisthe only things that matter are the perceptions of the decision maker.
2013-08-06 Unlocking the Two Mysteries behind SPIAs by Wade Pfau (Article)
Two mysteries confound planners who purchase single-premium immediate annuities (SPIAs) for their clients: Why does the present value of a SPIA often exceed its cost, and why do equity allocations appear to increase when a SPIA is purchased? Unlocking those mysteries requires advisors to use a different framework ? based on the household balance sheet ? for the withdrawal phase of retirement.
2013-08-06 Equities Grind Higher as the Economy Continues to Muddle Through by Bob Doll of Nuveen Asset Management
U.S. equities advanced last week, with the S&P 500 increasing 1.10%.1 For the month of July, the S&P gained 5.09%, and equities have increased 21.33% year to date. Second quarter earnings season is nearly complete, and there has not been a material change in estimated earnings for the balance of the year or 2014. Revenues were slightly ahead of expectations, and earnings per share were approximately 3% higher than expected, annualizing at about $110 per S&P 500 share.
2013-08-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1668.68. The ratios in parentheses use the monthly close of 1685.73. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.
2013-08-02 The Federal Reserve in a Time for Doves by Kenneth Rogoff of Project Syndicate
The battle is on to replace current US Federal Reserve Chairman Ben Bernanke, and two of the leading candidates, Lawrence Summers and Janet Yellen, display a dovish bias regarding inflation. In normal times, that would be a handicap; under current conditions, it is an advantage.
2013-08-02 3 Reasons Silver Is Not the Same As Gold by Russ Koesterich of iShares Blog
Many investors who remain cautious on gold wonder whether they should get their precious metal exposure through silver instead. In response, Russ explains why the two metals arent interchangeable.
2013-07-30 The Power of Diversification and Safe Withdrawal Rates by Geoff Considine (Article)
When Bill Bengen published his seminal research in 1994, a 4% safe withdrawal rate (SWR) was clearly attainable with a variety of asset allocations. But bond yields are lower now than they were then, and equity returns for the next 20 years are unlikely to exceed those of the prior two decades. Indeed, a new paper by three highly respected researchers showed that SWRs for stock-bond portfolios are well below 4%. But as I will demonstrate, a 4% SWR is still possible with a more diversified portfolio ? and without subjecting clients to additional risk.
2013-07-30 Leuthold's Chun Wang on 10-year Rates by Chun Wang of Leuthold Weeden Capital Management
So now the question is how high can it go? Just like every other market, bond yields tend to overshoot, and we think 3% is the upper bound in the short-term. However, we believe it will settle back closer to 250 bps by the end of the year.
2013-07-26 Economic Value Approach to ROIC May Unearth Hidden Value by Team of Jacob Funds
Equity mutual fund managers employ a wide variety of investing approaches in an attempt to outperform the market, but very few stand out from the crowd. The approaches that do work over the long term tend to be very distinctive, focusing consistently on a specific methodology that is executed regardless of the market environment.
2013-07-22 More Plow Horse in Q2 by Brian Wesbury, Bob Stein of First Trust Advisors
Forecasting economic growth for the second quarter of the year is always precarious. The reason is that the initial report on the second quarter is when the government goes back and makes revisions to GDP for the past several years. This time around, its particularly iffy because the government for the very first time is going to start accounting in GDP for the value of R&D spending by companies.
2013-07-22 What the *&%! Just Happened? by Ben Inker of GMO
In a new quarterly letter to GMOs institutional clients, head of asset allocation Ben Inker highlights the period from May 22 to June 24 characterized by "the universality of the declines" across asset classes.
2013-07-19 Is Inflation Really Gone Forever? by Jon Ruff of AllianceBernstein
Recent movements in asset prices suggest that markets have forsaken any possibility of an inflation outbreak in the next decade. We believe that view is far too sanguine.
2013-07-19 Fixed Income Fed Insight: It's All About Employment by Christopher Molumphy of Franklin Templeton Investments
We can try to guess what the Fed is thinking, but ultimately the Fed is driven by inflation and the labor markets. With inflation seemingly under control, its really the labor markets that dominate. So if you want to know what the Feds going to be doing, look at the labor markets how many jobs we create each month and, most importantly, the unemployment rate.
2013-07-19 Opportunity in Europe by Team of Neuberger Berman
A striking feature of this years global stock market rally is that international markets have significantly trailed U.S. stocks. Nevertheless, Neuberger Bermans Asset Allocation Committee (AAC) recently made the contrarian call of upgrading its view for international developed markets, particularly Europe. In this Strategic Spotlight, we provide an update on the European economy and lay out some reasons for optimism despite the dour growth outlook.
2013-07-18 What's Next for the U.S. Dollar? by Nic Pifer of Columbia Management
Global government bonds have performed poorly so far this year. Year to date through July 13, the Barclays Global Treasury Index, which covers 30 investment grade domestic government bond markets, is down 5.5% in unhedged U.S. dollar terms. The same index hedged back to U.S. dollars is down 0.6% year to date. This difference in returns highlights a key point.
2013-07-17 Bubbles Forever by Robert Shiller of Project Syndicate
In 2006, the largest global real-estate bubble in history imploded, and the collapse of a major worldwide stock-market bubble a year later triggered the global financial crisis. Although one might think that we have been living in a "post-bubble" world since then, talk of new bubbles keeps reappearing.
2013-07-16 AdvisorShares Weekly Market Review by AdvisorShares Research of AdvisorShares
The market increased again last week and both the S&P 500 and the Dow Jones Industrial Average reached record highs by the end of the week. The Nasdaq Composite Index also rose significantly, hitting a 12 year high.
2013-07-15 Mid-Year Outlook: Waiting to Move Beyond a Muddle-Through Economy by Bob Doll of Nuveen Asset Management
By focusing on current economic conditions while giving due importance to the uncertainty created by Fed actions we offer thoughts for consideration in evaluating risk-on investments.
2013-07-15 And That's the Week That Was by Ron Brounes of Brounes & Associates
After weeks of naysaying and fear-mongering about the Fed, investors finally embraced news from Bernanke and friends and equities moved back into record-setting territory. While most accept the fact that the Fed has entered the beginning-of-the-end of its bond-buying stimuli, the minutes from the latest policy meeting and a few comforting comments from Dr. B. himself helped calm the masses that the program would not end yesterday.
2013-07-11 The Taper by Richard Bernstein of Richard Bernstein Advisors
If SNLs Emily Litella worked on Wall Street, shed probably be asking Whats all this hubbub about the Feds tapir? After all, its a fine animal that never hurt anyone on Wall Street. It would then be pointed out to her that the word was taper and not tapir. She would politely end her commentary with her famous Never mind.
2013-07-09 Retirement Portfolios: Fears over Rising Rates are Overblown by Joe Tomlinson (Article)
The second quarter saw increases in interest rates, losses in every category of bonds and investors abandoning fixed-income markets. The distress has been particularly acute among retirement investors who considered bond funds to be safe. But are fears of bond losses overblown? I will make the case that the rise in interest rates is actually good for retirement portfolios. To see this, one has to look beyond the quarterly statement losses and focus on overall retirement outcomes.
2013-07-09 ENERGY MLPs: A Suitable and Sustainable Asset Class by Sponsored Content from ClearBridge Investments (Article)
Greater capitalization. More liquidity. The energy MLP market has grown steadily, with good reason: our constant demand for energy. While oil prices go up and down, volume has stayed consistent. Production is increasing. And the infrastructure is needed to support it. Add some risk, and you’ve got an investment which could fit in a diversified portfolio.
2013-07-09 U.S. Stocks Continue to Dominate ? What’s Next? by Ron Surz (Article)
U.S. stocks earned 2.5% in the second quarter, bringing the year-to-date return up to a lofty 14%. By contrast, the EAFE index lost 1% in the quarter, bringing its year-to-date return down to 4%. In fact, as shown in the following graph, no other asset class comes even close to the return on U.S. stocks so far this year.
2013-07-09 The Germans Deserve Credit for Extending Credit by Sam Wardwell of Pioneer Investments
Germanys government agreed to (indirectly, via guarantees) provide Spains government-run ICO development banks with the funding to make up to 800 million of low-interest loans to small and medium-sized businesses.
2013-07-05 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The odds of a September tapering have increased but are conditional on labor market conditions continuing to evolve at least as favorably as viewed at the present time. The important caveat is that the Feds forward guidance has stressed the importance of improvements in the outlook of the labor market and inflation to consider tapering, which implies that economic data between now and the September FOMC meeting will play an important role in the timing of tapering of asset purchases.
2013-07-03 Failure to Communicate, Part 2 by Scott Brown of Raymond James
The financial markets have begun to reassess Fed Chairman Bernankes monetary policy comments. Several Fed officials spoke last week, each echoing Bernankes key messages: 1) policy will remain data-dependent, 2) tapering is not tightening, and 3) a rise in the federal funds target rate is a long time off. With an emphasis on data-dependence, the economic figures should get more scrutiny from the markets. Still, theres a sense that hope plays a major role the Feds economic outlook.
2013-07-02 Gundlach’s One-Word Explanation for June’s Decline by Robert Huebscher (Article)
According to Doubleline’s Jeffrey Gundlach, a single word explains the declines global capital markets experienced in June.
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.
2013-07-01 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1618.77. The ratios in parentheses use the monthly close of 1606.28. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.
2013-06-27 What We've Got Here is (a) Failure to Communicate by Scott Brown of Raymond James
In his press briefing following the June 19 FOMC meeting, Fed Chairman Bernanke outlined how the evolution of the economic outlook will drive policy decisions in the months ahead. The key messages are that monetary policy will remain data-dependent, that tapering is not tightening, and that higher short-term interest rates are still a long way off.
2013-06-27 AdvisorShares Weekly Market Review by Team of AdvisorShares
Once again, US stock indexes declined last week based on investors fears of rising interest rates. While markets were rising at the beginning of the week, on Wednesday, Federal Open Market Committee Chairman Ben Bernanke said that if the economy continued on its current growth path, the Fed would scale back on asset purchases by the end of the year and attempt to end the extraordinary measures by the middle of 2014.
2013-06-27 Turmoil Shouldn't Derail Turkey by Carlos von Hardenberg of Franklin Templeton Investments
In 2012, Turkeys stock market rose more than 50%, posting one of the strongest performances of any global equity market last year. However, recent news of protests sweeping the nation has started scaring off some investors, at least in the short term. We consider turmoil to often be a natural part of change and development, and these short-term political disturbances likely wont be the last. Ive invited my colleague Carlos von Hardenberg, Managing Director, Turkey, based in Istanbul, to share some local insight.
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 Back to Normal by Brian Wesbury, Bob Stein of First Trust Advisors
Market behavior especially since Fed Chair Ben Bernanke mentioned QE tapering has been relatively dramatic. Not unprecedented, but dramatic. By contrast, the reaction of the punditry has been way over the top.
2013-06-25 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
All markets came under pressure last week (and this morning) over the dual concerns of a slowing global economy coupled with the Federal Reserves suggestion that things are improving and thus tapering might start by the end of the year.
2013-06-25 Rates, Dividends and The Laws of Gravity by Don Taylor of Franklin Templeton Investments
The laws of gravity may dictate that what goes up must come down, but interest rates seem to have their own converse course of action what goes down eventually will go up. Although it seems like interest rates can stay stuck in low gear for years, (decades even, in the case of Japan) eventually they will creep higher, and talk is heating up about the timing and magnitude of such creep in the US. As the portfolio manager of Franklin Rising Dividends Fund, Don Taylor was quick to comment that higher interest rates dont mean all dividend-paying stocks are doomed.
2013-06-21 Outlook for the Global Bond Market by Nic Pifer of Columbia Management
The global economy continues to expand, but seems stuck on a moderate, below-trend trajectory. Lately, the story seems to be more about a growth rotation across regions than a clear-cut acceleration or deceleration at the global level. Looking to 2014, however, we still expect the global economy to accelerate to a more trend-like pace.
2013-06-20 Fed Slightly More Optimistic by Brian Wesbury, Bob Stein of First Trust Advisors
The Federal Reserve made only slight changes to the text of its statement, but those it did make signal slightly more optimism. It said labor market conditions show further improvement, rather than some improvement and sees diminished downside risks for the broader economy.
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 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.
2013-06-17 Keynesian Model Blew It Again by Brian Wesbury, Bob Stein of First Trust Advisors
If theres one economic conclusion we can make from recent data, its that the Keynesian model has failed - again.
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 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.
2013-06-11 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The last few weeks have seen volatility emerge as concerns about the Feds policy of quantitative easing and the timing of changing it have taken center stage.
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.
2013-06-06 Inflation Is Still the Lesser Evil by Kenneth Rogoff of Project Syndicate
The worlds major central banks continue to express concern about inflationary spillover from their recession-fighting efforts. That is a mistake: given the political, social, and economic risks of continued slow growth, policymakers should encourage a sustained burst of moderate inflation.
2013-06-04 Vincent Reinhart on Debt and Growth in the U.S. and Japan by Robert Huebscher (Article)
High debt levels translate to slower growth, according to Vincent Reinhart. That conclusion will be disheartening to those who jumped on the errors several University of Massachusetts scholars found last month in Carmen Reinhart (Vincent’s wife) and Ken Rogoff’s research. But Vincent Reinhart is the author, along with his wife and Rogoff, of a study published in 2012 that documented the degree to which high debt-to-GDP levels correlate with slower economic growth in developed countries.
2013-06-04 The Threat to the Central-Bank Brand by Mohamed El-Erian of Project Syndicate
For the last 30 years, Western central banks have used their "brand" to help maintain low and stable inflation: by signaling their intention to contain price pressures, they would alter expectations and behavior. But, as corporate executives know, brand management is a tricky affair, particularly when popular sentiment overshoots.
2013-06-04 Equities Hit Pause by Bob Doll of Nuveen Asset Management
Stocks and other risk assets struggled last week, with the S&P 500 declining 1.11%.1 Equities finished lower on Friday, the final trading session of May. The decline trimmed Mays gains and sealed the second consecutive weekly decline for U.S. equities. The S&P increased 2.34% for the month and has gained 4.31% this quarter and 15.37% for the year.1
2013-06-01 After the Gold Rush by Nouriel Roubini of Project Syndicate
The run-up in gold prices in recent years from $800 per ounce in early 2009 to above $1,900 in the fall of 2011 had all the features of a bubble. And now, like all asset-price surges that are divorced from the fundamentals of supply and demand, the gold bubble is deflating.
2013-06-01 Central Bankers Gone Wild by John Mauldin of Millennium Wave Advisors
For the last two weeks we have focused on the problems facing Japan, and such is the importance of Japan to the world economy that this week we will once again turn to the Land of the Rising Sun. I will try to summarize the situation facing the Japanese. This is critical to understand, because they are determined to share their problems with the world, and we will have no choice but to deal with them. Japan is going to affect your economy and your investments, no matter where you live; Japan is that important.
2013-05-31 The American Consumer is Not Okay by Stephen Roach of Project Syndicate
The spin-doctors are hard at work arguing that falling unemployment, rising home values, and record stock prices mean that the American consumer the major drag on the economy in the post-crisis period is finally back. The facts say otherwise.
2013-05-31 The Week in Fiscal and Monetary Policy by Scott Brown of Raymond James
The financial markets were more than a bit confused by the minutes of the April 30 May 1 Federal Open Market Committee meeting. Some Fed officials wanted to begin tapering the rate of asset purchases as early as June. However, that wasnt a majority opinion. Fed Chairman Bernankes testimony to the Joint Economic Committee of Congress was balanced, but strongly suggested that monetary policy is unlikely to be tightened anytime soon. In his testimony, Bernanke also lectured congress on fiscal policy, which has been completely wrong-footed this year.
2013-05-29 Outlook on the Japanese Equity Market by Team of Nomura Asset Management
The Nikkei Stock Average closed 128 points higher, or 0.9%, to close the week at 14,612 following the dramatic 7.3% sell-off on Thursday, May 23, 2013. The Tokyo Stock Price Index (TOPIX) also added 6 points, or 0.5%, to 1,194, following a 6.9% sell-off on Thursday, May 23rd.
2013-05-28 Taking Stock by Bob Doll of Nuveen Asset Management
U.S. and global equities were under pressure last week, with all major U.S. indices lower for only the fourth time this year. With discussion of the Fed tapering its stimulus, market uncertainty gained momentum. The S&P 500 was down 1.0% for the week.1 We consider the market pullback technical in nature since the mention of a Fed quantitative easing exit likely created a natural point to take profits after the recent rally.
2013-05-25 The Mother of All Painted-In Corners by John Mauldin of Millennium Wave Advisors
Japan has painted itself into the mother all corners. There will be no clean or easy exit. There is going to be massive economic pain as they the Japanese try and find a way out of their problems, and sadly, the pain will not be confined to Japan. This will be the true test of the theories of neo-Keynesianism writ large. Japan is going to print and monetize and spend more than almost any observer can currently imagine. You like what Paul Krugman prescribes? You think he makes sense? You (we all!) are going to be participants in a real-world experiment on how that works out.
2013-05-24 4 Ideas for Today's Low Inflation Environment by Russ Koesterich of iShares Blog
Theres certainly no shortage of things to worry about right now related to the US economy. But one thing were not too worried about right now: Inflation. Not only is inflation low, but the latest numbers show its actually falling. And as I write in my commentary this week, inflation is unlikely to become a problem in the United States for at least another 12 to 18 months. Why? There are a number of headwinds keeping US prices low in the near term.
2013-05-23 Chart of the Week: S&P 500 versus Expected CPI by Mark Ungewitter of Charter Trust Company
In the post-crash environment, US equities have shown a remarkable 70% correlation with TIPS breakeven spreads. This compares with a 0% correlation in the four years preceding March 2009.
2013-05-22 Is Japan's Economic Rebound For Real? by Daisuke Nomoto of Columbia Management
The two phrases Abenomics and the BOJs Shock and Awe Monetary Easing are all over the headlines about Japan. Prime Minister Abe unveiled his economic policy late last year calling for a 3% annual nominal gross domestic product (GDP) growth target and an aggressive monetary easing by the BOJ (The Bank of Japan) to achieve 2% inflation. The BOJ unleashed the worlds most intense burst of monetary stimulus last month promising to double the monetary base to 270 trillion yen ($2.7 trillion) by the end of 2014 to defeat deflation.
2013-05-21 Putting Cash to Work: 3 Ways to Enter the Market Today by Russ Koesterich of iShares Blog
With global equities up more than 25% since their bottom last June, many investors are wondering: Is it too late to move cash from the sidelines to stocks? No, says Russ, and he offers three ideas for where find value today.
2013-05-20 Bernanke's JEC Testimony by Scott Brown of Raymond James
On Wednesday, May 22, Federal Reserve Chairman Ben Bernanke will testify on The Economic Outlook. The next monetary policy meeting is four weeks away, but Bernanke is likely to provide a preview of what will be discussed at that time specifically, on the issue of when to begin reducing the rate of asset purchases. The short answer may be it depends.
2013-05-17 Weekly Market Highlights by Matthew Rubin of Neuberger Berman
Bank of England leaves monetary policy unchanged. S&P 500 and DJIA post gains of 1.3% and 1.1%, respectively. U.S. inflation and housing data and euro area GDP headline this weeks economic releases.
2013-05-15 And That's the Week That Was by Ron Brounes of Brounes & Associates
Fiscal Cliff. Sequester. Different names for similar budgetary issues that both basically resulted in games of Congressional kick the can. Now in a stroke of luck for non-compromising politicos, the budget deficit is shrinking as higher payroll taxes and paybacks from previously bailed out entities (thanks Fan) have enhanced government revenues since the beginning of the year.
2013-05-14 David Rosenberg ? My Love Affair with Bonds is Over by Robert Huebscher (Article)
The chorus of rate-spike-fearing inflationists has a new member. David Rosenberg, a stalwart advocate of fixed-income investing for the last quarter century, publicly declared on May 3 that his “love affair with the bond market has come to an end.” Prepare for a redux of 1970s stagflation, he said, and he advised investors how to construct portfolios to prepare for that scenario.
2013-05-14 Nassim Taleb on the Anti-Fragile Portfolio and the Benefits of Taking Risks by Ben Huebscher (Article)
As we recover from the most recent financial crisis, how we can we learn from the mistakes to best prepare for the future? Nassim Taleb tackled this very question in his latest book, Antifragile: Things That Gain From Disorder, which built off his previous works and applies the lessons learned to today’s biggest challenges. Taleb examined how small doses of volatility can help systems handle larger disruptors in the future.
2013-05-14 Changing Face of High Yield by Christian Thwaites of Sentinel Investments
High yield has been on a tear. A series of fortunate events have made this one of the best asset classes in recent years. It has outperformed the S&P nine out of the last thirteen years. In those that it lagged, underperformance averaged 1.9%. Outperformance averaged 9.7%. From 1985 to 2012, high yield had five down years averaging (-8.8%). The S&P had five down years averaging (-16.6%). Over the entire period, high yield underperformed the S&P by around 180bp but with about half the risk and a 0.58 correlation.
2013-05-14 Inflation Update by Team of North Peak Asset Management
Basing investment decisions on inaccurate measurements of the inflation rate can result in investors unknowingly positioning their portfolios to lose purchasing power over time. This mis-measurement could be especially dangerous when yields are low. For example, evaluating a nominal 3% investment opportunity using an inaccurate 2% inflation rate indicates a marginally attractive 1% real return opportunity. However, if inflation is actually running at 5%, this becomes a deeply unattractive negative 2% real return investment.
2013-05-07 How to Construct a Low-Cost Conservative Portfolio by Geoff Considine (Article)
One of the greatest challenges for investors today is constructing low-risk portfolios that provide the best returns using low-cost funds or ETFs. Doing so requires advisors to define risk as the potential for retirees to fail to achieve their financial goals, instead of as volatility, as it is traditionally measured. I will show how to construct a low-cost portfolio that minimizes this definition of risk while generating a reasonable real return.
2013-05-06 The Economy: Why Interest Rates Shouldn't Rise Anytime Soon by Ron Sloan of Invesco
Real is irrelevant. The US Federal Reserve (the Fed) is unconcerned about real GDP the inflation-adjusted measurement of US economic growth. Rather, without inflation in our economy, the Fed is focused on raising nominal GDP. And that priority means that interest rates should stay low for the foreseeable future.
2013-05-06 All's Well That Ends Well by Scott Brown of Raymond James
The economic data reports were decidedly mixed last week. However, the April Employment Report exceeded expectations, which provided a good excuse for share prices to move higher. Bonds were whipsawed, encouraged by the view that the Fed was less likely to taper its asset purchases, but then hit hard by the better-than-expected payroll figures.
2013-05-02 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,570.70. The ratios in parentheses use the monthly close of 1,597.57. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.
2013-05-02 Fed Doesn't Budge by Brian Wesbury, Bob Stein of First Trust Advisors
It would be hard to find a policy statement from the Federal Reserve with as few changes as the one issued today. The Fed made no changes to monetary policy and only minor changes to the language of its statement. Even the lone dissent, from Kansas City Fed Bank President Esther George, was a carbon copy from the last statement in March.
2013-05-01 Likely Rate Cut from the European Central Bank Will Be No Magic Wand by Darren Williams of AllianceBernstein
Disappointing April data suggest that the ECB is set to cut the refinancing rate at Thursdays Council meeting. This is likely to have limited economic impact but could encourage expectations of more creative policy action later, helping to take some upward pressure off the euro.
2013-04-30 The Best Solution for Protecting Retirement Portfolios: Put and Call Options versus GLWBs by Joe Tomlinson (Article)
Retirees cannot be exposed to severe ? or even modest ? market losses. They need to protect their savings in a cost-effective manner. I will compare the projected outcomes for two types of strategies: options, which can reduce volatility, and products that guarantee lifetime income, such as variable annuities with guaranteed lifetime withdrawal benefits.
2013-04-30 Letters to the Editor by Various (Article)
A number of readers responded to Robert Huebscher’s article, The New Challenges to Reinhart and Rogoff, which appeared last week.
2013-04-30 Beyond Gold: 4 Reasons to Think Energy by Russ Koesterich of iShares Blog
While the sell-off in gold has dominated headlines lately, another commodity oil has also experienced price declines in recent months. But despite crudes drop, Russ is still a fan of energy stocks for four reasons.
2013-04-29 The Trapdoors at the Fed's Exit by Nouriel Roubini of Project Syndicate
It may be too soon to say that many risky assets have reached bubble levels, and that leverage and risk-taking in financial markets is becoming excessive. But the reality is that credit and asset/equity bubbles are likely to form in the next two years, owing to loose US monetary policy.
2013-04-26 The Sustainability of U.S. Interest Rates Rising by Paresh Upadhyaya of Pioneer Investments
Investors are growing concerned, with good reason, we think, that yields have bottomed for the 10-year Treasury and will surge as the economy gains strength. Prices, which move inversely to yields, would fall, and the question is whether rising rates in 2013 could trigger a bond bear market along the lines of the Great Bond Bear Market of 1994. We dont think so.
2013-04-24 Market Observations, Deflation Fears by John Rothe of Riverbend Investment Management
Last week, the S&P 500 took a quick dive down toward the 50-day moving average as investors became worried about continued poor economic data. While some investors are quick to point to the Boston Marathon attack as the reason for the decline, there was in fact a large decline in the market before the tragedy in Boston occurred.
2013-04-23 Venerated Voices? Q1 2013 by Advisor Perspectives (Article)
Advisor Perspectives, a leading publisher serving financial advisors and the financial advisory community, has published its Venerated Voices awards for articles published in Q1 2013.
2013-04-22 Guess What? Growth is Back! by Brian Wesbury, Bob Stein of First Trust Advisors
The first quarter has come and gone and lots of data have been released. Still, there are pieces of data missing and these missing data points make forecasting GDP treacherous.
2013-04-22 Commodity Declines and Weak Data Startle Investors by Bob Doll of Nuveen Asset Management
U.S. equities declined last week as the S&P 500 fell by more than 2.0%, which came on the heels of a new all-time high the prior week. Led by gold, commodities experienced volatility and declined over the past two weeks. Other detractors included disappointing first quarter Chinese economic numbers and somewhat softer U.S. releases.
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.
2013-04-19 Global Economic Overview - March 2013 by Team of Thomas White International
Global economic trends turned softer during the month of March as indicators from Europe showed further declines and U.S. consumer sentiment moderated on labor market uncertainties, government spending cuts, and tax increases. Continuing weakness in European demand has somewhat dulled the export outlook for emerging economies, while government policies to prevent excessive asset price inflation have led to concerns about domestic consumption growth in these countries.
2013-04-18 Reversing Quantitative Easing by Richard Bernstein of Richard Bernstein Advisors
The Fed is likely to lag the markets, as they do in most cycles. The markets will probably anticipate the Fed reversing QE. The Fed will surprise few investors. The Fed should reverse QE in a yield curve-neutral way, in our view. Steepening the curve risks perversely stimulating the economy by making carry trades and loan spreads more profitable. This cycle will probably end as do most cycles. The Fed will be behind the curve, play catch-up, tighten too much, invert the curve, and cause a recession. That end result, however, is probably quite far in the future.
2013-04-18 The Road to Omaha: Own High Quality Businesses by Bill Smead of Smead Capital Management
We are spending the five weeks leading up to the Berkshire Hathaway Annual Meeting focusing on investment keys which are important to both Warren Buffett and Smead Capital Management. This week our focus is on owning high quality businesses.
2013-04-18 Inflation and Interest Rates by Scott Brown of Raymond James
The Federal Reserve began its first asset purchase program in the fall of 2008, during the depth of the financial panic. Some observers feared that the Feds actions would fuel higher inflation. However, the Fed is now well along in its third asset purchase program and inflation (as measured by the PCE Price Index) has remained low. In fact, Fed officials expect that inflation will trend at or below the 2% target for the next couple of years. That hasnt stopped the inflation worrywarts from predicting that inflation is still just around the corner.
2013-04-15 2013 First Quarter TIPS Performance by Stephen Percoco of Lark Research, Inc.
TIPS returns turned negative in the 2013 first quarter. The average loss was 0.31%, according to our estimates. By comparison, the return on comparable maturity straight Treasurys was flat.
2013-04-15 Keynes And Retail Sales by Brian Wesbury, Bob Stein of First Trust Advisors
No, just because retail sales fell 0.4% in March does not mean Keynes was right. Sequestration did not cause the decline. Nor did the end of the temporary 2% payroll tax cut, back in January, cause it either.
2013-04-11 Bank of Japan Surprises Market and Yen Reacts by Team of Nomura Asset Management
We recently indicated on March 14, 2013 that we believed the Yen would remain range bound near the level of PPP (purchasing power parity), which we estimated to be between 90 to 95 Yen/USD. We wrote at the time that though currency movements will be affected by various factors, the monetary policies of both Japan and the U.S. are the most important.
2013-04-10 Economic Slowdown Halts Equity Rally by Bob Doll of Nuveen Asset Management
The latest softness in economic indicators probably means that more consolidation in the equity markets is required before we can advance beyond the recent all-time highs. During March, nearly all of the activity for the S&P 500 was within 1% of 1550. Equities may move lower due to deteriorating technical conditions and the possibility of weak first quarter earnings reports.
2013-04-10 Surprising Surge!! by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup
Momentum from 2012s surprisingly strong performance continued into the first quarter of 2013 with stocks rising sharply. Our portfolios did well but lagged behind our benchmarks in the quarter. Taking a little longer view, over the trailing 12 and 36 months we mostly matched the double-digit gains of our benchmarks, which we are very pleased with since we usually underperform during strong market advances. So far this year small- & mid-capitalization, value, and domestic stocks were the market leaders, while international, growth, commodity stocks and Apple were laggards.
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 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Click to viewHere is a new update of a popular market valuation method using the most recent Standard & Poors "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,550.83. The ratios in parentheses use the monthly close of 1,569.19. For the earnings, see the table below created from Standard & Poors latest earnings spreadsheet.
2013-03-28 Today's Good News Isn't Bad for US Stocks by Daniel Loewy of AllianceBernstein
Believe it or not, recent US housing market gains, the slight reduction in jobless rates and other signs of a revival in US economic growth are making some investors bearish about US stocks. We think their fears are misplaced.
2013-03-27 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Even after a global market surge that virtually wiped away the four year bear market, equities still seem to be the best game in town. Corporate and individual investors are flocking back to a haven they had abandoned in favor of bonds when, in an era long ago, yields and credit rating offered them a secure place to park money.
2013-03-25 Fed Outlook: Cautiously Optimistic or Just Hopeful? by Scott Brown of Raymond James
The Federal Open Market Committees latest policy meeting generated few surprises. The FOMC maintained its forward guidance on the federal funds rate target, which is still not expected to start rising until 2015, and did not alter its asset purchases plans ($40 billion per month in agency mortgage-backed securities and $45 billion in longer-term Treasuries). However, in his press briefing, Bernanke indicated that the pace of asset purchases could be varied as progress is made toward the Feds goals or if the assessment of the benefits and potential costs of the program were to cha
2013-03-20 Spending Patterns Paint Half Truth by John Browne of Euro Pacific Capital
On March 13th, the Commerce Department announced a 1.1 percent increase in food and services retail sales, doubling a prior Dow Jones survey of economists that forecast an increase of just 0.6 percent. This new data has led to a fresh wave of enthusiastic commentaries that the US economy is set for a strong recovery. Less examined were the underlying factors that supported the increase.
2013-03-19 Understanding the Role of SPIAs in a Retirement Portfolio by David B. Loeper (Article)
Wade Pfau’s recent article, Breaking Free from the Safe Withdrawal Paradigm, was well researched. Its goal was to accurately calculate the benefits of using SPIAs based on certain assumptions. I fear, however, that many readers may have not fully grasped the impact of a few key assumptions that drive his results.
2013-03-19 How Strong? by Scott Brown of Raymond James
The recent economic reports have been mixed. The stock market seems to have embraced the strength and ignored the weakness. The bond market typically approaches the information in a more balanced way. How might the differences between the two markets be resolved?
2013-03-18 And That’s the Week That Was by Ron Brounes of Brounes & Associates
Move over Dow Jones, here comes the S&P. What few thought possible a year ago is coming to fruition as the major indexes continue to push toward record territory. The S&P 500 is close (but no cigar) to besting its personal high set in late 2007, before this whole banking mess emerged and sent equities into a tailspin. Confident investors seemed to be overlooking the numerous concerns (budget/sequester, payroll taxes, Europe, China) so they can participate in the record run.
2013-03-13 Dow--Then and Now by Frank Holmes of U.S. Global Investors
The Dow Jones Industrial Average is making record highs, knocking the 2007 peak off its pedestal, but investors arent celebrating.
2013-03-12 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks rose each day last week as the notion of a ho-hum global economy was reassuring to those who fear either a recession or a surge in economic activity.
2013-03-11 The Job Market: Not As Strong As It Looks by Scott Brown of Raymond James
With headwinds fading, the U.S. economic recovery appeared poised to pick up more substantially in 2013. Unfortunately, fiscal policy is going in the wrong direction.
2013-03-07 New Highs by Team of Janus Capital Group
The Dow Jones Industrial Average closed at a new record high the first week of March, breaking its previous closing high reached in October of 2007. The new record is symbolic more than anything else, but it still has some positive implications for equity markets.
2013-03-07 After the Dow Record Close: What Comes Next? by Russ Koesterich of iShares Blog
After Tuesday's record setting Dow Industrials close, are US stocks still cheap? Can the market move higher? Russ answers these questions and more.
2013-03-05 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,512.31. The ratios in parentheses use the monthly close of 1,514.68. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.
2013-03-05 No Rest for the Wicked by Scott Brown of Raymond James
With headwinds fading, the U.S. economic recovery appeared poised to pick up more substantially in 2013. Unfortunately, fiscal policy is going in the wrong direction.
2013-03-04 Is Congress About to Cause a Major Economic Slowdown? by John Rothe of Riverbend Investment Management
The fiscal cliff, sequestration, higher taxes, and a pending budget debate may be too much for overly optimistic investors to handle. Volatility has started to rise and the market is looking weaker:
2013-03-01 What Are The FOMC Minutes Telling Us? by Zach Pandl of Columbia Management
The release of the minutes of the January Federal Open Market Committee (FOMC) of the Federal Reserve (Fed) caused a tremor in the bedrock of investor euphoria last week. The minutes confirmed that the cost/benefit analysis of quantitative easing (QE) is at center of policy debate right now. However, the minutes did not provide a definitive signal that the program may be cut short. In particular, it is not clear where Chairman Bernanke and Vice Chair Yellen stand. I believe the level of debate slightly raises the odds that QE will end this year.
2013-03-01 Seeking a Fixed Income Fix by Team of Franklin Templeton Investments
While governments worldwide continue to struggle with debt and budget issues, for the most part, corporations have turned lemons into lemonade and have become lean and mean. While not without risk, corporate credit actually looks to be in fairly good shape, according to Eric Takaha who, as senior vice president and portfolio manager of Franklin Strategic Income Fund spends a good deal of time analyzing the space.
2013-02-27 "Abenomics" & the Weakening YenToo Far, Too Fast by Chun Wang of Leuthold Weeden Capital Management
Japan's new Prime Minster Shinzo Abe made more of an impact on the market than anyone else last month. In what the market has dubbed "Abenomics," Abe not only launched a new fiscal stimulus, but also pushed the Bank of Japan to raise its inflation target from 1% to 2% AND agree to a new open-ended QE program. The reluctance on the BoJ's part is clearly visible because the new open-ended QE will not start until 2014 and there is no commitment to asset purchases after 2014. Shortly afterwards, the BoJ governor said he would step down, a clear sign of disagreement.
2013-02-27 Singapore A Wise Owl Among Currency Snakes by John Browne of Euro Pacific Capital
As China enters the "Year of the Snake," Singapore stands as a beacon of sound currency in a world gone mad. China's renminbi remains pegged to the US dollar, while even steadfast Switzerland has followed the US, UK, EU, and Japan into an impoverishing strategy of currency debasement. Singapore, alone, has been able to sustain genuine economic growth in the context of a strong national currency.
2013-02-25 Fed Will Make Excuses About Inflation by Brian S. Wesbury and Robert Stein of First Trust Advisors
Inflation is tame. For now. The CPI was flat in January and is up only 1.6% from a year ago. The PPI rose a small 0.2% in January and is up just 1.4% from a year ago. And even though energy prices spiked in February, the year ago comparisons are likely to stay tame. The consensus expects the February CPI to rise 0.6% - the largest in 44 months. Nonetheless, it would still show just 1.9% inflation in the past year, which is still below the Federal Reserves target of 2%. This wont last. With the Fed loose; we expect consumer prices to rise toward 3% during 2013.
2013-02-25 We Expect High-Yield Defaults to Remain Low by Jeff Skoglund of AllianceBernstein
High-yield bond defaults are historically low today, even for troubled companies. Despite the worries we hear in some corners about looming high-yield defaults, we think default rates will stay low for at least the next few years. In the wake of the 2008 financial meltdown, US companies did the responsible thing and got leaner, reducing head count and overhead costs aggressively. When the recovery gained traction, they held the line on expensesand profit margins are at historic highs today.
2013-02-22 UK Equities Reach Inflation Tipping Point by Jon Ruff, Patrick Rudden of AllianceBernstein
As UK inflation surges ahead, equity investors should be concerned. With yields on inflation-linked bonds at extreme lows, we think real assets offer a better way to combat the risk of rising prices.
2013-02-21 Fed Must Tune in to Changing US Economy by Joseph Carson of AllianceBernstein
With each passing month, more questions are being asked about the sluggish US economic recovery. Why has growth been subdued since the recession ended in mid-2009? What's changed in the economy? How long can loose monetary policies persist before promoting more inflation or creating a new bubble?
2013-02-19 Alan Greenspan on the Market and the Global Economy by Adam Jared Apt (Article)
During his six-decade-long career in financial services, Alan Greenspan was a central figure in seminal events that drove investment markets, from the savings-and-loan crisis to the dot-com bubble to the housing crisis. Now, nearing 87, he rarely speaks in public. But he did so last week, offering his forecasts for the U.S. and European economies.
2013-02-19 All is Not Well Down Under by Russ Koesterich of iShares Blog
Though Russ continues to like Australian equities for the longer term, he explains why he may downgrade his near-term view of the Australian market soon.
2013-02-19 On Competitive Devaluations by Scott Brown of Raymond James
Aggressive monetary policy moves in recent years have been accompanied by a growing fear of a currency war. In a currency war, or competitive devaluation, countries attempt to weaken their currencies to boost exports, but each devaluation leads to counter devaluations. That's not what's going on now. However, whether a country is purposely devaluing its currency or is merely pursuing accommodative monetary policy is irrelevant, the consequences are the same. The recent meeting of G-20 finance ministers and central bankers highlights the lack of coherent policies to boost growth.
2013-02-11 When to Worry About Inflation by Russ Koesterich of iShares Blog
Though the Fed continues to flood the US economy with money, Russ explains why inflation isn't likely to be a problem until 2014 and what investors can do in the meantime to prepare.
2013-02-08 Messing with the Bull by Peter Schiff of Euro Pacific Capital
With the announcement this week of its massive $5 billion lawsuit against ratings agency Standard & Poor's, the Federal Government took a bold step to squelch any remaining independence of thought or action in the financial services industry. Given the circumstances and timing of the suit, can there be any doubt that S&P is paying the price for the August 2011 removal of its AAA rating on U.S. Treasury debt?
2013-02-08 World War C: Neosho Capital On The Currency War by Chris Richey of Neosho Capital
This summer, Brad Pitt will star in a new film called "World War Z", an action-horror film about a post-zombie apocalypse Earth, hence the "Z" in the title. Zombie films are not our cup of tea at Neosho (we thought the genre was dead), so it is debatable whether we will see this film, but one thing is clear to us, we are perched on the precipice of "World War C", where "C" stands for "currency".
2013-02-06 What Happens When the Fed Loses Money by Zach Pandl of Columbia Management
The Federal Reserve's exit from ultra-easy monetary policy still looks very far offby most accounts, rate hikes will not begin for more than two years and asset sales for even longer. However, the exit strategy could matter for markets well before that point. Fed officials have said that they will consider the costs and risks associated with quantitative easing (QE) when deciding how long to continue their purchases, and one factor they will be looking at will be whether the program could "complicate the Committee's efforts to eventually withdraw monetary policy accommodation."
2013-02-05 Dividend Growth Continues to Impress by Mike Boyle of Advisors Asset Management
The S&P 500 posted a very solid price appreciation of 5.14% (total return of 5.18%) for the month of January which marks its best January since logging a total return of 6.25% in January 1997 (16 years). However, it does pale in comparison to the best January of the last 50 years which saw the S&P 500 return 13.47% in January 1987. Perhaps equally noteworthy, but clearly not garnering as many headlines, is the continued impressive growth of dividends.
2013-02-05 The 2030 Outlook by Bill O'Grady, Kaisa Stucke of Confluence Investment Management
Over the next several weeks we will look into the more distant future, to the year 2030. We will explore the long-term strategic alternative world development scenarios as laid out by the National Intelligence Council (NIC) and present our views regarding the developments. The NIC forecasts the likely paths that are either currently underway or are forecast to occur in the future. The NIC projects four possible global political and economic states based on these expected trends.
2013-02-05 2012 Equity Market Market Year in Review by Natalie Trunow of Calvert Investment Management
Equities started the year strong as global inflation remained tame, and aggressive, accommodative monetary policy by central banks around the globe helped equity markets rally hard off their lows posted in the fall of 2011. Continuously improving U.S. economic data, strong corporate earnings, and policy steps toward mitigation of the sovereign debt crisis in Europe also provided support for the equity markets worldwide.
2013-02-04 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,480.40. The ratios in parentheses use the monthly close of 1,498.11.
2013-01-31 Signs of a Solid 2013 for Stocks by Milton Ezrati of Lord Abbett
Yield spreads versus bonds indicate that stock valuations have considerable upside.
2013-01-29 Are Planners Worth the Fees they Charge? by Wade Pfau (Article)
Could financial advisors who offer comprehensive services be doing a better job? Two recent studies shed a positive light on the potential of the financial planning profession to do right by their clients.
2013-01-29 Investment Basics by Michael Kayes of Willingdon Wealth Management
I've always been curious about how famous people would have done had they pursued completely different careers. Some of our former presidents make excellent examples. For instance, Abe Lincoln towered over his contemporaries. I wonder how he would have fared as a basketball player had the game existed during his life. Our heaviest president, William Howard Taft weighed well over 300 pounds. Had football risen to prominence a few decades earlier, could gridiron greatness have been part of his resume?
2013-01-28 Economic Insights: Signs of a Solid 2013 for Stocks by Milton Ezrati of Lord Abbett
Yield spreads versus bonds indicate that stock valuations have considerable upside. Earlier in this recovery, when earnings were growing very strongly, consensus concerns about equities cited the danger of an earnings slowdown. Those expressing this concern pointed out, that such a slowdown would occur inevitably as the recovery matured, especially with economic growth proceeding at such a subpar rate. What seems to have escaped notice is that the slowdown already occurred in 2012 and that the stock market offered good returns despite it.
2013-01-23 Ignore the GDP Headline by Brian Wesbury, Bob Stein of First Trust Advisors
Next week, Fourth Quarter Real GDP will be released. Our forecast of 0.9% annualized growth, if correct, will encourage the pessimists to continue fretting about the economy in the year ahead. But we will ignore that dour response. Beneath the surface of the report will be evidence that the plow horse economy is picking up some steam.
2013-01-23 Inflated Expectations? by Kristina Hooper of Allianz Global Investors
Investors should prepare themselves for higher long-term inflation because the market may be ignoring it, a mistake that could come back to haunt. On the heels of encouraging economic data, central bankers are projecting only modest price increases for goods and services over the next 10 years. But history tells us that an inflation spike is inevitable when governments print money so aggressively. As such, investors with long-term time horizons should have substantial exposure to inflation-hedging asset classes. Now, more than ever, real returns matter.
2013-01-22 Dylan Grice: Witch Hunts, Inflation Fears, and Why I?m Bearish in 2013 by Michael Skocpol (Article)
For someone who started his remarks proposing to 'kill all the economists,' Dylan Grice can wax surprisingly sentimental, with a fresh, human take on monetary policy that leads him to some worrisome conclusions. Making a case for gold, cash, and other safe havens, Grice said the biggest threat to investors today is a problem that has plagued societies throughout history ? mistrust.
2013-01-22 Wally Weitz on Value Investing in the Post-Crisis Era by Robert Huebscher (Article)
As the president and founder of Weitz Funds, Wally Weitz has spent nearly three decades putting his instinct for opportunity to work for shareholders. Influenced by the value-investing model of Benjamin Graham and Warren Buffett, Wally manages the Partners III Opportunity Fund (WPOPX), which has had an annual return of 10.85%, versus 6.23% for the S&P 500. In this interview, he discusses his investment methodology and how it has evolved since the financial crisis.
2013-01-22 The Political Cliff by Lawrence Grossman (Article)
Cliff-dwelling politicians are sending our country toward insolvency. Averting this crisis requires unconventional yet bold thinking. I propose such a plan.
2013-01-17 Rehab: An Update on Housing Recovery by Liz Ann Sonders of Charles Schwab
The National Association of Home Builders' Housing Market Index has staged a record-breaking run higher. Home prices have been rising and are feeding into real mortgage rates, consumer confidence, household net worth...and pushing fence-sitters off the fence. Housing's contribution to job growth could push the unemployment rate down more quickly than many believe.
2013-01-15 Gundlach?s Predictions for 2013 by Robert Huebscher (Article)
Don't expect the low volatility that characterized the capital markets in 2012 to continue. Global economic uncertainty remains, and markets are poised like a 'coiled snake' to reward or penalize investors in certain asset classes, according to Jeffrey Gundlach.
2013-01-15 Template for a Year-End Client Letter 2012 in Review: Learning from the Past, Looking to the Future by Dan Richards (Article)
Client concerns about whether you're on top of things can be reduced by sending regular overviews of what's happened in the immediate past and the outlook for the period ahead. That's why each year 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.
2013-01-15 Inflation, Still Not Taking Off Anytime Soon by Scott Brown of Raymond James
A few years ago, amid exceptionally large federal budget deficit and extraordinarily accommodative Fed policy, a number of pundits warned of impending hyperinflation. Instead, inflation has stayed low. That hasn't stopped the inflation worrywarts. It's just a matter of time, they say. Inflation "has to show up at some point." That's not an argument. There are a number of reasons to expect inflation to stay low.
2013-01-11 2 Reasons to Stick With Emerging Markets by Russ Koesterich of iShares Blog
Think emerging markets equities have run their course? Not so fast despite recent strong performance, Russ explains why there's room for further EM gains in 2013.
2013-01-08 2012: Resumption of the Stock Market Recovery by Ronald Surz (Article)
Let's take a close look at the details of what occurred in 2012 so we can assess the opportunities and prepare for the surprises that 2013 will bring. I'll give you my opinions, and you should form your own.
2013-01-08 The Good Without The Awful by John Hussman of Hussman Funds
Generally speaking, the very best times to be long are when a market decline to reasonable or depressed valuations is followed by an early improvement in market internals (breadth, leadership, positive divergences, price-volume behavior, and so forth). This is a version of a general principle: bullish investors should look for uniformly positive trends to be coupled with an absence of particularly hostile features such as overvalued, overbought, overbullish conditions. Put simply, we are looking for the good without the awful.
2013-01-08 The Cliff, the Fed, and the Economy by Scott Brown of Raymond James
The budget deal removes a major uncertainty for the financial markets. We now know what tax rates will be. However, the American Taxpayer Relief Act (ATRA) has a number of drawbacks. The December 11-12 FOMC policy meeting minutes showed a split among Fed officials, but that doesn't necessarily mean that asset purchases will end any sooner. The economic data reports have been mixed but generally indicate that the recovery is in reasonable shape.
2013-01-03 Is the Stock Market Cheap? by Doug Short of Advisor Perspectives (dshort.com)
Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,422.29. The ratios in parentheses use the monthly close of 1,426.19.
2013-01-03 Beyond the Fiscal Cliff by Richard Bernstein of Richard Bernstein Advisors
Politicians love the spotlight, but it is very unfortunate that investors watch the show. The drama of the so-called "fiscal cliff" has scared investors, and led them to miss a very good year in the equity market (the S&P 500's total return was 16.0% during 2012 versus the long-term annual average of 11.8%). It appears as though Washington wants to continue to dominate the headlines, which means that it may be more important than ever for investors to downplay Washington's theatrics.
2013-01-02 Getting the Most from Your Investment Committee by Bob Veres (Article)
Investment committees are a little bit like fingerprints: they come in all shapes and sizes, and no two are exactly alike in form or function. So advisory firms that have investment committees ? or are considering creating one ? can learn a lot from one another. My research has identified some best practices for this flexible management tool, by comparing notes among advisors on how they are managing their IC teams.
2013-01-02 Brian McMahon on Thornburg?s Investment Income Builder Fund by Robert Huebscher (Article)
Brian McMahon is the chief executive officer and chief investment officer for Thornburg Investment Management, where he the co-portfolio manager for the $11.4 billion Thornburg Investment Income Builder Fund (TIBAX). The fund's goal is income production, and it has outperformed its benchmark, the Morningstar Moderate Target Risk, over the last ten years (10.87% versus 2.88%). In this interview, he offers his views on the economy and the markets, and how he has positioned his fund.
2012-12-27 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don't always get the readership they deserve. We've posted the 10 most-widely read articles for the past year. Below are another 10 that you might have missed, but I believe merit reading.
2012-12-26 Gundlach's High-Conviction Investment Idea by Robert Huebscher (Article)
Count Jeffrey Gundlach among those who expect Japan's currency to collapse because it can't service its debt. Japan's challenges may parallel those that the US faces, and Gundlach feels strongly that they have created a compelling investment opportunity.
2012-12-18 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.
2012-12-11 Shared Sacrifice by David Rosenberg (Article)
Now that everyone is focused like a laser beam on Fiscal Armageddon, it may be more appropriate to look at what is happening on Main Street rather than Washington. Looking ahead, it is going to be more about the economy, and taking it a step further, at times like these, it is important to understand where the real economic power resides, and this is with the people.
2012-12-11 Loomis Sayles' Matt Eagan on the Macro and Fixed Income Outlook by David Schawel, CFA (Article)
In this interview, Loomis Sayles' Matt Eagan discusses the fixed income universe, Fed policy and issues facing the global macro economy. Eagan is the co-manager, along with Dan Fuss, of the Loomis Sayles Bond Fund and he manages the Loomis Sayles Strategic Alpha Bond Fund.
2012-12-11 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.
2012-12-04 The Big Picture by David Rosenberg (Article)
Our crystal ball says to stick with what works in an uncertain financial and economic climate - in other words, maintain a defensive and income-oriented investment strategy.
2012-12-04 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 Ten (Near?) Certainties to Invest Around by David Rosenberg (Article)
The ten key trends that should guide your investment decisions.
2012-11-27 Letters to the Editor by Various (Article)
A reader responds to Peter Schiff's commentary, Patriotic Millionaires Unmasked, which was published on November 21, and a reader responds to Joe Tomlinson's article, Are Inflation-Adjusted Annuities Right for Clients?, which was published last week.
2012-11-20 Kyle Bass on the Next Big Crisis by Robert Huebscher (Article)
If economics could be studied in a laboratory, scientists might concoct something like the circumstances now unfolding in Japan ? and policymakers should be paying close attention. According to Kyle Bass, Japan's currency ? and its bond market ? are about to collapse under the weight of the country's unsustainable fiscal deficit.
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 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 How Well Does the Next Generation of Guarantee Riders Protect Your Income? Part 2 - Starting the Inc by Wade Pfau (Article)
Unlike traditional VA/GLWBs, the future payments from stand-alone income riders are tied to 10-year Treasury rates. That's bad news for retirees, who may find their future benefits compromised if interest rates remain at historically low levels - regardless of how the stock market performs.
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.
2012-11-06 Lacy Hunt on Our Economic Future by Robert Huebscher (Article)
Last week I spoke with Lacy Hunt, an unequivocal advocate of deficit reduction. Hunt defended ? as persuasively as few others can ? the need to address our fiscal imbalances. But equally respected economists are advocating for the other extreme, and he shares some common ground with them.
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.
2012-10-30 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 Letter to the Editor by Various (Article)
A reader responds to a discussion from last week, which was in response to Joe Tomlinson's article, We Need a Bold Solution to Fix the Retirement System, which appeared on October 9.
2012-10-23 Chip Roame on the Next Big Problem by Robert Huebscher (Article)
The financial crisis decimated consumer wealth, and scandals such as J.P. Morgan's 'whale' and MF Global's collapse have plagued the investment industry. But the next challenge advisors and money managers face may be even worse.
2012-10-23 Letter to the Editor by Various (Article)
A reader responds to Joe Tomlinson's article, We Need a Bold Solution to Fix the Retirement System, which appeared on October 9.
2012-10-16 Will Bonds Be ?Burnt to a Crisp?? by David Schawel, CFA (Article)
Bill Gross's recent monthly commentary painted a disturbing picture for investors - he foresees bonds being ?burnt to a crisp.? This isn't just hot air. Such a conflagration is possible, and investors in bond funds, especially those that are constructed similar to the widely followed Barclays bond index, need to heed risks inherent in today''s market.
2012-10-09 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 We Need a Bold Solution to Fix the Retirement System by Joe Tomlinson (Article)
Our retirement system is broken. The average American isn't saving enough to comfortably retire, and the fault lies in our reliance on defined-contribution (DC) plans, such as 401(k)s. Tinkering with DC plans won't solve the problem, and the other extreme - a federally mandated guarantee - isn't likely to gain support. But a number of compromises that lie between those approaches offer a better way forward for future generations.
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 Letters to the Editor by Various (Article)
Two readers respond to Rob Arnott's commentary, The Glidepath Illusion, which was published on September 25. A reader responds to Adam Apt's article, How to Build a Portfolio, which appeared last week.
2012-09-25 Jim Bianco ? Markets Will Benefit From Disastrous Fed Policy by Robert Huebscher (Article)
The Fed's quantitative easing policy will be 'disastrous,' according to Jim Bianco, but prices for riskier assets will rise over the near term as a result. In remarks last week, Bianco, the head of the Chicago-based economic research firm that bears his name, also gave the US economy a near-failing grade of C-, and warned that inflation will be 'problematic.'
2012-09-25 Bill Gross: Hedging Your Bet on Deflation versus Inflation by Ben Huebscher (Article)
Will deflation or inflation prevail? The answer to that one question determines portfolio construction, according to Bill Gross, founder, managing director, and co-CIO of PIMCO.
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?
2012-09-18 Recognize the Relative Advantages of Natural Resource Equities vs. Commodities by RS Investments (Article)
This RS Investments research brief examines how shifts in commodity fundamentals presents the case for employing natural resource equities as a means to benefit from favorable long-term secular trends, while achieving superior risk-adjusted returns, similar diversification benefits, and more reliable inflation protection relative to commodities.
2012-09-18 Gundlach ? The End of the Bond Bull Market by Robert Huebscher (Article)
Likening bullishness on Treasury bonds to a 'mass psychosis,' Jeffrey Gundlach made his strongest statement yet that interest rates are about to rise. In a conference call with investors last Tuesday, he said that the rate on the benchmark 10-year Treasury bond could increase by 100 basis points by the end of the year.
2012-09-18 Letters to the Editor by Various (Article)
Several readers respond to our article, Can Our Retirement System be Fixed?, which appeared last week. A reader responds to Bill Gross' commentary, The Lending Lindy, which appeared on September 5, and a reader responds to David Schawel's article, Three Bond Funds for Rising or Falling Rates, which appeared last week.
2012-09-11 Can Our Retirement System be Fixed? by Robert Huebscher (Article)
Google 'Teresa Ghilarducci' and you'll find countless references to her as the most dangerous woman in America. That dubious distinction stems from her 2008 book, When I'm Sixty-Four, in which she advocated replacing voluntary 401(k) plans with government-mandated savings accounts. Ghilarducci was attempting to address a problem that thus far has eluded solution, so it's important to consider her arguments, which have drawn praise from some quarters, too.
2012-09-11 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.
2012-08-28 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 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.
2012-08-14 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.
2012-07-31 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 The Alternative to AUM-Based Fees: The Total Profitability Retainer Formula by Bob Veres (Article)
Many - perhaps most - advisors are overcharging a few of their clients and undercharging the rest. In other words, a small number of investment advisor clients are subsidizing the services that the others are receiving. Here's a way to address that.
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 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 Optimal Strategies for Secular Market Cycles by Michael Kitces (Article)
With alternative investments and active management strategies growing ever more popular, an advisor recently told me, 'It's just a fad and will end with heartache as all investment fads do. I've watched it play out over and over during my 30-year career.' But I am not persuaded. The secular market cycle today is different from the bear market 30 years ago, and not all market cycles favor the same investment strategies.
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 Letters to the Editor by Various (Article)
Two readers respond to Bob Veres' article, Why Are Advisory Fees Lower Than They Have To Be?, which appeared last week, and a reader responds to Larry Siegel's article, Benchmarking Your Retirement Portfolio With a Risk-Free Strategy, which also appeared last week.
2012-07-10 Benchmarking Your Retirement Portfolio With a Risk-Free Strategy by Laurence B. Siegel (Article)
Making the savings from 35 or 40 years of work pay for a retirement of the same length is a real challenge. At a zero real rate of return, you would have to save half of your income to enjoy a retirement that long without taking a cut in your living standard. There is, of course, a better way - judicious use of TIPS and annuities. A riskless strategy using those asset classes can safeguard one's retirement assets and can serve as a benchmark against which riskier portfolios can be measured.
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 The Plight of the Conservative Retiree by Michael Nairne (Article)
Today's extraordinarily low rates on top of a lower equity premium leave conservative retirees with the risk of heightened capital depletion as poorer portfolio returns may be inadequate to offset the combined impact of withdrawals and inflation.
2012-07-03 Don't Get Emotional by Michael Nairne (Article)
With the developed world mired in slow growth and the eurozone teetering on the brink of disintegration, to many investors the future seems bleak. Some are so disheartened they are abandoning the stock market as a hopeless endeavor. Yet, one of the abiding tenets of investing is that investor sentiment is rarely predictive of the future.
2012-06-26 Jeremy Grantham: US Stocks are Expensive and Bonds are Disgusting by Robert Huebscher (Article)
Jeremy Grantham, who has consistently identified overpricing in the US equity markets - he flagged both the Dot Com bubble and the irrational pricing that preceded the financial crisis, for instance - said last week that US stocks are 'a little expensive' and bonds are 'disgusting.' But his sternest warning to investors concerned the longer-term threat posed by global resource constraints.
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.
2012-06-12 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 Kingdoms of the Blind by Michael Lewitt (Article)
Recent events offer a rare illustration of the combined effects of the failure of monetary, fiscal and regulatory policy to coordinate a meaningful response. Rising budget deficits, record low interest rates, J.P. Morgan's proprietary trading blunder and the botched Facebook IPO process speak to abject policy failures in virtually every aspect of finance. It's not even a question of not having learned our lessons; our collective policy intelligence actually appears to have diminished.
2012-06-05 Letters to the Editor by Various (Article)
A number of readers respond to our article, Can Krugman Fix Our Economy?, which appeared last week.
2012-05-29 Can Krugman Fix Our Economy? by Robert Huebscher (Article)
Our economy faces depression-like conditions, according to Paul Krugman, in its alarmingly high unemployment rate. It needn?t be that way, though, Krugman says ? a few simple steps could quickly solve our problems.
2012-05-22 David Rosenberg - I am not a Permabear by Robert Huebscher (Article)
While most sell-side analysts are correctly classified as permabulls, Gluskin Sheff's David Rosenberg has been branded as the opposite - a permabear. He rejects that label. He recently said he's indeed bullish - on bonds and income - and has been so for quite a while.
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 Lacy Hunt on Debt, Austerity and Recovery by Robert Huebscher (Article)
Global economies are experiencing unsustainable debt disequilibrium, according to Lacy Hunt. Economic textbooks preach that equilibrium, rather than transition, should be the predominant condition. But our attempts to reduce our indebtedness by taking on more ? and less productive ? debt are weakening our economy and creating unstable conditions.
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.
2012-05-08 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.
2012-05-01 The Asymmetric Value of Delaying Social Security Benefits by Michael Kitces (Article)
Despite a compelling body of research arguing that most retirees would benefit by delaying the onset of Social Security payments, the majority who are eligible still elect to begin receiving them as early as possible. But delaying Social Security benefits is one of the best triple-hedges available to any retiree - simultaneously protecting against poor returns, high inflation, and longevity.
2012-05-01 Another Story of Too Much Debt: Investing During Unsustainable Economic Conditions by Brian McAuley (Article)
US-based investors cannot ignore the macro environment, and therefore must consider the consequences of our increasing indebtedness and its impact on capital markets. We can gain valuable insights into our fiscal problems from the housing bubble and the European sovereign debt crisis - lessons which every value investor should heed.
2012-05-01 Making the Right Wager on Client Longevity by Manish Malhotra (Article)
Using annuities to fund retirement is anathema to most advisors, who view the loss of control over one's capital and impossibility of a bequest as nonstarters for their clients. But as clients reach the later stages of their retirement, those arguments no longer apply. A single-premium immediate annuity is superior to a TIPS ladder or a systematic-withdrawal portfolio for funding the last phase of retirement.
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.
2012-05-01 Why MLPs Belong in Your Portfolio by Geoff Considine (Article)
One would think that an asset class yielding 7% and carrying less volatility than do equities would be popular with investors. Yet, despite those attributes, master limited partnerships (MLPs) remain unknown or ignored by large numbers of investors. The case for MLPs is compelling, so it's time for a deep examination of the special properties of this asset class.
2012-04-24 Gundlach - Two Dangers for Equity Markets by Robert Huebscher (Article)
Don't buy stocks ? for real, this time. That was the message Jeffrey Gundlach delivered to investors last Tuesday.
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 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.
2012-04-17 Rethinking Safe Withdrawal Rates: The Meaning of Failure by Wade Pfau (Article)
Merely knowing the probability that an investor's wealth will be depleted at some point is not enough to build a retirement strategy. That is the traditional measure of failure in safe withdrawal studies, and it's time to move beyond it.
2012-04-17 Muppet Capers by Michael Lewitt (Article)
Investors enjoyed strong stock market and credit market gains during the first quarter of the year, but storm clouds may be forming on the horizon. Corporate profits have likely peaked. Stocks may be the best house in a bad neighborhood, but houses in that neighborhood appear to be fully priced for now. There are also some troubling signs in the bond markets, particularly the long end.
2012-04-10 Flexible Strategies for Longevity Protection: Comparing Two Products by Joe Tomlinson (Article)
Products that guarantee income for life can be useful for retirement planning, but many clients also want flexibility and control over their investments. Two products that can meet these objectives are variable annuities with guaranteed lifetime withdrawal benefits (VA/GLWBs) and deferred income annuities (DIAs).
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 Paul Kasriel's Parting Thoughts on the Economy by Robert Huebscher (Article)
Paul Kasriel, the chief economist at Northern Trust, will retire at the end of this month. In this interview, he explains why he is optimistic about the prospects for the US economy and why supposed headwinds - from the price of oil to the housing market - pose much less of a threat than most people believe.
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.
2012-03-27 GMO: Two Questions We Can't Answer by Robert Huebscher (Article)
Its reputation was built on stellar returns achieved with long-term bets on undervalued asset classes. Current market conditions, however, pose two unanswerable questions for GMO ? leaving the firm with an uncertain strategy for its equities and fixed-income allocations.
2012-03-20 Jeremy Grantham: This Time is Different by Michael Edesess (Article)
Jeremy Grantham is a paradox. A man who has said many times, 'This time it's different are the four most dangerous words in the English language,' is now saying - loud and clear - this time it really is different.
2012-03-20 Bob Rodriguez on the Dangers in Today's Markets by Robert Huebscher (Article)
Bob Rodriguez is the managing partner and chief executive officer of Los Angeles-based First Pacific Advisors. In this interview, he discusses how the challenges faced by the US economy will impact the capital markets.
2012-03-20 The Wages of Denial by Michael Lewitt (Article)
Europe is insolvent, and hopelessly so. Her procurer - the European Central Bank (ECB) - can front her some money for a while, but in the end she is either going to have to repay him or suffer a very rough consequence. In the meantime, however, she can continue to entertain her customers, in this case those willing to extend her credit in one form or another. Sooner rather than later, however, these creditors are going to grow tired of her tricks and turn their attention otherwise. At that point, she will be left to deal with the ECB because nobody else will have her.
2012-03-13 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 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.
2012-03-06 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.
2012-02-28 Jim O?Shaughnessy: What Now Works on Wall Street by Katie Southwick (Article)
Understanding the science of investing has been the lifelong passion of Jim O'Shaughnessy, whose 1996 book, What Works on Wall Street, was among the first to explain the benefits of quantitative, empirical methods. Now, with the hindsight of the two bear markets since, he has refined his approach - rejecting some of his original ideas in favor of improved ways to forecast market performance. His new and improved approach finds that a dividend-oriented global strategy is best in today's environment.
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 Gundlach: The Two Questions that Matter Most by Robert Huebscher (Article)
Two questions stand out amid the complexity of the current economic and market environment, according to Jeffrey Gundlach, both of which relate to critical elements of fiscal and monetary policy and should guide portfolio construction for investors.
2012-02-14 The Safety-first, Goals-based Approach to Financial Planning by Wade Pfau (Article)
Little of what is taught in traditional investment textbooks is of value in personal financial planning. Risk is not standard deviation; it is the probability and consequences of not meeting one's goals. That real-world perspective animates a new book by Zvi Bodie and Rachelle Taqqu that implores advisors and their clients to lock in the funding of their essential expenses before worrying about their discretionary goals.
2012-02-14 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 Jeremy Siegel, Rob Arnott and Other Experts Forecast Equity Returns by Laurence B. Siegel (Article)
A forecast of the equity risk premium (ERP) tells you how much to save, how to allocate assets between equities and fixed income, and how much you can consume. Given its great importance, the CFA Institute recently convened a group of top-level academics and practitioners to forecast future ERPs - and to reflect on similar predictions they had made a decade ago.
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 Letters to the Editor ? Reinhart and Rogoff by Various (Article)
Several readers respond to Robert Huebscher's article, Beyond Reinhart and Rogoff, which appeared last week.
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 Must Bond Investors Fear Rising Interest Rates? by Andrew D. Martin (Article)
Thirty-one years ago, in 1981, the one-year Treasury reached its all time high of 14%. Today it hovers around 0.10%. Never before have interest rates fallen so far. Many economists and investment advisors, seeing nowhere to go but up, expect interest rates to climb from these historic lows. But that would not be the catastrophe that many bond investors fear.
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 Income Annuities versus GLWBs: A Product Comparison by Joe Tomlinson (Article)
The variable annuity with a guaranteed lifetime withdrawal benefit (VA/GLWB) has become the most popular form of annuity, as retirees seek income protection and equity-market participation. But VA/GLWBs are often costly, and the typical purchaser has few tools with which to assess the costs. Investors need a straightforward way to gauge the fees for VA/GLWBs versus other retirement income alternatives.
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 A Nobel Laureate?s View on the US - A Debt Problem, but an Unemployment Crisis - Video 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 video 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 The Misreading of Reinhart and Rogoff by Robert Huebscher (Article)
If the cry for deficit reduction rests on an intellectual framework, it would be the work of Reinhart and Rogoff, whose book, This Time is Different, has been hailed for its historical study of financial crises. A key finding - that growth slows once the ratio of debt-to-GDP exceeds 90% - has been widely cited by those calling for decreased government spending. But those calling for deficit reduction have largely ignored a number of caveats that Reinhart and Rogoff gave with respect to their 90% threshold, and as a result many warn that the US faces a Greek-like sovereign-debt crisis.
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 Gundlach on the Key Risk for Bond Investors by Robert Huebscher (Article)
Watch out if you own a bond fund that underperformed its benchmark by 2% or more last year, as most did. Rather than put their careers at risk by suffering a second year of poor performance, those fund managers will turn to indexation, according to DoubleLine?s Jeffrey Gundlach. And since the Barclay?s Aggregate Index holds nearly 35% of its assets in Treasury bonds with near-zero yields, its investors will endure poor returns.
2012-01-10 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 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.
2012-01-03 Letter to the Editor by Various (Article)
A reader responds to our article, Understanding Variable Annuities with GMWBs (and the flaws in Ibbotson's analysis), which appeared on March 1.
2011-12-27 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don't always get the readership they deserve. Here are 10 articles that you might have missed, but I believe merit reading.
2011-12-27 The Ten Most-Read Articles in 2011 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.
2011-12-27 Vitaliy Katsenelson on Krugman?s Missed Call by Robert Huebscher (Article)
Vitaliy Katsenelson is the chief investment officer at Investment Management Associates, a Denver-based money management firm, and the author of two highly acclaimed books on value investing. In this interview, he identifies what Paul Krugman failed to see with regard to China, discusses the prospects for the European and domestic economies, and explains why Microsoft is a grossly undervalued stock.
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 Expectations Creep by Jamie Cornehlsen (Article)
Today's generation of college students have it easier, at least in one respect, than any of their predecessors. Over the years, college professors had made it easier for students to get good grades, a phenomenon known more commonly referred to as 'grade inflation.' The reasons for this erosion of expectations continue to be debated, but there is ample data showing that the trend toward more generous grading is real. Today, a similar phenomenon plagues economic expectations.
2011-12-20 Letters to the Editor by Various (Article)
Readers respond to several articles: GLWBs: Retiree Protection or Money Illusion?, Did Congress Cash In on Insider Stock Trading?, and Can this be Serious?, all which appeared last week, and to John Mauldin's commentary, The Center Cannot Hold, which appeared on Saturday.
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 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 Improving on Buy and Hold: A Buy Signal by Georg Vrba, P.E. (Article)
In my August 2010 article I advocated a market timing strategy, to sell or significantly reduce one's stock holdings in anticipation of a recession or slowdown in the economy and switch into cash or a low-beta Treasury bond fund, and then reverse the process ahead of a recovery. A type-A buy signal was generated on December 9, 2011.
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.
2011-11-29 Do You Really Understand Rates of Return? Using them to look backward - and forward by Michael Edesess (Article)
The basic quantitative building block for professional judgments about investment performance is the rate of return. How well do we really understand it? And how can we use past rates to assess the prospects for future performance? You may be surprised to learn that 'expected return' may not be what you think.
2011-11-29 The Investment Case for Israel by Jamia Jasper (Article)
What country went into the 2008-2009 recession in a stronger position and exited sooner than any western nation? Whose stock market has outperformed the MSCI EAFE over the past 10 years?
2011-11-29 Sometimes We Lose Perspective by Scott A. MacKillop (Article)
It's been a rough ride lately for investors. Looking back over the course of my lifetime, however, what has been particularly exceptional is not recent market swings - these come and go - but rather the return one would have earned if they had been continuously invested in the stock market over the past 60-plus years.
2011-11-29 Letters to the Editor - Krugman, Summers and Morningstar Ratings by Various (Article)
A reader responds to our article, Krugman versus Summers - Will the US mirror Japan?, which appeared last week. Another reader responds to our article, Morningstar's Attempt to Predict Performance, which also appeared last week.
2011-11-22 Investment Trends in the Financial Advisory Profession by Robert Huebscher (Article)
Advisors are optimistic about the returns Treasury bonds will provide over the next decade, but they are less sanguine about the projected performance of US equities. Their inflation expectations are consistent with the historical data. These findings and many others arise from our study, Investment Trends in the Financial Advisory Space: Key Implications for the Investment Management Industry, a research report now available from Advisor Perspectives.
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 Are Gold Prices Correlated to the Real Federal Funds Rate? by Georg Vrba, P.E. (Article)
The price of gold depends on many variables, among them the real federal funds rate, which is the federal funds rate adjusted for inflation. But the real federal funds rate, or RFFR, alone does not explain variation in gold prices. One must also look at the change in the RFFR for a full understanding.
2011-11-08 Bill Gross' Revised Paradigm: The New Normal Minus by Robert Huebscher (Article)
Following the financial crisis of 2008, PIMCO articulated its 'new normal' forecast of slow growth and mediocre capital market returns. Appending the even drearier modifier 'minus' to that outlook, Bill Gross said that expectations now appear worse than even he previously feared. Gross was pessimistic in both the near and long terms, and he startled the audience with his premonition that 'capitalism is at risk.'
2011-11-08 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.
2011-11-08 Is One Better than Three? by Dave Loeper, CIMA, CIMC (Article)
One way to 'juice' a portfolio is by increasing allocations to small- and mid-caps, as one recently published paper contends. But a careful analysis - properly adjusting for risk - shows how that seemingly appealing approach can destroy client wealth.
2011-11-01 What, Me Worry? by Scott A. MacKillop (Article)
As we gnash our teeth over the latest crisis du jour let's remember that difficulties do not, ultimately, prevent progress. On the contrary, over my lifetime progress has continued unimpeded despite a more or less constant stream of difficulties.
2011-11-01 Why Invest? by Adam Jared Apt (Article)
Investing has its rational justifications, but like any human activity, it's contingent upon history. American society has come to regard investing in stocks and bonds as a matter of personal responsibility and even an obligation, which in part explains why we invest.
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.
2011-10-11 Market See-Saw Brings Us Back to April 2010 Double-Digit Third Quarter Losses Erase Previous Gains by Ron Surz (Article)
Stock markets around the world plummeted in the third quarter, with the US market losing 16% and foreign markets faring somewhat worse with 17% losses. This quarter's loss reverses the gains of the first quarter and brings year-to-date returns below water, with domestic markets losing 11% and foreign markets losing 13%.
2011-10-04 The Adjusted Gold/XAU Ratio as an Indicator of Forward Returns for Gold Stocks by Georg Vrba, P.E. (Article)
While the recent bull market took gold prices to new highs, the prices of gold-mining companies lagged. Some claim those companies are now drastically undervalued, and we can investigate that claim by examining the relationship between gold and gold-mining prices.
2011-09-27 Reexamining Bill Gross' Decision to Sell Treasury Bonds by Geoff Considine (Article)
Bill Gross made headlines in February by asserting that Treasury bonds were not providing enough yield to make them worth the risk and reducing his allocation to zero in the PIMCO Total Return Fund. The subsequent rally forced him to admit his mistake in August, but by then his fund was trailing 90% of its peers and having its worst year since 1995. I will examine Gross' decision in retrospect, to illustrate its tactical and strategic costs and benefits for his shareholders.
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.
2011-09-06 Time-Tested Investment Strategies for the Long Term by American Century Investments (Article)
Recent market volatility, changing economic conditions and unexpected world events have lead to heightened uncertainty among investors. Use this retail-approved article to encourage your clients to stay the course. It will help you explain to clients that while there may be short-term losses, historically the market rewards long-term investing.
2011-09-06 Five Strategies for a Sideways Market by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)
If this slow growth environment coupled with asset price volatility continues for (to steal a quote from Fed Chairman Bernanke) 'an extended period,' what additional portfolio strategies might aid the overall risk/return profile of investor portfolios? More specifically, how do you manage investments in a sideways market?
2011-09-06 No Way Out by Michael Lewitt (Article)
There aren't enough Steve Jobs and Mark Zuckerbergs to innovate our way out of the Everest of debt we have built for ourselves (and will continue to build for the foreseeable future). The good news (a purely relative evaluation) is that astute investors will find enormous opportunities in today's markets as they increasingly reflect unsustainable fiscal and monetary imbalances.
2011-08-30 Scenarios for a Stock Market Bottom by Keith C. Goddard, CFA (Article)
A probability-based forecast for the U.S. stock market between now and 2013 can be constructed using historical relationships between stock prices, earnings and dividends. This yields a matrix of possible outcomes for the S&P 500 Index over the next two years.
2011-08-30 Errata and Letters to the Editor by Various (Article)
We correct a couple of errors which appeared in our article last week, The Simplest, Safest Withdrawal Strategy. A reader also responds to that article, and two readers respond to other recent articles.
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 Strategies for a Rising Rate Environment by Jayant Kumar of Fisher Francis Trees & Watts (Article)
Shortening the duration of a fixed-income portfolio is often considered the default option, but it is not the only way to hedge against a potential rise in interest rates. This article provides investors with a framework to analyze and implement a range of fixed-income strategies, and highlights various investment considerations that should carefully be taken into account.
2011-08-23 Letters to the Editor by Various (Article)
A reader responds to our article, Jeremy Grantham Guarantees Gold will Crash, which appeared on May 18, 2010. Another reader responds to Michael O. Kokesh's Letter to the Editor, published last week, which was in response to Paul Kasriel's July 26 commentary, Washington Had a Spending Problem.
2011-08-16 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 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.
2011-08-02 A Winning Endgame by Robert Huebscher (Article)
Reducing our nation's debt burden is no longer only the rallying cry of Tea Partiers and fiscal conservatives. As the debate over the debt ceiling proved, it is now the goal of the president and many fellow Democrats. John Mauldin and Jonathan Tepper's book, Endgame, published earlier this year, makes a compelling argument as to why reducing the deficit is so critical and why we face a long, slow and ultimately painful period of deleveraging. I will explain their thesis and then provide the counterargument.
2011-07-26 Investing with a View of Significant Inflation by Bob Kargenian (Article)
Almost all the analysis we read has concluded that, with the Fed seemingly printing money out of nowhere, the inevitable consequence must be significantly higher inflation. We're not convinced, but we have identified which strategies are likely to best protect clients if inflation accelerates.
2011-07-26 Jeremy Siegel - Why I Changed My Mind about Index Funds by Dan Richards (Article)
Jeremy Siegel, the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania, discusses what caused him to reject capitalization-weighted market indexes and what he chose instead. This is a transcript of the interview.
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 Sorting Out the Annuity Puzzle by Joseph A. Tomlinson (Article)
Why do so few people buy annuities? Economic theory would predict robust demand for this financial product, especially as the workforce ages, but the reality is quite the reverse. Most efforts to explain this have focused on buyer behavior. But to better understand the annuity puzzle, we need to study the sellers.
2011-07-19 Retirement Planning and Worst-Case Scenarios by Wade Pfau (Article)
New research suggests that skepticism in a 4% safe withdrawal rate (SWR) is well justified. It is perhaps due to good luck that American retirees have not yet experienced a withdrawal rate below 4%. But a better approach than worrying about SWRs is to focus on the savings rate needed to meet your retirement spending goals, not on what the safe withdrawal rate is.
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 Inflation Field Manual: A Guide for a Changing World by American Century Investments (Article)
This client-approved executive summary by Senior PM Robert Gahagan and Senior PM William Martine, CFA examines the competing forces at work that will affect inflation for the months and years to come. It also provides an analysis of inflation-hedging assets in different market environments, and suggests strategies for protecting a portfolio from inflation risk.
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 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 Essential Summer Reading - Desperate Households and More by Michael Shamosh (Article)
Summer reruns don't have to be boring and predictable. If we use a little imagination, televised repeats can depict the problems facing our economy and markets, and the storylines can become tantalizingly uncertain.
2011-07-05 The Chinese Black Swan by Vitaliy Katsenelson (Article)
Party rulers in China are trapped in a position that chess players deeply fear - zugzwang - where any move make puts you at disadvantage. In China, the cost of both action and inaction is potential economic collapse.
2011-07-05 Fox in the Henhouse by Joseph Calhoun and Douglas Terry (Article)
In 1971, President Nixon ended the Bretton Woods gold standard currency system. That move set us on a path of debauching our currency through inflation. Ever since, we have counted on the Federal Reserve to preserve the purchasing power of our money. We have depended on the fox to protect our hens.
2011-06-28 An Important Challenge to ?Stocks for the Long Run? by Geoff Considine (Article)
Jeremy Siegel's dictum - to invest in stocks for the long run - faces a new challenge. A recent paper by Robert Stambaugh, a Wharton colleague, and Lubos Pastor of the University of Chicago says that once you take into account the uncertainty of estimating future returns, stocks are not nearly as attractive to retirement-oriented investors as Siegel has claimed.
2011-06-28 What Happens If You Outlive Your Safe Withdrawal Rate Time Horizon? by Michael Kitces (Article)
Although the research on safe withdrawal rates (SWRs) has been replicated many times by various researchers, one significant challenge has always lingered: A SWR recommendation is only as good as its associated time horizon. What's the outlook for a SWR approach if the client outlives the original time horizon?
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 Where are Long Bond Yields Heading? The Bond Value Ratio as a Predictor of Future Yields by Georg Vrba, P.E. (Article)
Are long-maturity bond funds still a good investment? My analysis shows that there is currently a maximum potential appreciation of only about 10% for long-bond values. The 30-year bull market for bonds will be ending soon and the risk-reward ratio is too high to warrant buying long-bond funds now.
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 Challenging Conventions: Natural Resource Equities vs. Commodities 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. In this paper, we review how changes in fundamentals impact the unique return streams generated by both commodities and natural resource equities in the context of the benefits expected from each investment option.
2011-06-14 Bruce Berkowitz - Ignoring the Crowd on Financials by Sam Parl (Article)
Bruce Berkowitz has said that his deep value and contrarian investing style will not guarantee short-term results, but he promises his shareholders will be rewarded for their patience over the long term. Last week, he explained why some of his positions - especially those in the financial services sector - are among the best opportunities in the market.
2011-06-14 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 Who's Afraid of the Big Bad Debt? by Kerry Pechter (Article)
Not Warren Mosler, bond trader, racecar dabbler, Senatorial candidate and recent author of The Seven Deadly Innocent Frauds.
2011-06-14 Letter to the Editor - Equity-Indexed Annuities, et al. by Various (Article)
A reader responds to our article about equity-indexed annuities. Guy Cumbie provides the latest installment in his exchange with Michael Edesess, which concerned Edesess' article three weeks ago, On the Wikileaks of the Economics Profession.
2011-06-10 Why Bill Gross Doesn?t Like Stocks (or Treasury Bonds) by Sam Parl (Article)
Stocks have come to the end of a ?wonderful journey,? according to PIMCO's Bill Gross, and are now on their own, like ?a baby bird just released from the nest.? The journey Gross spoke of is the multi-decade decline in real interest rates, which have fueled bull markets across ?risk assets,? especially in equities and bonds.
2011-06-07 New Challenges for the Endowment Model by Robert Huebscher (Article)
The multi-billion dollar endowments of elite institutions like Harvard, Yale, and Princeton are supposed to never be strapped for cash, but that's not how things played out during the financial crisis, when all those schools and many others were forced to raise liquidity under adverse market conditions. The endowment model, despite those failures, is still basically sound, according to Luis Viceira, but it needs several key improvements before institutions and individuals can rely on it.
2011-05-31 Letter to the Editor ? Challenging Dave Rosenberg by Georg Vrba, P.E. (Article)
Predictions are usually made with great conviction and without a specified time frame. I review some of David Rosenberg's past predictions and show that investors would have underperformed the market had they followed his advice.
2011-05-31 Hedging In an Inflationary World by Andrew Foster (Article)
These days, given the complex web of global financial transactions in which companies are enmeshed, it is unrealistic to expect management to avoid hedging. When I invest, however, I search for companies that follow simple, consistent, and short-term hedging policies ? and whose business models are strong enough to adapt to the inherent volatility and uncertainty of the marketplace.
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.
2011-05-17 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 Pippa Malmgren on Inflation and its Geopolitical Impact by Robert Huebscher (Article)
The Cold War may have been over for a quarter century, but the inflation-driven challenges that characterized that historical era are heating back up. Today, global volatility is back, according to Pippa Malmgren, who says that commodity-driven inflation will lead to political instability in emerging markets.
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 Inflation Field Manual: A Guide for a Changing World by American Century Investments (Article)
We examine the competing forces at work that will affect inflation. On the one hand, a whole host of factors are currently constraining inflation. On the other hand, US monetary and fiscal policies and a number of global economic imbalances suggest an environment of high and rising inflation. The outcome of this debate is important for financial assets, whose performance turns on the difference between expected and actual inflation-it is when inflation surprises to the upside that stocks and nominal bonds typically underperform and inflation-protected assets do best.
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.
2011-05-03 My Breakfast with Dave by Robert Huebscher (Article)
A month ago, one of the most closely followed market observers, Gluskin Sheff's David Rosenberg, moved his Breakfast with Dave commentaries behind a pay-wall, ending an era of free access to his insights. Last Friday, however, he presented his views publicly to an audience of 500 advisors and investors, your author included.
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 P/E: Future on the Horizon by Ed Easterling (Article)
Most people expect P/E to measure current valuation and to show historical patterns. But more features are available from some versions of P/E. The methodology behind the Crestmont P/E enables investors to anticipate the future. It may not precisely predict the market ten years away, but it frames within a relatively tight range the likely outcome. One component from determining the Crestmont P/E is a means to assess the future trend line for EPS using estimates of future economic growth (GDP).
2011-04-26 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.
2011-04-19 Gundlach: Treasuries will Rally When QE2 Ends by Robert Huebscher (Article)
The bonds that PIMCO's Bill Gross sold to take a 3% short position in the Treasury market may have found a buyer in Doubleline's Jeffrey Gundlach. In a conference call with investors last week, Gundlach said that Treasury prices would rise in the near term, once QE2 expires on June 30.
2011-04-12 Ten Trends that will Reshape the Fund Industry by Robert Huebscher (Article)
For advisors scouring among thousands of mutual funds, bargains and inefficiencies will be harder to find in coming years. Intense competition among funds for shelf space will not translate to lower fees, and the new class of broad asset allocation funds is unlikely to live up to its marketing promises. Those were among the surprising forecasts from Geoff Bobroff, with whom I met last week.
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.
2011-04-05 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.
2011-03-29 GMO's Market Outlook: 'Disappointingly Overvalued' by Robert Huebscher (Article)
Opportunities across US and foreign assets classes are unattractive, according to Ben Inker, the head of asset allocation at the Boston-based global money manager Grantham, Mayo, van Otterloo & Co. (GMO). Neither the equity nor fixed income markets hold the potential for investors to earn acceptable inflation-adjusted returns, Inker said.
2011-03-29 Inflation versus Deflation: Two Experts Disagree by Robert Huebscher (Article)
An important question for all investors is whether low inflation rates will persist or whether the economy is heading toward much higher inflation. The answer to that question will dictate asset class allocations, portfolio construction and ultimately the rates of return investors should expect.
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 Gundlach Sets the Record Straight by Robert Huebscher (Article)
Jeffrey Gundlach corrects two inaccuracies in a recent interview that appeared in Barron's, and offers his assessments of valuations for the Japanese markets, municipal bonds and high-yield bonds.
2011-03-22 What Investors Should Fear in the Permanent Portfolio by Geoff Considine, Ph.D. (Article)
Over the last decade, the assets of the fund PRPFX have swelled from $50 million to more than $10 billion. The concept underlying that fund, Harry Browne's Permanent Portfolio (PP), has rewarded PRPFX investors with attractive risk-adjusted returns. Those investors, however, may want to rethink their exposure - especially if PRPFX is the core of a retirement-oriented strategy.
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.
2011-03-08 Ed Hyman: The Key Threat to Economy Recovery by Robert Huebscher (Article)
Ed Hyman is not worried about China, quantitative easing or fiscal deficits. Equity market performance this year will be strong, he predicts, and the US economic recovery will proceed. But there is a caveat in his outlook ? and it is an immense one.
2011-03-08 Letters to the Editor and a Final Thought on VAs with GMWBs by Various (Article)
We received a record number of letters in response to Robert Huebscher?s article, Understanding Variable Annuities with GMWBs, and to Peng Chen?s response, The Real Flaws ? A response to 'Understanding Variable Annuities with GMWBs,' which were published last week. We also provide a final thought on this subject.
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 Toward an Understanding of Risk - Part 2 by Robert Huebscher (Article)
How should clients think about risk in their portfolios? Advisor Perspectives put that question to a cross-section of prominent advisors and academics. Their answers encompassed diverse opinions and underscored how crucial that question is to the investment process. In part one of this series, which appeared last week, we heard from seven practitioners in the financial planning community. This week, we hear from seven well-known academics, including two Nobel Prize winners.
2011-02-15 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.
2011-02-08 Letter to the Editor - John Hussman Responds by John Hussman (Article)
John Hussman responds to a reader's comment, and reiterates his significant concerns about the present course of monetary policy.
2011-02-01 Can Economics Save the Economy? by Robert Huebscher (Article)
Christina Romer, Greg Mankiw and Paul Krugman were among a group of thought leaders who spoke at a conference in Cambridge last week. They cited a lack of sufficiently powerful and politically feasible policy options, calling into question whether economists will be able to produce the clear path to the stronger recovery that the Obama administration seeks.
2011-02-01 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 Letter to the Editor by Various (Article)
A reader disagrees with John Hussman's recent commentary, Sixteen Cents: Pushing the Unstable Limits of Monetary Policy, which appeared on January 24.
2011-01-25 Go for the Long Bond: Technical Indicators are Positive by Georg Vrba, P.E. (Article)
My article, Seeking Beta in the Bond Market: Update December 31, 2010, showed that my Bond Value Ratio (BVR) model indicated the beginning of an up-market for high-beta bond funds on 12/17/10. I present a further indicator here which reinforces this signal.
2011-01-11 2010: A Truth Odyssey by Ron Surz (Article)
I review some of the lessons learned in the last two years. I review the last year, discuss 2008's lessons, and conclude with my traditional review of the longer-term history of U.S. markets over the past 85 years.
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 Ten Most-Read Articles in 2010 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...
2010-12-28 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don't always get the readership they deserve. Here are 10 articles that you might have missed, but we believe merit reading.
2010-12-21 Gundlach: Are Taxes Too Darn Low? by Robert Huebscher (Article)
One way to avert the crisis posed by growing fiscal deficits is a significant tax increase, according to Doubleline's Jeffrey Gundlach. Although he did not advocate this policy, in his conference call with investors last week he said the strain of fiscal deficits poses as yet unanswered challenges to the economy and the markets.
2010-12-21 Ed Hyman: We Are Not Japan by Katie Southwick (Article)
Despite his worrisome outlook earlier this year, the ISI Group's Ed Hyman provided an upbeat forecast of the US economy, arguing that we are in the midst of an economic recovery that will lead to expansion. We are demonstrating that we are not Japan, he said.
2010-12-14 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.
2010-12-06 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 Real Return Expectations by Michael Nairne (Article)
There is nothing more important to long-term investors than the real rate-of-return that they can reasonably expect to earn on their investments. We forecast the expected real annual return for US stocks over the next 10 years and then set out ways to potentially improve on what many will find to be a discouragingly low expected return.
2010-12-06 Creating a Mirage of Economic Growth by Doug Carey (Article)
Bubble formation is not random. Some may believe it is, but bubbles are in fact a predictable byproduct of the fractional reserve system upon which our economy is built. By stimulating and amplifying lending through its fractional reserve system, the Federal Reserve systematically creates the mirage of growth, from which deception systemic crises inevitably result.
2010-11-30 Black Gold, Texas Tea by Robert Huebscher (Article)
The flow of money into gold-related funds is, at least in part, driven by good intentions - hedging against dollar debasement, inflation, and systemic risk. As investors drive the price of gold to record levels, though, they are overlooking an equally compelling commodity hedge, one that the Beverly Hillbillies once dubbed 'black gold, Texas tea' - oil, that is.
2010-11-30 QE2: Beware the Perils of its Success by Vitaliy Katsenelson (Article)
QE2 is like a drug prescription that comes with a list of side effects that are often worse than the disease it was supposed to cure. It is difficult to know the unintended consequences of QE2, but it may result in a substantial decline in the dollar, stagflation, lower economic growth and much higher interest rates.
2010-11-23 Why Three Top Bond Managers Like Equities by Robert Huebscher (Article)
You'll rarely - perhaps never - hear a fund manager say that market conditions do not favor investing in their chosen asset class. That's why it was so remarkable when several prominent managers recently admitted that they favored equities over their own discipline - fixed income.
2010-11-23 Ned Davis - Still Positive on Stocks by Robert Huebscher (Article)
Just over a year ago, Ned Davis correctly forecast a continuation of the cyclical bull market in stocks. In February of 2008, he foresaw that year's market upheaval, and a year later he predicted the rally that began in March of 2009. Today, Davis is moderately bullish on stocks, as long as the Fed maintains its policy of quantitative easing.
2010-11-23 Stop Front-Running the Fed by Keith C. Goddard, CFA (Article)
A change of mindset is in order for bond investors, who must recognize that it is no longer wise to 'front-run' monetary policy by purchasing the same bonds the Federal Reserve is targeting with its latest round of quantitative easing.
2010-11-23 Seeking Beta in the Bond Market: A Math-driven Investment Strategy for Higher Returns by Georg Vrba, P.E. (Article)
Investors seeking permanent exposure to the bond market should invest in high-beta funds during up markets and low-beta funds during down markets. This simple strategy provides consistent long-term returns that are considerably higher than what a static investment in bond funds would achieve.
2010-11-16 Jeremy Siegel on the Upside for Equities and the Virtues of QE2 by Robert Huebscher (Article)
In our annual interview, Jeremy Siegel, the Russell E. Palmer Professor of Finance at the Wharton School, offers his forecast for equities - a 10% to 20% gain in 2011, along with a continued rally through the end of this year. He also explains why the current round of quantitative easing is exactly what is needed to stimulate the economy.
2010-11-09 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 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 Serenity Now by Emilio Vargas (Article)
Hope has transformed into fear - not about making money but about the prospect of another bubble. The recent statements and actions of the Federal Reserve Bank may be laying the groundwork for the third massive asset mispricing in ten years.
2010-11-02 Flaws in Vanguard?s Withdrawal Strategy: Income versus Total-Return Portfolios by Geoff Considine, Ph.D. (Article)
Vanguard advertises that its mission is to simplify investors' retirement decisions. In a recently published study, however, it oversimplified the critical choices investors and their advisors face in constructing a portfolio for the withdrawal phase of retirement.
2010-11-02 Gold and the Decade to Come by American Century Investments (Article)
Gold is an asset class unto itself. It is not only a barometer of confidence in governments and the financial system, but also a reserve asset, an alternative currency, and a store of value. Those characteristics make gold an ideal diversifier because it has low correlation to most financial assets, both in expansionary and recessionary periods. Indeed, the return pattern to gold investments is not only uncorrelated to most traditional financial assets, but makes gold uniquely positioned to outperform when you want diversification the most--during periods of crisis.
2010-11-02 A Top Economist's Nightmare Scenario by Charlie Curnow (Article)
Remember the 1970s? Stagflation like we saw then could return to the U.S. if unsustainable public debt levels trigger a selloff of government bonds and dollar-denominated holdings, according to a recent study by John C. Cochrane. Cochrane, a finance professor at the University of Chicago, is perhaps best known for his response to Paul Krugman's article in the New York Times on why mainstream economics failed to anticipate the financial crisis.
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.
2010-10-29 Asset Allocation in an Uncertain Economy by Robert Huebscher (Article)
Advisors should not bet on whether the recession will be L-, V-, or W-shaped. Instead, Ron Albahary said they should use strategic asset allocation and overweight or underweight those asset classes that have historically done well at certain points in the economic cycle. Albahary is the CIO of Convergent Wealth Advisors, a Washington, DC-based wealth manager.
2010-10-29 Four Critical Investment Themes for the Next Decade by Robert Huebscher (Article)
Four investment themes will dominate market behavior over the next decade, according to Martin Murenbeeld, the chief economist at DundeeWealth Economics, a Canadian investment manager and financial advisor. Investors, he said, would be wise to overweight gold and other commodities.
2010-10-26 An Exceptional Resource for Asset Allocation by Michael Edesess (Article)
Roger C. Gibson's fine and exemplary book, Asset Allocation: Balancing Financial Risk, Fourth Edition, shows that character and conscience-based counseling still exist, even in the financial profession. It is still possible for advisors to look out for their clients' long-term interests.
2010-10-19 'Bond Bubble' Fears Overblown by G. David MacEwen (Article)
Despite considerable debate in the financial media about the existence of a bond market "bubble," the fixed income team at American Century Investments finds little evidence to support this claim. None of the factors traditionally associated with asset bubbles are at work in the bond market. However, a confluence of economic headwinds argues for a prolonged period of low interest rates and inflation, while behavioral finance trends favor further bond inflows.
2010-10-19 Bernanke's Impossible Dilemma by Robert Huebscher (Article)
David Wessel, economics editor of the Wall Street Journal, examines the challenge Ben Bernanke faces. His goal is to provide full employment and price stability. Yet he faces a slowly growing economy, unemployment close to 10%, consumers deleveraging and spending frugally, renewed fears of banking system instability, and the threat of an asset bubble is growing somewhere in the markets. Monetary and fiscal policy options have been seemingly exhausted, and the public is losing confidence in all aspects of government.
2010-10-19 Allen Sinai: US at the Crossroads by Robert Huebscher (Article)
America is at a crossroads in a shifting global economy, and it's not just our economy that is in trouble. We have moved from a mindset of prosperity to a much gloomier self-conception, and dysfunctions within our government and society are pushing us downward. That sobering assessment was delivered by Allen Sinai, the president of Decision Economics, an economic research firm he founded in 1996.
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 Misconceptions in the Great Bond Bubble Debate by Robert Huebscher (Article)
Interest rates, many claim, have bottomed, making bonds the latest asset class worthy of the dreaded "bubble" label. Others counter that deflationary forces will prevail and that bonds offer the best risk-adjusted returns in the market. Which side of this debate you take matters profoundly, but making that call is not simply a matter of predicting the direction of interest rates, as is the typical focus of analysts.
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 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 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 Charles Brandes on Investing Lessons from Benjamin Graham by Dan Richards (Article)
In this interview, Charles Brandes, the founder and Chairman of the Brandes Investment Management, discusses the lessons he learned from legendary value investor Benjamin Graham. Brandes also offers his forecast for equity market performance, as well as why he believes value stocks have an inherent, sustainable advantage over growth stocks. This is the transcript of the interview.
2010-10-05 Charles Brandes on Investing Lessons from Benjamin Graham ? Video by Dan Richards (Article)
In this interview, Charles Brandes, the founder and Chairman of the Brandes Investment Management, discusses the lessons he learned from legendary value investor Benjamin Graham. Brandes also offers his forecast for equity market performance, as well as why he believes value stocks have an inherent, sustainable advantage over growth stocks. This is the video of the interview.
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.
2010-10-05 A September to Remember by Ron Surz (Article)
In his quarterly market analysis, Ron Surz notes that September has historically been the worst performing month for US stock markets, losing 1% on average over the past 85 years, while the average return in the other 11 months was a positive 1.3%. Not so this September. Surz reviews global market performance and provides his thoughts on peer group analysis and target date funds.
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.
2010-09-21 Getting off the Sidelines: Investing in the Smart Risk Zone by American Century Investments (Article)
Individual investors have experienced painful losses. Some have left the financial markets; others are reluctant to recommit their assets. Financial advisors want to get their clients off the sidelines, out of cash alternatives, and on track toward achieving their financial goals. In this article, American Century Investments offers a smart risk strategy to identify, understand, and manage risk by focusing on investment vehicles that offer higher potential return, lower volatility, better downside protection, and consistent compensation for risk. We thank them for their sponsorship.
2010-09-21 The Housing Elevator: Going Up or Down? by Robert Huebscher (Article)
Several prominent analysts have written recently that the bear market in housing is nearing its end. Writing with varying degrees of conviction and citing a range of statistical measures, they reach the broad conclusion that now is the time to buy a house. We provide a summary of those opinions - from James Grant of Grant's Interest Rate Observer, Dave Leonhardt of The New York Times, and Anatole Kaletsky of GaveKal Research - along with our own contrasting thoughts.
2010-09-21 The One-Sided Fallacy by Richard E. Cripps, CFA (Article)
The current tenor of political debate has amplified one-sided arguments as each party attempts to sell their view to voters. The same polarization has become evident in approaches to investment, and market bears are exhibiting all the classic symptoms of confirmation bias. But we know better than to let these slanted arguments sway our market convictions. As Richard Cripps explains in this guest contribution, there are plenty of reasons to remain invested in equities.
2010-09-14 A Better Way to Invest in Gold by Geoff Considine, Ph.D. (Article)
In the year since Geoff Considine last wrote about gold, underlying prices have risen 24%, leading to several important questions - including whether his advice of a year ago still holds today. We look closely at how a direct investment in GLD performed as compared to a bond-plus-call-option strategy, and which conditions favor each strategy.
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.
2010-09-14 What the Taylor Rule Says about Interest Rates by Charlie Curnow (Article)
The Taylor Rule, a widely cited forecasting tool, predicts that the current inflation rate of 1.2 percent and the unemployment rate of 9.6 percent will keep the target federal funds rate in the range of -3.5 to -4.5 percent. We report on a presentation last week by an official at the Boston Federal Reserve Bank.
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.
2010-08-31 Double ?Bubble,? Toil and Trouble by Sam Bass (Article)
The latest economic prophecy, which has gripped investors' fears for the past three years and counting, is that a 'bubble' in US Treasury bonds is about to burst. Hyperinflation is just around the corner, the prediction goes, and US Treasury bonds, driven up in price to record levels by unprecedented policy measures, are about to crash. In this guest contribution, Sam Bass writes that advisors shouldn't follow the advice of these "seers."
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.
2010-08-17 A Double-Dip Recession Remains Unlikely ? A Mid-Year Update by Bob Doll (Article)
The past couple of months have been difficult for investors, but we are holding to our view that the recovery will continue and stocks will gain ground. Bob Doll, Vice Chairman and Chief Equity Strategist for Fundamental Equities at BlackRock, discusses the current situation, the predictions he made at the beginning of 2010 and opportunity in the financial markets for the second half of the year. We thank BlackRock for their sponsorship.
2010-08-17 A New Framework for Retirement Income Planning by Manish Malhotra (Article)
In this guest contribution, Manish Malhorta proposes a new framework to solve many problems associated with retirement income planning, one that answers questions investors often ask, such as: "How much retirement income can I have with only a 10% chance of failure?" and "How much do I need to have now to draw $50,000 for 30 years with full certainty?"
2010-08-10 Three Steps to Talk About Risk by Dan Richards (Article)
Among the most important things that good advisors bring is the ability to help clients make the right trade-off between risk and return ... and, as Dan Richards says, to help clients understand the critical relationship between the timeframe over which they hold investments and the volatility they experience.
2010-08-10 Zvi Bodie on Stocks and Annuities in Retirement by Dan Richards (Article)
In this interview, retirement expert Zvi Bodie discusses the role of stocks and annuities in a retirement portfolio, and how advisors and clients should think about risk. This is the transcript of the interview.
2010-08-10 Zvi Bodie on Stocks and Annuities in Retirement (Video) by Dan Richards (Article)
In this interview, retirement expert Zvi Bodie discusses the role of stocks and annuities in a retirement portfolio, and how advisors and clients should think about risk. This is the video of the interview.
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 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.
2010-07-27 Why Immediate Annuities Make Sense by Geoff Considine, Ph.D. (Article)
As they approach retirement, baby boomers are increasingly concerned about how best to manage their portfolios during the decumulation phase of their lives. One of the challenges for advisors and investors is understanding what role annuities should play, if any. Geoff Considine shows that immediate annuities should be an important part of a decumulation strategy.
2010-07-27 Robert Shiller: A Cautious Outlook for Stocks by Dan Richards (Article)
Dan Richards recently spoke with Robert Shiller, the Yale economist who foresaw the financial crisis and created the Case-Shiller housing index. Shiller discusses the potential for a double-dip recession, valuations in the US equity market, and the outlook for a housing recovery. This is the transcript of the interview.
2010-07-27 Important New Research Talking to Seniors About Risk and Market Volatility by Dan Richards (Article)
New research shows how to talk to seniors about their investments. Titled "Behavioral finance and the post-retirement crisis" and released in May, this report compiles findings on how older investors perceive risk and make financial decisions. Dan Richards discusses the findings.
2010-07-20 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 Jeremy Siegel on Why Stocks are Undervalued by Dan Richards (Article)
The Wharton School's Jeremy Siegel remains an outspoken proponent of stocks for the long run, as he demonstrates in this interview with Dan Richards. In the transcript of this interview, Siegel explains why equity investors should not be deterred by sour economic forecasts or by signals of apparent overvaluation based on Shiller P/E ratios.
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 Fake Diversification Exposed: Does Asset Allocation Work? by David B. Loeper, CIMA, CIMC (Article)
Domestic equities are down roughly 14.5% from their April 23rd high. Many advisors tout sophisticated (and very expensive) asset diversification strategies, supposedly to protect their clients against precisely these circumstances. So, with this recent decline, Dave Loeper asks whether all of those supposed diversifiers protected portfolios?
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 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 The Ultimate Income Portfolio by Geoff Considine, Ph.D. (Article)
Conventional approaches to constructing income-oriented portfolios use either bonds or high-yield stocks. In this article, Geoff Considine explores a compelling alternative to that approach: a carefully selected model high-yield portfolio consisting primarily of low-beta, high-dividend stocks, against which the investor sells call options.
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 Template for a Mid-Year Letter ? Navigating through this Calamitous Decade by Dan Richards (Article)
It's always important for clients to feel they're being kept informed of what's happening in markets - but never more so than in markets like we've seen in the past few months. Dan Richards provides a template for a mid-year market commentary to clients, adaptable to your own opinions and circumstances, based on a recently rediscovered speech by Benjamin Graham.
2010-07-06 And the Winner Is... by Michael Nairne (Article)
As investors rush into U.S. Treasury bonds in response to a weakening economy that may portend the onset of deflation, this begs the question whether there is a superior deflationary hedge. History can be instructive in this regard, as Michael Nairne explains in this guest contribution.
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 Jeff Gundlach: The US will 'Politely Default' on its Debt by Robert Huebscher (Article)
Jeff Gundlach's keynote address at last week's Morningstar conference documented the immensity of U.S. debt obligations and the lack of choices available for alleviating that burden. As he has stated in the past, he does not view inflation to be a threat in the capital markets today. He cited six options open to policy makers, but believes a seventh - some form of default - is most likely.
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.
2010-06-22 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 Niall Ferguson on Japan, China, and the US by Dan Richards (Article)
Harvard's Niall Ferguson is arguably today's leading economic historian. In part two of this interview, Ferguson explains why he fears the future is bleak for Japan, why China may someday be the leading global superpower, and what all this means for the US. We provide a video and a transcript.
2010-06-08 Five Strategies for a Rising Rate Environment by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)
The Federal Reserve can't accommodate forever, and the global stimulus effort will likely lead to inflation. Our growing indebtedness can only result in increased borrowing costs. That much we know. What we don't know is when and how quickly interest rates will rise. In this guest contribution, Kane Cotton and Jonathan Scheid examine five strategies for a rising rate environment.
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 Three Ways to Improve Safe Withdrawal Rates by Geoff Considine, Ph.D. (Article)
Using Monte Carlo analysis, Geoff Considine examines three ways safe withdrawal rates can be increased beyond the baseline 4% guideline. He compares and quantifies the benefits of increasing diversification beyond equities and bonds, increasing allocations to fixed income, and employing tactical asset allocation.
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.
2010-05-25 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.
2010-05-18 Jeremy Grantham Guarantees Gold will Crash by Robert Huebscher (Article)
Jeremy Grantham, the investor celebrated for his ability to spot and exploit bubbles in asset classes, guaranteed yesterday that the current bull market in gold will end. His proof? He bought some - for his own account - at the end of last week. That comment was tongue-in-cheek, but he went on to identify two asset classes likely to go into bubble territory.
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 Actively Passive or Passively Active? by Craig L. Israelsen, Ph.D. (Article)
The active-passive debate typically centers on the nature of the investment product - whether it is an actively managed fund or a passive index fund. This, however, is only one aspect of that debate, and to consider it alone represents too simplistic a view, says Craig Israelsen in this guest contribution. A broader issue, namely how a portfolio of actively or passively managed funds is managed over time, has a more profound impact on whether one is truly an active or passive investor.
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.
2010-05-11 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 Talking to Clients about Expected Returns by Dan Richards (Article)
Of all the assumptions that go into clients' retirement plans, none has a bigger impact than the expected return on their investments, says Dan Richards. That number determines how much investors need to save, when they can afford to retire and the kind of lifestyle they can anticipate. Richards provides a context for discussing expected returns with clients.
2010-05-11 Inspire Client Trust by Delivering Clear, Insightful Investment Communications by Ani Yessaillian (Article)
One of the best ways to build trust with your clients is to consistently deliver clear, insightful investment communications. In this guest contribution, consultant Ani Yessaillian tells you how to make the most of your quarterly performance report and your off-cycle investment communications.
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 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 Gary Shilling: America?s Lost Decade by Robert Huebscher (Article)
The US faces 10 years of slow growth and deflation that could rival Japan's "lost decade" - two words which Gary Shilling did not utter but which unmistakably characterize his forecast. Shilling is founder and President of the New Jersey-based economic consulting firm A. Gary Shilling & Co.
2010-04-27 The Four Horsemen of Growth: David Kelly?s Guide to Markets by Katie Southwick (Article)
With unprecedented volatility now largely behind us, J.P. Morgan's Chief Investment Strategist David Kelly believes that the economy is entering a period of recovery. To move forward, we must abandon our negative mindsets and focus on opportunities for expansion.
2010-04-27 The Hidden Risk in Target Date Funds by Ron Surz (Article)
Choosing the appropriate target date fund (TDF) for an investor is not easy, given the large number of products in the marketplace and the lack of tools to easily compare those offerings. That choice, however, is made a lot easier if one focuses on the component of TDFs where investors are exposed to the greatest risk - what guest contributor Ron Surz calls the "risk zone."
2010-04-20 Lessons from Yale?s Endowment Model and the Financial Crisis by Geoff Considine, Ph.D. (Article)
The Yale endowment's performance during the financial crisis was worse than what would be mathematically expected, but not significantly enough to question the endowment model's tenets. Moreover, Yale's performance and philosophy suggest two very important lessons for advisors and investors- to diversify beyond equities and fixed income, and that some illiquid asset classes can be an important source of alpha.
2010-04-20 Letter to the Editor ? The Interest Rate Debate by Various (Article)
As a Treasury bond bear of modest conviction, advisor Martin Weil read with interest Gluskin Sheff's David Rosenberg's piece in our April 12 issue. Though providing little data to support his thesis, Rosenberg makes a solid argument for why it is inflation, not supply and demand, that drives Treasury prices and yields. In taking this position, he pits himself against, among others, Jim Grant, with whom he has been carrying on a running debate.
2010-04-20 A Short-Term Buying Opportunity for Long-Term TIPS by Michael Brennan (Article)
Fixed income investors should consider a short-term buying opportunity for Treasury Inflation Protected Securities (TIPS) with maturities of ten or more years, writes Michael Brennan in this guest contribution. The 10-year TIPS should have a total return anywhere from 30 to 40 basis points greater than the comparable nominal Treasury bond.
2010-04-07 Currency Manipulation: A Primer by Komal Sri-Kumar of TCW Asset Management
The air is thick with allegations that China is manipulating its currency by keeping the renmibi fixed and undervalued with respect to the U.S. dollar. All of this is in anticipation of whether Treasury Secretary Timothy Geithner will designate China as a currency manipulator in his semi-annual report to Congress on trade practices. This designation could lead to new U.S. sanctions against Chinese exports. Ultimately, however, the key to success for U.S. authorities would not be public criticism of the United States' largest creditor, but a thoughtful discussion behind closed doors.
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 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.
2010-04-01 The Fed's Last Hurrah by Peter Schiff of Euro Pacific Capital
When the tech bubble burst, the Fed inflated a larger one in real estate. Now that the real estate bubble has burst, the Fed is inflating the biggest bubble of all - a bubble in government. The government bubble will cripple the economy and deliver widespread misery to the majority of Americans. As government grows, it deprives the private sector of the resources it needs to survive and grow. In the end, when runaway inflation and skyrocketing interest rates burst the government bubble, there will be no more bubbles to replace it ? just one hell of a hangover.
2010-04-01 Market Insight by Duncan W. Richardson of Eaton Vance Investment Managers
A year ago today, changes in the financial markets were nearly overwhelming for investors. At the close of last year's first quarter even the most sanguine of observers couldn't help but worry that the worst might not be over yet. Investor fear was reflected in the March 2009 asset allocation survey by the American Association of Individual Investors showing record low 41 percent allocations to equities and record high 45 percent allocations to cash.
2010-03-30 China's 2010 Growth Forecasts Upgraded by the World Bank by Team of American Century Investments
The World Bank raised China's 2010 growth forecasts to 9.5 percent last week from the 8.7 percent projected in November, but also predicted that China's growth will slow somewhat in 2011, to 8.7 percent. It also recommended higher interest rates and a stronger currency for China amidst growing concerns over rising inflation and a property sector bubble. The Chinese government emphasized the need for structural reforms in recent presentations to the National People's Congress.
2010-03-30 Letter to the Editor by Various (Article)
In a letter to the Editor, a reader comments on Keith Goddard and Channing Smith's article, Implications of the Current Shiller P/E Ratio.
2010-03-29 Taking Stock of Deficits by Milton Ezrati of Lord Abbett
As investors have gained confidence that financial markets have healed and economic recovery has begun, their concern has increasingly turned to the flow of federal red ink. While not all deficits lead to bad markets, there is reason for concern. The White House forecasts huge budget shortfalls in the years to come, and the deficit-narrowing plans it has offered rely almost exclusively on tax increases. Other considerations such as economic growth, a balanced monetary policy and earnings improvements, however, may allow stocks to rise even in the face of fiscal woes.
2010-03-29 And That's the Week That Was... by Ron Brounes of Brounes & Associates
Last week's data revealed continued economic recovery, even though housing continues to lag, an alarming trend given that future Fed moves could negatively impact the sector. Optimists still hope that dismal housing numbers reflect poor winter conditions, however, and will reverse themselves in the coming months. As the first quarter comes to a close, expect managers to rebalance positions, take some profits and even lock in losses for tax purposes. The new month will bring a plethora of economic data, highlighted by the unemployment rate late in the week.
2010-03-23 Employment Gains Likely by Bob Doll of BlackRock
The jobs-shedding phase appears to have ended, but new jobs are still not being created. Unemployment claims have declined in March, however, and so this scenario may soon reverse. Temporary employment has increased, and many firms have discussed plans for permanent hiring. Factoring in census hiring, payrolls may increase by more than 200,000 this month. Once jobs growth commences in earnest, corporate earnings should also increase and investor uncertainty should diminish, and this should drive the next cyclical bull market in equities.
2010-03-23 Fixed Income Short Duration Bonds by American Century Investments (Article)
The fixed-income team at American Century Investments doesn't foresee sudden surges in inflation or interest rates in the immediate future, but they are on the horizon. "Near-term inflation concerns remain low due to lingering weak economic fundamentals," says David MacEwen, chief investment officer for fixed income. "However, looking long-term, the unprecedented levels of fiscal and monetary stimulus used to fight the recession will eventually result in higher inflation." (This is sponsored content.)
2010-03-22 An Update on Valuation and Forward Earnings Assumptions by John P. Hussman of Hussman Funds
The market's valuation looks overpriced based on widely tracked fundamentals. Price-to-normalized earnings, price-to-dividend multiples, price-to-book values and price-to-sales multiples all sit above long-term averages. Valuations based on forward operating earnings are also unfavorable. The long-term average P/E ratio based on forward operating earnings is about 12. The current multiple is 14.8, and this value assumes the continuation of near-record profit margins. Even a minor lowering of expected profits would cause the whole scale of the overvaluation to widen materially.
2010-03-22 Health Care Fallout by Brian S. Wesbury and Robert Stein of First Trust Advisors
The health care bill is no reason to run for the hills. In the short term, there are no policy changes that will derail or noticeably slow the V-shaped economic recovery slowly underway. There are harmful policy shifts, including extra fees on health insurers and the makers of medical devices, but these are sector and not macroeconomic issues, at least in the short term. The biggest macroeconomic effects will stem from tax hikes scheduled to go into effect in 2013. In the meantime, however, Wesbury and Stein retain their bullish stance.
2010-03-19 Another Year Older... And Deeper in Debt? by Isbitts of Emerald Asset Advisors
Consumers continue to deleverage around the globe, as they have since 2008, and that deleveraging process is the underlying force behind financial markets. Despite the obvious short-term problems for markets everywhere, however, 2010 will be viewed in retrospect as a time for investors with long time horizons to start angling their portfolios toward a more positive long-term return than in the past decade. Continued low interest rates are starting to spark economic growth, and are making 'risk' assets more attractive.
2010-03-19 Jobless Claims, Inflation and Retail Pricing Power by David A. Rosenberg of Gluskin Sheff
Jobless claims are down to 457,000, the same place they were in late 2001 after the terrorist attacks. Sustained job creation does not occur, however, until claims drop below 400,000. The headline inflation rate was 2.1 percent in February and the core was 1.3 percent, the lowest core inflation rate since February 2004. Pricing trends suggest that airlines, shipping and hospital services have retained pricing power, while restaurants, home improvement, apparel, movies, telecoms, books and newspapers have not.
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.
2010-03-15 More Solid Growth Ahead by Brian S. Wesbury and Robert Stein of First Trust Advisors
The consensus is forecasting a growth rate of 2.7 percent for the first half of 2010. In contrast, we are predicting 4.5 percent, with faster growth in the second quarter than the first. The tilt toward Q2 is due to unusually harsh winter weather across much of the country. The consensus is still underestimating the resilience and robustness of the US economy and remains stuck on expectations of a 'new normal.' But, productivity is strong, monetary policy is (and will continue to be) easy, inventories are razor-thin, and corporate profits are growing rapidly.
2010-03-15 Weekly Commentary and Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The conventional wisdom seems to be that the worst is over and a slow but self-sustaining recovery is taking place. A very quiet and slow week of trading produced yet another advance in the stock market. Concerns over Greece and other sovereign debt issues receded, while evidence on the global economy was mixed. The Dow Jones Industrial Average gained 1.5 percent while the NASDAQ gained 1.8 percent over excitement generated by the new product line by Apple.
2010-03-11 Market Comment by David A. Rosenberg of Gluskin Sheff
Government stop-and-go policies have fostered an environment of intense volatility for equity markets over the past 12 years. The market has basically been flat for a buy-and-hold investor during this period. While this may make a great case for active portfolio management, chasing performance at this juncture is probably unwise. Housing is the quintessential leading indicator for economic activity, and many realtors still say business is slow. As the Japanese experience shows us, a double-dip recession may come faster than we think.
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.
2010-03-09 Equities Notch Weekly Gains by Bob Doll of BlackRock
Last week was strong for risk assets, and equities in particular, as the broad U.S. averages entered positive territory for the first time since early January. All sectors were positive, with materials up the most at 6 percent. A profits-led recovery seems to be unfolding, which will lead to increases in capital expenditures, and eventually, employment. After six negative weeks, flows in equities have been positive for three weeks running. Accommodative liquidity conditions and a healing economy support a pro-growth investment stance.
2010-03-09 A Looming Lack of Liquidity by Robert Huebscher (Article)
Headlines warn that the rapid buildup in the money supply, caused by the Federal Reserve's efforts to confront the financial crisis, is destined to result in inflation. That may be the case, but a more ominous signal from the money supply warns of impending economic contraction.
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 Asset Allocation Perspective by Scott Wittman, CFA (Article)
Scott Wittman, Chief Investment Officer for American Century Investments, provides his quarterly review of macro-economic factors and trends which influence the tactical weighting decisions for American Century's asset allocation funds. In the article, Wittman reviews and comments on recent events, trends and expected short-term future changes in monetary, fiscal, industrial, trade, regulatory, political and financial macro economic factors. We thank them for their sponsorship. This is sponsored content.
2010-03-02 Recovery Continues, But Jobs Data Critical by Bob Doll of BlackRock Investment Management
The economic recovery remains intact, but data remains mixed and outlooks are still uncertain. Employment trends remain the most critical economic data, because the labor market is the mechanism that sustains and reinforces growth. At present, corporate earnings and balance sheets are supportive of companies increasing their payrolls. Trading remains uneven, but higher-risk assets still hold long-term upside potential.
2010-02-26 Focus on the Forest, Not the Trees by David A. Rosenberg of Gluskin Sheff
Despite the reflexive rebound in global equity markets, deflation is still the primary trend for consumer prices and asset values as households rebuild balance sheets and as governments face sovereign default risks. Investors should focus on bonds, hybrids, and dividends with consistent yields as they search for safety and income at a reasonable price.
2010-02-23 A Greek Tragedy, 'PIIGS,' and a Euro Challenge by Milton Ezrati of Lord Abbett
Greece's public debt has risen to 110 percent of its gross domestic product, and its budget deficit stands at 14 percent of GDP, well above the EU limit of 3 percent. This has raised concerns about other European states with questionable finances, including Portugal, Ireland, Italy and Spain. The political risks of a Greek default, however, will probably motivate other EU nations to support the troubled country.
2010-02-23 Interest Rates, Inflation and the PIMCO Total Return Fund by Robert Huebscher (Article)
The current generation of financial advisors has never experienced rising interest rates, but that will change, based on the forecasts we collected in our survey last week. We review our survey results and look at the implications for the largest bond portfolio, the PIMCO Total Return fund.
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.
2010-02-22 Inflation is Contained, Fed Focus on Growth and Jobs Remains in Place by Asha Bangalore of Northern Trust
The January consumer price index report shows no inflationary pressures. The CPI rose 0.2 percent last month following similar gains in the previous four months. The Federal Reserve will continue to focus on economic growth and jobs, while eliminating emergency measures put in place as the economic crisis unfolded in August 2007.
2010-02-20 The Fed Tests the Waters by Brian S. Wesbury and Robert Stein of First Trust Advisors
The Federal Reserve took a big first psychological step toward a tighter monetary policy yesterday when it raised the discount rate to 0.75 percent, from 0.50 percent. The Fed wants to make sure, however, that markets understand that a rising discount rate does not necessarily entail higher federal funds rate.
2010-02-16 G7 Weekly Economic Prospects by Christopher Probyn and Geoffrey Somes of State Street Global Advisors
Christopher Probyn and Geoffrey Somes of State Street Global Advisors say in their weekly economic commentary that US retail sales rose 0.5 percent in January, but consumer confidence fell 0.7 points, to 73.7. Investor risk appetites improved following assurances that the EU will stand behind Greek fiscal reforms.
2010-02-16 Robert Shiller on Trills, Housing and Market Valuations by Dan Richards (Article)
Robert Shiller, a professor of economics at Yale University and co-creator of the Case-Shiller Housing Index, discusses several topics in this interview with Dan Richards, including his plan for governments to finance their debts by issuing "trills," a security representing a fractional claim on the country's GDP.
2010-02-13 Fear Takes the Wheel by Peter Schiff of Euro Pacific Capital
Peter Schiff of Euro Pacific Capital says in his economic commentary that the recent strength of the stock market may be more attributable to fears of inflation than an improving economy. Growing U.S. debt levels threaten to swamp to dollar, and are leading investors away from dollars and treasury bonds.
2010-02-12 Insights from CM Analyst Conference Part II by Tom Wu of Franklin Templeton
Tom Wu of Templeton Asset Management says the emerging markets of Turkey and Hungary may offer opportunities for rapid growth. Turkey has built its foreign exchange reserves to $70 billion, while the MCSI Hungary Index posted 78 percent returns in 2009. Wu notes, however, that these opportunities for growth come with higher risks.
2010-02-09 Letters to the Editor by Various (Article)
Our letters to Editor include two responses to our article about Joseph Stiglitz and one in response to Keith Goddard's article about asset allocation using Shiller P/E ratios.
2010-02-06 January Employment Situation - Mixed Report, Deduce Carefully by Asha Bangalore of Northern Trust
Although the jobless rate declined and the pace of job losses has slowed noticeably, the labor market situation remains a source of serious concern. A total of 8.4 million jobs have been lost since the recession commenced in December 2007 and the jobless rate is high. Consistent back-to-back gains in employment are necessary to declare the worst is behind us. One monthly decline of the jobless rate is adequate to act on; the FOMC is predicted to stay on hold for several more months.
2010-02-02 Return Distributions and the Shiller P/E Ratio by Keith C. Goddard, CFA (Article)
Keith Goddard expands on ideas developed by Joe Tomlinson in a series of recent articles on the topic of the Shiller P/E Ratio as a predictor of future returns in the stock market. Specifically, this article looks at the distribution of three-year returns in the stock market following different starting points for the Shiller P/E ratio to illustrate that the historical distribution of rolling three-year returns in the stock market is not random.
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 Letter to the Editor by Various (Article)
In a letter to the Editor, a reader responds to a commentary recently posted on our site.
2010-01-28 "Extended Period" of Low Rates Starting to Lose Support by Brian S. Wesbury and Robert Stein of First Trust Advisors
The Federal Reserve made no direct changes to the stance of monetary policy today, leaving the target range for the federal funds rate at 0% to 0.25%. However, one member dissented from the Fed?s comm
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 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.
2010-01-23 Annual Report Letter to Shareholders by Hawkins and Cates of Longleaf Partners
Interestingly we have not been asked about the 'lessons of 2009.' The first answer to that unasked question is that bottoms-up fundamental company analysis matters quite a bit. If it wer
2010-01-23 Was it Really a Lost Decade? by Rob Arnott of Research Affiliates
?In this issue we study this abysmal stretch of portfolio performance, both to glean long-term lessons for how we allocate assets and structure equity indexes and to consider whether the ?naughts? mig
2010-01-22 Reflections Across the Pond by John Browne of Euro Pacific Capital
Having been among the economic engines of Europe for much of the past decade, it appears as if the British economy has run out of steam. Inflation is rising while bankruptcies and unemployment continu
2010-01-19 Steve Leuthold: The Market will Rally This Year by Robert Huebscher (Article)
Steve Leuthold is chairman of the $4.5 billion Leuthold Group and one of the most widely-followed market analysts. In his keynote presentation at last week's Fortigent conference, he offered an upbeat forecast for the first half of 2010.
2010-01-19 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 A Market for Contrarians by Robert Huebscher (Article)
Along with Steve Leuthold, Rob Arnott, Doug Kass and DoubleLine co-founder Joe Galligan were among the speakers at Fortigent's conference. These three speakers' bearish sentiment extended across a wide range of asset classes, opening lots of possibilities for those who prefer contrarian bets.
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.
2010-01-14 Recent Fed Rhetoric and Highlights of Beige Book by Asha Bangalore of Northern Trust
In speeches late yesterday, Fed Presidents Plosser and Fisher of Philadelphia and Dallas, respectively, were of the opinion that unemployment rate is most likely to trend higher than the December jobl
2010-01-14 Is Recovery Here to Stay? by William H. McAfee of WHM Capital Advisors
There are still high levels of uninvested cash sitting idly on the sidelines. Equity markets are likely to do well in 2010 as the perception of risk diminishes and cash flows out of low yielding mone
2010-01-12 Things Fall Apart in Eurozone by John Browne of Euro Pacific Capital
2010-01-12 Bruce Berkowitz on the Keys to Success for the Fairholme Fund by Robert Huebscher (Article)
Bruce Berkowitz, manager of the Fairholme Fund, was just named Morningstar's US fund manager of the year. In our interview, he discusses current market conditions, the thesis behind several of his largest positions, his views on health care reform, and the elements of the macro environment that concern him most.
2010-01-12 The True Cost of Insuring the Uninsured by Robert Huebscher (Article)
Let's say your spouse sends you out to buy a quart of milk and you take along a bag of soda cans to return. You use the deposit from the cans to buy the milk. Was the milk free? Of course not. But that's essentially the argument the government is using when it claims universal health care will reduce the deficit by $132 billion over the next decade.
2010-01-12 Letter to the Editor ? Paul Krugman by Various (Article)
Our interview last week, Paul Krugman on Deficits, Taxes, Inflation and Recovery, drew a number of responses, all of which expressed the same sentiment. We publish one of those letters.
2010-01-11 Inflation Expectations Approach Pre-Crisis Range by Asha Bangalore of Northern Trust
Inflation expectations as measured by the difference between yields of the nominal U.S. 10-year Treasury note and the 10-year inflation protected security are now at levels seen prior to the onset of
2010-01-09 December Employment Report: Hiring Freeze Yet to Thaw by Asha Bangalore of Northern Trust
2010-01-06 The Carry Trade in 2010 by Nouriel Roubini of RGE Monitor
2010-01-05 Paul Krugman on Deficits, Taxes, Inflation, and Recovery by Dan Richards (Article)
Dan Richards' interview with Paul Krugman, the 2008 Nobel prize winner in Economics, covers his views on the size of the next stimulus package, how high marginal tax rates should go, and lessons from the Japanese experience. Whether or not you agree with him, Krugman is highly influential and his views may presage future policy decisions.
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.
2009-12-30 Monetary Policy: Inflation-Deflation, Debt, Excess Reserves, Currency Volatility by Michael J. Schussele of Michael J. Schussele, CPA
2009-12-29 Jeremy Siegel on the Undervaluation in US Equities by Robert Huebscher (Article)
"I think that earnings growth next year will be stronger than anticipated and will break the all-time high for the S&P, which was in the second quarter of 2007, when earnings for the trailing 12 months were in the low 90s," says Siegel. "In 2011 or 2012 we will break that amount. With $90 in earnings and a 15 P/E ratio, you get 1,350 for the S&P."
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.
2009-12-29 The Top 10 Articles You Didn?t Read (But Should Have) by Robert Huebscher (Article)
We closely monitor which articles draw the most readership. This allows us to fine-tune our content to the preferences of our audience. Reflecting on those articles that were most popular over the last year, however, we believe other articles also deserved your attention. We provide the "Top 10" articles you didn't read - but should have.
2009-12-29 Letter to the Editor ? Pension Liabilities by Various (Article)
In this first letter to the Editor, a reader responds to our article last week, The Next Black Swan? Underfunded Public Pensions, and provides additional data showing the depth of the pension crisis.
2009-12-28 Stocks are Still Cheap by Brian S. Wesbury of First Trust Advisors
2009-12-22 ECRI: Recovery and Jobs Growth are Underway by Robert Huebscher (Article)
Lakshman Achuthan, the managing director of the Economic Cycle Research Institute (ECRI), provides an upbeat forecast in our interview. He says the economic recovery has been underway since the summer and he expects to see jobs growth in the coming quarters. ECRI is a global research firm serving buy- and sell-side institutions and Fortune 500 companies.
2009-12-15 Barton Biggs on Undervaluation in the S&P 100 by Robert Huebscher (Article)
Barton Biggs, the former Chief Global Strategist for Morgan Stanley who now runs the hedge fund Traxis Partners, says the high-quality, large-capitalization stocks in the S&P 100 are now undervalued by one standard deviation. In our interview, Biggs also discusses his fears and how investors should protect themselves from the worst-case scenarios.
2009-12-15 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 Investing in Range-bound Markets by Vitaliy Katsenelson (Article)
Vitaliy Katsenelson, a frequent contributor to these pages, reviews his thesis for secular market cycles, why the US markets remain locked in a range-bound state, and what it will take for them to exit from that state.
2009-12-08 The 529 Dilemma by Mary Ann Lambert (Article)
The recent market decline coupled with, tax, custodial, management fees and estate planning issues make the decision to use a 529 plan less than straightforward. In this guest contribution, advisor Mary Ann Lambert briefly reviews the history of college savings plans and shows how the current landscape favors 529s for some clients but not for others.
2009-12-08 The Investment Value of Art by Robert Huebscher (Article)
In a newly released study, Yale Professor Will Goetzmann shows that changes in art prices over long periods of time are mostly explained by changes in income inequality. As income inequality - the percentage of income earned by the top 0.1% of the population - grows, so does the value of art. Art has little diversification value with respect to equities.
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.
2009-11-24 Gary Shilling's Version of the New Normal by Robert Huebscher (Article)
A dramatic reduction in consumer spending has doomed the US economy to slow growth and deflation, according to Gary Shilling. America's 25-year spree of profligate spending is over, and it will be supplanted by a decade-long retrenchment that will ultimately bring the consumer savings rate from 4% to double-digits, where it has not been since the mid-1980s, he said.
2009-11-24 Dan Fuss and the Long-Term Outlook for Interest Rates by Robert Huebscher (Article)
Dan Fuss, the highly respected bond manager at Loomis Sayles in Boston, says we are in the early stages on a long-term rise in interest rates. His view was shared by two other panelists, Carl Kaufman of Osterwies and Margie Patel of Evergreen. If you accept this consensus, you must ask whether your fixed income allocation is appropriate.
2009-11-24 Interview: Brian McMahon of Thornburg Investments by Robert Huebscher (Article)
We speak with Brian McMahon, CEO and CIO of Thornburg Investment Management about the Thornburg Income Builder Fund (TIBAX) and the challenges of finding income-producing securities in today's markets.
2009-11-24 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 Ned Davis: The Cyclical Bull Rally is Not Over by Robert Huebscher (Article)
In February of last year, Ned Davis, president and senior investment strategist of an eponymous Florida-based institutional research firm, correctly forecast last year's market decline. In February of this year, he called the market rally that began in March. Now, he says, that cyclical bull rally is not over.
2009-11-17 Bruce Greenwald on Positioning First Eagle?s Funds by Robert Huebscher (Article)
Bruce Greenwald is a professor of finance at Columbia, the Director of Research at First Eagle Funds, and a leading expert on value investing. Last week we published part one of our interview, where he discussed the structural problems in the economy and his forecast for higher unemployment. This week he discusses the positioning of First Eagle's investments, and why Warren Buffett's purchase of Burlington Northern was a mistake.
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 3Q 2009 Financial Markets Review by Janus (Article)
At the end of the 3rd quarter, the S&P 500® Index posted its strongest back-to-back quarterly performance since 1975. While the economy continued to stabilize and the U.S. consumer showed signs of life, concern over the health of the consumer remained. Learn more about the key drivers of global financial markets from the perspective of the Janus investment team through this 3Q Financial Markets Review. We thank them for their sponsorship.
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.
2009-11-03 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.
2009-11-03 Worry of the Dollar?s Collapse Is Overblown by Frank Wei, CFA (Article)
The fundamentals for the dollar could not be worse. The U.S. economy has continued to struggle, the federal deficit has skyrocketed, and the government has adopted super-easing monetary policies and aggressive fiscal spending. But anxiety over a potential dollar collapse is overblown. A gradual decline appears more likely, according to Frank Wei of FundQuest in this guest contribution.
2009-10-27 Managing Downside Risk in Retirement Planning by Geoff Considine, Ph.D. (Article)
Boston University professor Zvi Bodie advocates a retirement investment strategy that offers investors some of the upside potential in equities tempered with downside protection against bear markets and a low-risk inflation hedge via heavy allocation to TIPS. Geoff Considine examines Bodie's strategy and shows that it will work very effectively, including in a bear market like the one just experienced.
2009-10-27 The ?V? Points Downward by Robert Huebscher (Article)
Long-term equity investors face a critical juncture. They can believe a V-shaped economic recovery is imminent, if not underway, and valuations for broad-based equity indexes properly reflect an end to the "decrepit decade" of return-less risk in US markets. Or they can believe true economic recovery - growth, not just stability - is still a long way off and US equity valuations are in bubble territory, not reflective of the rough terrain ahead. We provide our thoughts.
2009-10-20 Asset Allocation Perspective from American Century Investments by Scott Wittman, CFA (Article)
Scott Wittman,Senior Vice President, Asset Allocation at American Century Investments reflects on the one-year anniversary of the near-meltdown by our financial system and provides perspective on what kind of recovery may be coming. We thank American Century Investments for their sponsorship.
2009-10-20 Letters to the Editor - Fama-French and the Active-Passive Debate by Various (Article)
Last week's article, Luck vs. Skill in Mutual Fund Alpha Estimates, on the latest research from Ken French and Gene Fama drew plenty of responses. We publish two of them, both in support of active management.
2009-10-20 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.
2009-10-06 Tobin?s Q Now Bearish Long-Term by Robert Huebscher (Article)
The latest data for Tobin's Q-Ratio, a valuation metric shown by academic studies to be highly predictive of market performance, show that investors should brace themselves for sub-par returns over the next 10 years.
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 Strategic and Tactical Perspectives on Gold by Geoff Considine, Ph.D. (Article)
There are good reasons for investors to maintain a long-term strategic allocation to gold, which has clear, positive portfolio benefits (due to low correlation to other asset classes). That said, gold is in an historic run-up in value and has been generating unsustainably high returns. Because of its high price and rising volatility, Geoff Considine argues there is significant tactical risk in gold.
2009-09-29 The Case Against Inflation by Robert Huebscher (Article)
Investors should expect extremely low inflation - just slightly above zero - for the indefinite future, according to Connie Everson, the Managing Director and co-founder of the Capital Markets Outlook Group, a Boston-based economic consulting firm that serves institutional investors throughout the world. Everson delivered her remarks to an audience of financial analysts in Boston last Thursday.
2009-09-29 Interview: Jeff Mortimer, CIO of Charles Schwab Investment Management by Robert Huebscher (Article)
Jeff Mortimer is Senior Vice President and Chief Investment Officer-Charles Schwab Investment Management, Inc. (CSIM). Mortimer has overall responsibility for approximately $240 billion in Schwab Funds and managed accounts. We spoke with Mortimer two weeks ago about the economy and why he believes the market has already priced in the bad news trumpeted by the media.
2009-09-22 Letter to the Editor by Various (Article)
In a letter to the Editor, a reader responds to our article last week, Mohammed El-Erian: We Have Not Reached Escape Velocity.
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 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 Five Reasons to Avoid the Gold Rush (Updated) by Vitaliy Katsenelson (Article)
The reasons why one should sell the cat, pawn the mother-in-law, and use the proceeds to buy gold are well known. However, in this guest contribution, Vitaliy Katsenelson offers arguments why one should think twice before jumping in bed with the gold bugs, or at least remain sober while determining gold's weight in the portfolio.
2009-09-08 Are REITs Now Undervalued? by Geoff Considine, Ph.D. (Article)
The last couple of years have been rough for real estate, but there was a time not too long ago when it seemed that this was a 'special' asset class, with REITs providing valuable diversification benefits and consistently high returns. Do today's low valuations represent an opportunity to buy? Can investors expect a return to low correlations for REITs with the major equity market indexes?
2009-09-08 Infrastructure Investing by Michael D. Underhill (Article)
With global markets improving, liquidity returning to the credit markets, and valuations improving, the infrastructure market looks promising. In this guest contribution, Michael Underhill argues that infrastructure assets,when chosen correctly, can diversify an investor's portfolio because of their low correlation with other asset groups, their consistent returns coupled with lowered levels of risk, and their potential for inflation-linked returns.
2009-09-01 Shiller P/E's and Predicting Returns by Joseph A. Tomlinson, FSA, CFP (Article)
It becomes clearer every day that the stock market does not follow a random walk and that there may be some predictability in long-term returns. But there's little agreement on how best to make such predictions. In this guest contribution, advisor Joe Tomlinson takes a look at using price/earnings ratios to predict future stock market performance.
2009-09-01 Additional Thoughts on the ?New Normal? by Geoff Considine, Ph.D. (Article)
A number of readers responded to Geoff Considine's article three weeks ago, What the New Normal Means for Asset Allocation, including Larry Katz, Director of Research at Merriman, whose response we published last week. Katz criticized Considine along a number of dimensions, and in this guest contribution Considine defends his New Normal asset allocation.
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.
2009-08-25 Should Investors Hold More Equities Near Retirement? by Ron Surz (Article)
A just-published paper argues that investors should hold more equities as they near retirement, contrary to conventional wisdom and to the glide paths employed by the target date fund industry. Ron Surz examines this research, and argues that the authors of the paper failed to properly consider the risks inherent in such a strategy.
2009-08-25 Letters to the Editor by Various (Article)
In our letters to the Editor, a reader responds to Dougal Williams' article last week, A Crash Course in Investing: Six Lessons from the Market Meltdown, and other readers respond to our article on Actively Managed TIPS and to an Advisor Market Commentary on healthcare policy.
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.
2009-08-18 Beam Me Up Scotty, Vulcans Have Taken Over Planet Finance by Mariko Gordon (Article)
You don't need to be a dyed-in-the-wool Trekkie "to boldly go where no man has gone before." In this guest contribution, Mariko Gordon explains how one of these characters - Mr. Spock - helps shine a light on the value of emotion in the never-ending quest for sound investment decision-making.
2009-08-11 What the New Normal Means for Asset Allocation by Geoff Considine, Ph.D. (Article)
Bill Gross of PIMCO forecasts a New Normal - slow economic growth, higher inflation, and increasing correlations among asset classes. If this view is correct, what should investors do? Geoff Considine examines the implications for asset allocation and financial planning by stress-testing some well-known asset allocations to see how well they will serve investors in the forecast environment.
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.
2009-08-04 Paul Krugman on the Prospects for Recovery by Eric Uhlfelder (Article)
Nobel laureate economist Paul Krugman tells Eric Uhlfelder that massive government spending is essential for generating growth, but fears the first stimulus package will not be enough to keep the economy from slipping back into recession nor reducing unemployment.
2009-08-04 Uncovering the Mayhem in 2008 in the TIPS Market by Robert Huebscher (Article)
In an interview two weeks ago, Yale Endowment manager David Swensen singled out TIPS as the best way to protect against inflationary and deflationary scenarios. We review a comprehensive study of the history of the inflation-indexed bond market, including an explanation for the extreme volatility in TIPS last year.
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.
2009-07-28 How Long is the Long Run? by Robert Huebscher (Article)
How long must one be invested in the equity markets to have full confidence that they will earn superior returns (as compared to bonds) and overcome the risks of bear markets? We look at the historical record to see how stocks have fared against bonds for various holding periods, and we look at research by Zvi Bodie and Mark Kritzman on this topic.
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.
2009-07-14 Beyond Grantham: Politics and Investment Strategy by Jerry Minton (Article)
Jeremy Grantham, the chairman of GMO, believes strongly in what he describes as market "inefficiencies" within the "Presidential Cycle." He is referring to the fact that stock market returns are not distributed randomly across the four-year presidential election cycle, but rather are strongly skewed to favor the pre-election year. Grantham believes - and guest contributor Jerry Minton agrees - the evidence is incontrovertible: the behavior of the political class over the election cycle effects the distribution of stock market returns.
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.
2009-07-07 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.
2009-07-07 Burton Malkiel Talks the Random Walk by Robert Huebscher (Article)
Passive investing has no more outspoken advocate than Burton Malkiel. At age 72, Malkiel remains every bit as committed to the efficient market hypothesis as when he wrote A Random Walk Down Wall Street in 1973. Malkiel, who has taught finance at Princeton for the last 20 years, was a featured speaker at the Forbes Advisor Conference last week. He insists that investors should buy and hold index funds and defended his position against a series of challenges put to him.
2009-07-07 Riding the Stock Market Wave in the First Half of 2009 by Ron Surz (Article)
Ron Surz provides his award-winning market commentary, reviewing the first half stock market performance around the world. He looks at the past decade, to set expectations accordingly. Have markets become cheap enough yet? He concludes with a realistic and sobering look at our current debt problems - a cause for concern for both young and old.
2009-07-07 Letters to the Editor by Various (Article)
We have two sets of letters to the Editor. The first has a response to a recent article about research by Rob Arnott on bond market returns, and a response to last week's article about unconventional thinking - and whether media such as CNBC provides these kinds of insights.
2009-06-30 In Search of Unconventional Thinking by Dan Richards (Article)
Astute investors search out insights that aren't reflected in stock prices. For this to work, though, you have to be prepared to differ from the pack and defy conventional thinking - once an idea enters the mainstream, it no longer gives you an edge. Dan Richards discusses some important positive ideas that unconventional thinking elicits from the news and analysis presented in traditional media.
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 The Road to Zimbabwe by Robert Huebscher (Article)
John Williams of Shadow Government Statistics is best known for exposing inaccuracies and biases in government reporting of data - most notably the understatement of the CPI index. Williams says the US economy is on the brink of hyperinflation which will render the dollar worthless, as happened recently to Zimbabwe's local currency.
2009-06-23 Letters to the Editor ? Moving Average: Holy Grail or Fairy Tale? by Various (Article)
Ted Wong's article last week, Moving Average: Holy Grail or Fairy Tale?, drew a large number of questions and comments from readers.
2009-06-16 Seth Klarman: Why Most Investment Managers Have It Backwards by Robert Huebscher (Article)
In his keynote speech last week to the Boston Security Analysts Society, Seth Klarman discussed how he repositioned his portfolio last fall to capture opportunities created in the wake of the financial crisis. Klarman is the lead editor of the sixth edition of Graham and Dodd's Securities Analysis, and his fund, The Baupost Group, is among the top performing hedge funds over its 27 year history.
2009-06-16 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.
2009-06-09 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 Bill Gross and the New Normal by Robert Huebscher (Article)
Nearly a half-century of global economic prosperity has ended, and investors must gird themselves for muted returns from the capital markets, according to Bill Gross, a Managing Director at PIMCO. Gross shared his outlook at the Morningstar Investor Conference.
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 Jeff Gundlach: The Party is Over by Robert Huebscher (Article)
The easy money has been made in the credit markets, as investors have reaped strong year-to-date returns, topped by 17% in emerging market debt and 30% in high yield bonds. Now the markets are in a much riskier position, said Jeff Gundlach, Chief Investment Officer of the TCW Group, in his quarterly update to investors that he titled "It was Great While it Lasted."
2009-06-09 Changes in the Most Popular Mutual Funds by Robert Huebscher (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 the most popular mutual funds.
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.
2009-06-02 John Bogle and the Lantern on the Stern by Robert Huebscher (Article)
In his remarks at the Morningstar conference last week, Vanguard founder and index fund pioneer John Bogle criticized many aspects of the mutual fund industry. Bogle, who turned 80 this year, is primed to fight his next battle - reducing investor reliance on past returns - which he likens to a lantern on the stern of a ship.
2009-05-26 Dan Fuss and the Eisenhower Recession Redux by Robert Huebscher (Article)
Those of us old enough to remember Studebakers and the military-industrial complex will recall the Eisenhower Recession, which began in 1957, lasted eight months and was followed by the 10 month "Rolling Adjustment" recession beginning in 1961. The W-shaped path of the US economy during this period is the correct analogy to today's crisis, according to Loomis Sayles and Company's Dan Fuss.
2009-05-26 TIPS ? When a Discount is Really a Premium by Robert Huebscher (Article)
We answer a question posed by a number of readers in response to our article last week, Opportunities and Risks in TIPS, and show that TIPS purchased at a discount offer superior performance relative to those purchased at a premium, given deflationary assumptions.
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.
2009-05-19 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.
2009-05-19 David Swensen's Ascent by Mebane Faber (Article)
Mebane Faber provides an excerpt from his new book, The Ivy Portfolio, on the ascent of David Swensen and the development of the tools employed to manage Yale's endowment. Faber shows the data Swensen used to determine Yale's aggressive allocation to alternative asset classes.
2009-05-05 Defending Against Inflation: A New Look across Asset Classes by Robert Huebscher (Article)
In the long-term performance race against inflation, stocks are the hands-down winner, outpacing inflation 9.7% to 3.0% since 1926. But that history is characterized predominantly by modest inflation, with one big exception - the 1970s, when double-digit inflation contributed to a bear market. We look at new research showing the effectiveness of different asset classes as inflation hedges, and Zvi Bodie explains the implications for retirement portfolios.
2009-05-05 Letter to the Editor ? A Safer Four Percent Withdrawal Rule by Various (Article)
Hawaii-based advisor John Robinson is the author of several articles on safe withdrawal rates, and he reviews our recent article, A Safer Four Percent Withdrawal Rule. We respond to Robinson's critique.
2009-04-28 Gary Shilling ? Economic Forecast and Current Market Opportunities by Robert Huebscher (Article)
Gary Shilling is well-known for his forecasting record, having correctly predicted major economic events over the past several decades. Beginning in 2002, he warned his clients that the housing market "has taken on self-feeding, bubble dimensions that will sooner or later collapse," and continued to sound this warning through 2007, when his predictions came true. Dr. Shilling shares with us his current forecast for the economy and the market.