More on Related Themes
2015-01-07 Recession Probability Models - January 2015 by Ted Kavadas of StratX, LLC
There are a variety of economic models that are supposed to predict the probabilities of recession. While I don?t agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.
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.
2015-01-05 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.
2015-01-05 Paul Krugman and the Obama Recovery by Jeffrey Sachs of Project Syndicate
The Nobel laureate economist is a great economic theorist and a great polemicist. But he should replace his polemical hat with his analytical one and reflect more deeply on recent experience: rather than throwing the US back into recession, deficit reduction has been accompanied by recovery, job creation, and lower unemployment.
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.
2014-12-27 Sungarden's 2015 Investor Preview by Robert Isbitts of Sungarden Investment Research
2014 is nearly behind us. And since we tend to not want to do things the way the Wall Street herd does, our 2015 outlook is formatted this way: we list a group of potential scenarios, and then assign our best guess probability that they will happen next year. This is about considering the possibilities, not making outright predictions.
2014-12-22 Come and Listen to a Story About a Man Named Jed by Ted Ake of Willingdon Wealth Management
For those that were around in the 1960s, the Beverly Hillbillies were a highlight of lowbrow humor. Lester Flatt and Earl Scruggs played the theme song that I still sing today. The story of a poor mountain family that strikes it rich when oil is found on their land, made millions of us laugh as they moved to a huge mansion in Beverly Hills.
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.
2014-12-03 Recession Probability Models - December 2014 by Ted Kavadas of StratX, LLC
There are a variety of economic models that are supposed to predict the probabilities of recession. While I dont agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.
2014-11-26 Weekly Economic Commentary by Team of Northern Trust
Someone observed recently that the holidays are starting late this year, as the time between Thanksgiving and Christmas is shorter than usual. You could have fooled me; judging by store displays and TV advertising, the commercial side of the season is already two months old.
2014-11-22 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
Mixed fortunes drive the outlook for holiday spending; The Fed and Bank of England are working harder to achieve consensus; The dollar has a long way to strengthen before it impairs U.S. growth
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.
2014-11-14 High-Yield Bonds & Oil Prices by Team of LPL Financial
The decline in oil prices and its impact on the high-yield market has been cited as a concern for investors. This week we stay on the topic of high-yield bonds and take a closer look at the potential impact of oil prices on the high-yield bond market and whether recent concerns are justified.
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.
2014-11-05 Recession Probability Models - November 2014 by Ted Kavadas of StratX, LLC
There are a variety of economic models that are supposed to predict the probabilities of recession. While I dont agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.
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.
2014-10-27 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 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.
2014-10-17 5 Things To Ponder: "Buy" or "Run" by Lance Roberts of STA Wealth Management
This past week investors to a blow from a sharp selloff in the financial markets. I have spilled quite a bit of ink in recent months discussing the probabilities of such as corrective event as the Federal Reserves current liquidity operation came to a conclusion this month.
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.
2014-10-09 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.
2014-10-08 Recession Probability Models - October 2014 by Ted Kavadas of StratX, LLC
There are a variety of economic models that are supposed to predict the probabilities of recession.
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.
2014-09-30 The Fed Trap by Stephen Roach of Project Syndicate
The US Federal Reserve is grappling with the disparity between its unconventional policy's success in preventing economic disaster and its failure to foster a robust recovery. Given that this disconnect has fueled financial-market excesses, the exit will be all the more problematic especially for the market-fixated Fed.
2014-09-30 Economic Atonement by Peter Schiff of Euro Pacific Capital
This Friday is Yom Kippur, the day when Jews around the world ask forgiveness for their transgressions from the year past. Rabbis remind the penitent to dwell on their sins of omission, in which they did nothing when a more thoughtful and proactive action was needed, and sins of commission, in which they actively participated in an unjust action. And while not all economists are Jewish, Gene Epstein the economics editor at Barron's, offered his thoughts on how this applies to the group.
2014-09-23 The Dots by Scott Brown of Raymond James
As was widely anticipated, Federal Reserve policymakers reduced the monthly pace of asset purchases by another $10 billion and kept the considerable time language. Fed policymakers revised slightly their forecasts of growth, unemployment, and inflation. However, the really interesting item in the Feds Summary of Economic Projections was the dot plot, the projections of the appropriate year-end level of the federal funds rate for each of the next few years. There is a huge range of uncertainty among Fed officials.
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.
2014-09-02 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.
2014-08-25 Consumer Spending & Economic Recoveries: What They Mean Going Forward by Matt Lloyd of Advisors Asset Management
As a follow-up to the discussion on the rollover of the duration of the unemployed, the byproduct of an accelerating improvement in the undercurrents of the job market is consumer spending. The measure of consumption has a primary correlation to wages and income workers receive. As such, the benign improvement in wages has an obvious correlation to the benign improvement in consumption. There is a strong secondary driver which we will discuss shortly.
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.
2014-08-20 Is a Big Equity Correction Imminent? Not Yet by Vadim Zlotnikov of AllianceBernstein
Many investors think US stocks are due for a correction: They feel that the market has run too far, that the Fed has been slow to act, that complacency has created pockets of excess. Do these gut feelings mean a major equity correction looms? Not yet, in our view.
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.
2014-07-19 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.
2014-07-11 Why The Fed Needs You To Sell Your Bonds by Gary Halbert of Halbert Wealth Management
Today I will attempt to explain why longer-term interest rates have fallen significantly this year when almost everyone expected rates to rise. This discussion focuses on the fact that there is a shortage of Treasury securities in the marketplace today, especially in maturities of 10 years or longer. The shortage is due to a combination of factors that I will discuss below
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 Volatility Takes a Sabbatical by Mark Oelschlager of Oak Associates
The theme of the second quarter was low volatility, as stocks continued to grind higher. As June ended, the S&P 500 had gone 51 consecutive trading sessions without moving 1% or more in either direction. Not since April 16 has the index moved at least 1% in a given day. This is a remarkable streak and quite a contrast with the volatility of recent years. Naturally, when something like this happens, the inclination is to try to figure out what it means for the market going forward.
2014-07-05 2014 Mid-Year Outlook Update: Living Actively Forecast Continues by Stephen Wood of Russell Investments
Does 2014 at mid-year remain a year of living actively for investors as outlined in Russells 2014 Annual Global Outlook issued last December? In that report, my colleagues on the global team of investment strategists agreed on the macro-view that 2014 would be better represented as a year of validation than a year of appreciation. And now, as we examine the underlying fundamentals in the macro- data at mid-year, I dont see a reason yet to alter our year of validation call.
2014-07-02 Gouging the Gauchos by Nouriel Roubini of Project Syndicate
Like individuals and private firms that rely on bankruptcy procedures to reduce an excessive debt burden, countries sometimes need orderly debt restructuring or reduction. But the ongoing legal saga of Argentinas fight with holdout creditors shows that the international system for orderly sovereign-debt restructuring may be broken.
2014-07-01 Where are Municipals Headed in the Second Half by Roberto Roffo of Advisors Asset Management
With such strong performance in the first half of 2014 and interest rates at such low levels already, one would think that the municipal bond market has run its course and cant possibly continue to produce positive returns.
2014-06-25 Mid-Year Muni Market Update by Rafael Costas of Franklin Templeton Investments
The municipal bond market faced a rather tough year in 2013, with news of troubles in Detroit, Puerto Rico and elsewhere scaring off some investors. This year hasnt exactly been smooth sailing for the muni market either, but the waters seem a bit calmer and many investors have returned to the sector. Rafael Costas, Co-Director, Municipal Bond Department, Franklin Templeton Fixed Income Group, could be called cautiously optimistic about the muni market. He provides an update on some key market developments, including progress in the aforementioned trouble spots.
2014-06-14 Whos Afraid of Low, Low Rates? by James T. Tierney, Jr. of AllianceBernstein
Falling yields on Treasuries are often seen as a signal of a weakening economy that could undermine stocks. We think there are other explanations that dont threaten the outlook for equities.
2014-05-29 China Sets America’s Mental Trap by Stephen Roach of Project Syndicate
It is often said that a crisis should never be wasted: Politicians, policymakers, and regulators should embrace the moment of deep distress and take on the heavy burden of structural repair. China seems to be doing that; America is not.
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 Old Turkey by Jeffrey Saut of Raymond James
I revisit the Old Turkey story this morning, which I first read in the classic book Reminiscences of a Stock Operator, about the escapades of Jesse the boy plunger Livermore, because of the reference I made to him last week that drew so many questions. The wisdom of Old Turkey is as good today as it was when first published in 1923. The problem with most investors today is that they have never experienced the 1923 1929, the 1946 1964, or the 1982 2000 secular bull markets.
2014-05-15 Microsoft: The Progression of a Maturing Business by Team of F.A.S.T. Graphs
Everyone is keenly aware of the $300+ billion dollar company that is Microsoft (MSFT). From the classic Windows and Office products to the latest Xbox and Skype, the business doesnt exactly need an introduction. In fact, its quite likely that you are using or near a Microsoft product now; we used a couple just to get this article to you. So instead of providing a generic opening, we thought it might be interesting to highlight the company with some numbers.
2014-05-13 The Bull Market Isn’t Over. It’s Changing. by Sponsored Content by OppenheimerFunds (Article)
Markets, especially in the developed world, have hit new highs. However, a rising economic tide will no longer lift all boats to the extent it once did. Find out why Chief Economist Jerry Webman believes the winners are likely to be organic revenue generators, efficiency vendors and innovators.
2014-05-09 You Gotta Have Heart by Jeffrey Saut of Raymond James
Secretariat (3-30-70 10-4-89) is considered the greatest American racehorse of all time. In 1973 he became the first Triple Crown winner in 25 years, and in the process he set records in all three races that still stand today. In the Kentucky Derby his time was 1:59 2/5, in the Preakness it was 1:53, and in the Belmont Stakes 2:24.
2014-05-06 The U.S. Economy Reached a Turning Point in April by Robert Doll of Nuveen Asset Management
U.S. equities finished higher last week with the S&P 500 advancing nearly 1.0%. Positive sentiment has been supported by growing traction for the economic recovery, key economic data and corporate commentary. Although the upbeat dynamics were mentioned in the latest FOMC statement, policy normalization expectations have not changed. Another widely discussed tailwind was M&A headlines. Although tensions continue in Ukraine, geopolitical risks were mostly on the back burner.
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.
2014-04-16 An Uncomfortable Discussion by Scott Brown of Raymond James
Income inequality is a touchy subject. It?s hard to have a polite conversation, but like it or not, we are going to have a discussion this year. I will not take a position here (this is largely a political question). Rather, I will try to illustrate what the data say and to present the different points of view.
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.
2014-04-10 The March Employment Report by Scott Brown of Raymond James
Last week began with a speech by Janet Yellen. The Fed Chair was not expected to say much of consequence, but instead, she continued to emphasize the large amount of slack in the labor market and the Fed?s strong commitment to reduce it. The clear implication is that short-term interest rates are not going up anytime soon. This message may have been meant to counter misconceptions taken away from her recent press conference.
2014-04-05 The Lions in the Grass, Revisited by John Mauldin of Millennium Wave Advisors
Today we explore a few things we can see and then try to foresee a few things that are not quite so obvious. The simple premise is that it is not the lions we can see lounging in plain view that are the most insidious threat, but rather that in trying to avoid those we may stumble upon lions hidden in the grass.
2014-04-03 And That's The Quarter That Was by Ron Brounes of Brounes & Associates
After a nightmare than was January, the quarter actually turned out pretty well (except in the Ukraine).
2014-03-28 Johnson Controls: Back To Consistency? by Team of F.A.S.T. Graphs
Johnson Controls (JCI) traces its roots back to an interesting bit of history. One hundred and thirty-one years ago, Warren Johnson was a professor in Whitewater, Wisconsin. It was here that he invented and installed the first electric tele-thermoscope ? known today as the thermostat ? in his classrooms. The invention served a dual purpose: it kept his students more comfortable and put an end to the hourly interruptions from the janitor checking the rooms? temperature. Of course we can?t confirm this, but it would be our guess that Professor Warren was a regular student favorite.
2014-03-26 Understanding Gold Cost of Carry in Various Currencies by Ade Odunsi of AdvisorShares
Under normal market conditions, the term structure for the price of gold for delivery at increasing maturities (the term structure) exhibits an upward sloping curve. In futures market terminology the term structure is said to be in contango and implies that the price of gold for spot delivery is lower than the price of gold for future delivery.
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.
2014-03-10 With Fed in Charge, 5-Year Bull Run Poised to Continue by Kristina Hooper of Allianz Global Investors
The Federal Reserve?s loose monetary policy and gradual improvement in the economy are two big reasons the stock market can keep moving higher, says Kristina Hooper. Will it be reflected in this week?s consumer sentiment and spending data?
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.
2014-03-04 A Century of Policy Mistakes by Niels Jensen of Absolute Return Partners
A century ago Argentina ranked as one of the wealthiest countries in world. Today it is a shadow of its former self. A long string of policy errors explain the long slide from riches to rags. Europe, like Argentina 100 years ago, is facing enormous challenges - as well as potential pitfalls - and the management of those challenges will define the welfare path for many years to come. Unfortunately, the early signs are not good. Our political leaders, afraid to face public condemnation, have so far chosen to ignore them.
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.
2014-02-18 The Questions to Ask about Unconstrained Bond Funds by Brian Koble (Article)
Unconstrained bond funds have sparked unbridled enthusiasm among investors, with more than $55 billion pouring into these funds in 2013. They are the second most popular type of mutual fund in America. Yet many of these funds are unproven. Investors should proceed cautiously with these funds.
2014-02-18 Market Outlook by Scotty George of Alexander Capital
The new thinking amongst market analysts is that one must respond to every news flash, every short-term nuance, any variable that creates a daily ripple in prices or attitude, or risk having your portfolio drift in obscurity and underperformance. The new "keeping up with the Jones" demands that we stay tuned to business news programming 24/7 to see if were conforming to expectations.
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.
2014-02-05 Emerging Market Turmoil Creates January Decline by Bob Doll of Nuveen Asset Management
U.S. equities finished lower last week, as the S&P 500 ended January with the first monthly loss since August 2013 and the largest monthly decline since May 2012. A global retreat from risk has been sparked by unrest around the world, sell-offs in emerging markets led by a 20% decline in the Argentine peso, weaker than expected economic reports from China, U.S. economic growth concerns in light of frigid temperatures and anxiety over Fed tapering.
2014-02-05 2014 Market Outlook by Kevin Mahn of Hennion & Walsh
Some Bumps along the Road of Global Recovery
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.
2014-01-28 How to Identify the Ideal Female Client by Kristan Wojnar (Article)
Advisors are overwhelmed with data demonstrating the opportunity of working with the female market. Most advisors understand the opportunity, but they lack the tools to use the data effectively.
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.
2014-01-27 America's False Dawn by Stephen Roach of Project Syndicate
Financial markets and the so-called Davos consensus are in broad agreement that something close to a classic cyclical revival in the US economy may finally be at hand. But, while the celebration may seem warranted at first glance, the champagne should be kept on ice.
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.
2014-01-21 Achieving Escape Velocity by Mohamed El-Erian of Project Syndicate
While the prospect of faster global GDP growth in 2014 is good news, it is too early to celebrate. Indeed, there is a risk that, by tempting policymakers into complacency, this years economic upturn could even end up being counterproductive.
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.
2014-01-13 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.
2014-01-02 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.
2013-12-26 A Strong Finish for 2013 by Bob Doll of Nuveen Asset Management
For our weekly subscribers, we wanted to take an opportunity to look back on the year. We began 2013 with an outlook for the prospect of improvement for the global economy and risk assets. We thought global policymakers unprecedented attempts to reflate global growth would show some signs of bearing fruit, especially in the United States and China. In our forecast, equity markets would continue to be choppy in light of the fiscal cliff issues, but an inevitable political compromise would reduce the economic drag.
2013-12-24 A Spoonful of Sugar by Peter Schiff of Euro Pacific Capital
The press has framed Ben Bernankes valedictory press conference last week in heroic terms. Its as if a veteran quarterback engineered a stunning come-from-behind drive in his final game, and graciously bowed out of the game with the ball sitting on the opponents one-yard line. In reality, Bernanke has merely completed a five-yard pass from his own end zone, and has left Janet Yellen to come off the bench down by three touchdowns, with no credible deep threats, and very little time left on the clock.
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.
2013-12-21 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?
2013-12-17 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.
2013-12-13 The Impact of the Great Recession and Federal Reserve Accommodation on Households by Matt Lloyd of Advisors Asset Management
The latest release of macro data came out today from the Fed Flow of Funds report generated by the Federal Reserve. We monitor this with great anticipation so as to measure possible direction changes or momentum of a current direction. There are a myriad of data points, however, a few select charts should continue to raise confidence in the direction of the economy and, at worst, a liquidity-driven backstop to maintain consumption at minimum agreeable levels.
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.
2013-12-04 An Agenda to Save the Euro by Joseph Stiglitz of Project Syndicate
It has been three years since the outbreak of the euro crisis, and only an inveterate optimist would say that the worst is definitely over. It is not, and it wont be unless and until the eurozones structure is fundamentally reformed.
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.’
2013-11-26 QE: Not That Big of a Deal by Brian Wesbury, Bob Stein of First Trust Advisors
The most frequent question we get lately is "what happens to long-term interest rates when quantitative easing ends?" Many analysts argue that the Federal Reserve is buying and holding a huge share of Treasury debt and once QE ends other buyers will suddenly have to absorb more. This will cause interest rates to soar, bust the housing market, undermine stocks, and possibly cause a recession.
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.
2013-11-20 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 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.
2013-11-12 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 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.
2013-11-05 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 Why Wealth Taxes Are Not Enough by Kenneth Rogoff of Project Syndicate
The IMF is right on grounds of both fairness and efficiency to raise the idea of temporary wealth taxes in many countries. But, as appealing as such taxes may seem at first sight, a closer look reveals that the revenues are lower, and the costs higher, than calculations used to promote them would imply.
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.
2013-10-22 Recession-Proof Your Marketing by Kristen Luke (Article)
The choices you make and actions you take today will influence how your business fares following the next market crash. Here are two marketing strategies you can implement now to prepare for the future.
2013-10-21 Fourth Quarter Investment Outlook by Bob Doll of Nuveen Asset Management
The macro theme of the fourth quarter and early 2014 is monetary reflation and global growth resynchronization. The Feds surprising decision to postpone tapering its QE program will likely encourage further risk-taking. In the meantime, we observe increasing signs of a synchronized improvement among the four important economies - the United States, Europe, Japan and China.
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.
2013-10-17 Politics Secondary to US Equity Fundamentals by Grant Bowers of Franklin Templeton
Its easy to get caught up in the tense drama surrounding the government shutdown and the debt ceiling squabble between Congressional Republicans and Democrats, but Grant Bowers, portfolio manager of Franklin Growth Opportunities Fund, maintains that looking beyond the political posturing and focusing instead on US corporate fundamentals is his preferred approach. Read on for more from Bowers on how he views the issues at hand, and why, even in the face of another political showdown in the Capitol, he thinks the US still presents a strong investment case.
2013-10-15 A Q3 client letter: Mike Tyson on Sticking to Your Plan by Dan Richards (Article)
Each quarter I post a template for a client letter, as a starting point for advisors who want to send clients an overview of the three months that just ended and the outlook for the period ahead.
2013-10-14 House Republicans Determined to Burn Country to the Ground (In Order to Save It!) by David Edwards of Heron Financial Group
Whenever our financial markets commentary strays into the realm of politics, were guaranteed to offend at least half of our clients and readers. So let us state up front that our job is NOT to choose sides but to evaluate how politics will affect the US economy and by extension corporate earnings, which are the bedrock of stock market performance. By that measure, the current tactics of House Republicans to shutdown the non-essential parts of the federal government and block raising the debt ceiling is an unmitigated disaster. Businesses crave predictability and reliabi
2013-10-12 A Special Note on Potential Government Debt Default by Richard Bernstein of Richard Bernstein Advisors
We find it incredible that the government is, once again, on the verge of a default on US debt. Although we doubt that the US will actually default, it is unfathomable that elected officials would even consider such an event. Worse yet, some officials apparently believe that a default might benefit the US.
2013-10-12 Sometimes They Ring a Bell by John Mauldin of Millennium Wave Advisors
Three items have come across my screen in the past month that, taken together, truly do signal a major turning point in how energy is discovered, transported, and transformed. And while we’ll start with a story that most of us are somewhat aware of, there is an even larger transformation happening that I think argues against the negative research that has come out in the last few years about the reduced potential for growth in the world economy.
2013-10-07 When Economic Data is Worse Than Useless by John Hussman of Hussman Funds
Investors and analysts fall over themselves daily to analyze and interpret the latest data from regional Fed surveys (e.g. Philly Fed, Empire Manufacturing), purchasing managers indices (e.g. national manufacturing, national services, regional PMIs), and other economic measures (e.g. new unemployment claims, average weekly hours). The problem is that virtually all of these measures have become not only uncorrelated with subsequent economic outcomes, but negatively correlated with subsequent outcomes.
2013-10-04 Are Investors Paying More Attention to Quality Small-Caps? by Francis Gannon of The Royce Funds
Although it covers only a brief time period, recent research by Furey Research Partners showed that since the beginning of May 2013 through September 30 the lowest leveraged companies outperformed the highest leveraged companies within the Russell 2000to us a long-anticipated reversal and an encouraging signal that suggests investors have not abandoned quality despite an environment of easy money and near-zero interest rates.
2013-10-04 How Markets May Deal with D.C. Dysfunction by Milton Ezrati of Lord Abbett
A brief government shutdown would likely have only a modest impact on markets and the economy, and may even create buying opportunities in risk assets. A longer-term stalemate could be a far different story.
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.
2013-09-30 The Eurozone's Calm Before the Storm by Nouriel Roubini of Project Syndicate
A little more than a year ago, in the summer of 2012, the eurozone, faced with growing fears of a Greek exit and unsustainably high borrowing costs for Italy and Spain, appeared to be on the brink of collapse. Today, that risk has diminished significantly but the factors that fueled it remain largely unaddressed.
2013-09-27 Illinois and California: Similar Challenges, Different Approaches by Joseph Rosenblum, Neene Jenkins, John Ceffalio of AllianceBernstein
Every state faces challenges when it comes to balancing the books, but not every state is equally effective at tackling them. The responses of California and Illinois to post-2008 difficulties show how different the approaches can beand how much is at stake.
2013-09-21 Rich City, Poor City by John Mauldin of Millennium Wave Advisors
This week we will conclude our look at pension plans for the nonce with a 30,000-foot overview of the states and then take a deeper dive into one city: mine. This will give you at least one version of how to do your own homework about your own hometown. But fair warning, depending on your locale, you may need medical help or significant quantities of an adult beverage after you finish your research.
2013-09-20 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.
2013-09-20 Companies Can Do More to Unlock Shareholder Value by Kurt Feuerman of AllianceBernstein
As the global recession and financial crisis move further back in the rearview mirror, companies have been more proactive about using their balance sheets in ways that enhance shareholder value. But we think they can do a lot more.
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.
2013-09-07 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.
2013-09-04 How Strong is the Job Market? by Scott Brown of Raymond James
A year ago, as the Fed was about to embark on its third large-scale asset purchase program (QE3), the policy focus shifted to the labor market. In announcing QE3, the Federal Open Market Committee indicated that purchases would continue if the outlook for the labor market does not improve substantially. A year later, how much improvement have we seen?
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.
2013-08-27 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 Part-Timers and the Labor Market by Brian Wesbury, Bob Stein of First Trust Advisors
Over the past few weeks we keep getting the same two questions about the labor market. Basically, investors want to know whether the labor market is really improving if so many of the jobs are going to part-timers and if the more expansive definition of the unemployment rate (the one that includes discouraged workers and part-timers who want to work full-time) is about double the regular unemployment rate.
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.
2013-08-17 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 Europe's Queasy Status Quo by Milton Ezrati of Lord Abbett
The eurozones weaker members continue to falter, but the currency union will likely hang together. Make no mistake, though: Europe remains at the edge of crisis.
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
2013-07-27 A Lost Generation by John Mauldin of Millennium Wave Advisors
This week we will briefly look at why weak consumer spending is going to become an even greater problem in the coming years, and we will continue to look at some disturbing trends in employment.
2013-07-26 Investors Now a Concern by John Burns of John Burns Real Estate Consulting
During the downturn and early stages of recovery, we were huge proponents of investors taking advantage of overcorrected home prices to make great investments while also helping the housing market recover. Mission accomplished.
2013-07-26 Wedding Bells in Romania by Mark Mobius of Franklin Templeton Investments
I was invited to attend the wedding of one of our Romanian staff in June, and I jumped at the opportunity to celebrate with the happy couple, visit a different part of Romania, and talk to locals about life there. The celebration represented a microcosm of the juxtaposition of old and new in Romania, and this is similar for investors there as progress continues toward market reform.
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.
2013-07-19 Are Blue-Chip Consumer Staples Worth Today's Premium Valuations? by Chuck Carnevale of F.A.S.T. Graphs
The Consumer Staples sector consists of companies that provide essential products. In other words, Consumer Staples are products that people cannot or are unwilling to do without. As a result of the essential nature of Consumer Staples, there are several attributes that distinguish this sector from most others. First of all, the essential nature of the products that Consumer Staples companies produce, are for the most part, non-cyclical. Second, Consumer Staples tend to be very insensitive to economic cycles.
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.
2013-07-16 Arc of a Diver: The Budget Deficit's Plunge by Liz Ann Sonders of Charles Schwab
The budget deficit has been cut by more than halffrom over 10% of GDP to less than 5% today. June saw a budget surplus! The health of the private sector (given its deleveraging since 2007) more than offsets the drag from public sector deleveraging.
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.
2013-07-10 3 Risks that Could Derail the Market Rally by Russ Koesterich of iShares Blog
Stocks can withstand moderate rate increases, as we saw last Friday when they rallied despite a sell-off in bonds. But Russ K warns that they may not withstand these three other scenarios.
2013-07-03 Taper Tantrum Grips Muni Market by Rafael Costas of Franklin Templeton Investments
The markets have been in fits since mid-May, when Federal Ben Bernanke planted the seed that the central banks prolonged asset buying program would start winding down. Many investors were gripped with irrational panic, a so-called taper tantrum that roiled equity and fixed income markets. Rafael Costas, senior vice president and co-director of our municipal bond department, believes the early summer swoon sweeping the muni markets is unfounded and should be temporary, but the core reason for investing in the sector remains solid: long-term tax-free income potential.
2013-06-21 Un-Addiction by Jeremy Boynton of Laureate Wealth Management
It appears that the Un-Addiction process has begun. This marks a significant shift for the world of investments. Volatility is on the rise. Interest rates are rising / normalizing. In such a fragile economy, it seems prudent to consider that the risks of economic recession are somewhat higher, even if they are still not the base case. As always, please feel free to contact me with any thoughts or questions.
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 Letters to the Editor by Various (Article)
A number of readers responded to Adam Kanzer’s article, Exposing False Claims about Socially Responsible Investing, which appeared last week. Kanzer’s article was in response to Adam Apt’s article, Measuring the Cost of Socially Responsible Investing, which appeared the week before. Several readers responded to other articles as well.
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.
2013-06-06 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 An Advisor’s Perspective on Prophets and Profits by Gary Moore (Article)
More than 30 years on Wall Street have proven to me that many advisors could do more business ? and do more good for our clients, profession and the world ? if we considered the moral views of investors, whether we agree with those views or not.
2013-06-04 Stocks: How Long Will the Bull Run? by Milton Ezrati of Lord Abbett
Conditions appear favorable for the next 12 to 24 months. What could change the markets prospects in the longer term? Heres a look.
2013-06-03 Following the Fed to 50% Flops by John Hussman of Hussman Funds
One of the most strongly held beliefs of investors here is the notion that it is inappropriate to Fight the Fed reflecting the view that Federal Reserve easing is sufficient to keep stocks not only elevated, but rising. Whats baffling about this is that the last two 50% market declines both the 2001-2002 plunge and the 2008-2009 plunge occurred in environments of aggressive, persistent Federal Reserve easing.
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 This Is What Real Bubbles Look Like by Chuck Carnevale of F.A.S.T. Graphs
With the stock market currently doing so well, numerous articles are popping up playing the bubble card. Personally, I dont believe we are anywhere near bubble levels for equities, at least in the general sense. I do think there are certain stocks that are currently overvalued, but very few that I would describe as dangerously so. To me, the true definition of a bubble is when prices have become so ludicrously high, that the dangers of a catastrophic loss large enough to be considered almost permanent become imminent or at least quite obvious.
2013-05-30 Has the Fat Lady Started to Sing on the Housing Market? by Martin Pring of Pring Turner Capital Group
As decision makers we are continually looking for clues from economic activity in order to adjust portfolios. The beauty of following business cycle sequences is the value from anticipating financial market leadership changes. A major beneficiary of this four year old business recovery has been housing and housing related stocks.
2013-05-28 Economic Climate Change & the Long-Term View on Yields by Sponsored Content from Loomis Sayles (Article)
Will rates rise? It’s a logical question. US Treasury yields have been in a secular downward trend since the 1980s and almost frozen at historic lows for the last several months. While recent cyclical improvements suggest the US economy is heating up, we do not expect interest rates to start soaring to record highs. The interest rate environment will eventually undergo climate change, but the process will be gradual. There are secular headwinds cooling rates, and we expect them to persist for years to come.
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.
2013-05-15 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 Mohamed El-Erian: The Three-Speed Global Economy by Robert Huebscher (Article)
The global economy is operating at three distinct speeds, according to Mohamed El-Erian, and investors need to understand the implications of the divergent paths that key countries are following. Japan and most European countries are going backward, he said, and could continue in that direction for decades. The U.S. is “healing,” but not quickly enough to get to “escape velocity.” Certain emerging markets, meanwhile, are adapting technology and innovation and are growing rapidly.
2013-05-14 The Budget Deficit by Scott Brown of Raymond James
The Monthly Treasury Statement showed a large budget surplus for April. Some of that may prove to be temporary. Income was pulled forward into 2012 ahead of expected tax increases in 2013 and that was reflected in higher tax payments in April. Some of it is payback from the bailouts of a few years ago (for example, earnings from Fannie Mae and Freddie Mac). However, much of the improvement reflects a rebound from a severe recession. Tax revenues are recovering and recession-related expenses are trending lower.
2013-05-10 Earnings: Why Capex Will Be the New Driver of Business Growth by Ron Sloan of Invesco
This is the second in a three-part series on the economy, earnings and equities. The first post examined the US Federal Reserves gross domestic product (GDP) goals. Here, we discuss how those GDP goals set the stage for businesses to increase their capital expenditures.
2013-05-06 Beyond the Headlines: Job Growth, Exports and Housing by Gregg Bienstock of Lumesis
Congress has done something for the American public. FAA, sequester, flight delays we can fix that! While I would usually take a cynical swipe at Congress (something like, did they act because they, too, were impacted by their own stubbornness), Ill let well enough alone and simply pass on a heartfelt thanks. Perhaps this is the start of something. I hear they are working closely on immigration reform and an exemption for Congress and their staff from the Affordable Care Act (aka Obamacare). Ok, so two of three initiatives garnering bi-partisan support are purely self-ser
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 U.S. Economy A Gain in GDP? by Marie Schofield of Columbia Management
The advance estimate of gross domestic product (GDP) released by the Bureau of Economic Analysis last Friday showed that the U.S. economy grew at an annualized rate of 2.5% in the first quarter, below expectations of an increase of 3.0%. Despite the decent first quarter advance, year-over-year gains in nominal and real GDP are largely unchanged from the prior quarter at 3.4% and 1.8%, respectively. While growth rates at this slow pace in these measures have typically heralded recessions, they appear stable but also underscore a critical problemthe failure to generate escape velocity.
2013-04-25 Murkier Prospects for Merkel by Milton Ezrati of Lord Abbett
An anxious German electorate may make it harder for the chancellor to continue her pro-cooperation approach to Europes fiscal crisis.
2013-04-25 The End of “Expansionary Austerity?” by Scott Brown of Raymond James
A few years ago, an economic paper by Harvard professors Carmen Reinhart and Kenneth Rogoff helped fuel the push for austerity. It was met with some criticism from economists, but was widely embraced by the press and by politicians on both sides of the Atlantic. The study has now been demonstrated to have had serious flaws, but will those in power fold? Or will they double down on bad economic policy?
2013-04-22 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
The deadly bombings in Boston last week, along with a spate of senseless killings in Newtown and Aurora, should highlight for those consumed by economics and financial market statistics the fragility of life and a sense of perspective about helping those in need at their darkest hour. How noble that on the day of the U.S. equity markets most damaging point collapse in years, our focus was on Boston and not on our wallets or portfolios.
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.
2013-04-20 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.
2013-04-17 U.S. GDP: After Some First-Quarter Flurry, a Slowdown? by Ken Taubes of Pioneer Investments
We had a little flush of activity in the first quarter, which we believe will lead to much better GDP potentially well over 3% than people anticipated in the beginning of the year. We look at this activity as a little bit of a catch-up, for a couple of reasons.
2013-04-15 Housing Is it Getting Better, A Second Look by Gregg Bienstock of Lumesis
This week we take a quick look at some of what is in the Presidents budget and then focus on the housing market (the title harkens back to something we wrote a few months back). You may sense, as you read on, Im a bit cranky this week. As you read through the housing section youll understand why.
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.
2013-04-02 Bernanke’s Motives Behind Quantitative Easing by Paul Franchi (Article)
We are at a turning point: away from one global monetary standard, to a yet-to-be-determined new form.
2013-04-02 A Q1 Letter to Clients: Why Warren Buffett is Bullish on Stocks by Dan Richards (Article)
Since 2008, I have posted templates to serve as a starting point for advisors looking to send clients an overview of the year that just ended and the outlook for the period ahead. This quarter’s letter draws on Warren Buffett’s most recent letter to shareholders, and why he is bullish on the US equity market.
2013-04-01 The Global Economy on the Fly by Nouriel Roubini of Project Syndicate
In a fragile global environment, has America become a beacon of hope? While the US is experiencing several positive economic trends, Europe continues to stagnate, and China will be vulnerable to a hard landing in 2014 unless its new leaders accelerate the pace of reform.
2013-03-19 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks had a very quiet week with volumes reaching levels that one associates with holiday trading.
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 Freewheeling? by Dimitri Balatsos of Tesseract Partners
Ignoring threatening clouds in the distant horizon, the financial markets are wrapped in a blanket of complacency. Consider the following. The Dow Jones Index has been flirting with the 2007 record peak. Implied stock market volatility, as measured by the VIX Index, is in the basement. Junk bond yields are at record lows, compressing spreads to within shouting distance of risk-free Treasuries. Securitization is back from the dead, while the drought in M&A activity is now getting plenty of rainfall.
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.
2013-03-05 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.
2013-02-27 "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 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.
2013-02-21 Cracks Appear in the French Economic Model by Darren Williams of AllianceBernstein
Today's PMI data point to a deepening recession in France at a time when Germany is showing tentative signs of life. Is the euro crisis exposing the weaknesses of the French economic model?
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?
2013-02-20 Two New Country Views for a Two-Speed Global Economy by Russ Koesterich of iShares Blog
The global economy is stuck in a two-speed regime: Developed markets like Europe, Japan and the United States are stalling, while China is re-accelerating. Russ explains what this divergent growth landscape means for his country outlooks.
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 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.
2013-02-12 The Budget Outlook Why the Hysteria? by Scott Brown of Raymond James
President Obama will deliver his fifth State of the Union Address on Tuesday evening. These speeches tend not to be of much significance for the financial markets, although the topics discussed may be important for certain industries (healthcare, energy, defense). Obama is expected to repeat his request that the sequester, due March 1, be postponed to next year. Doing so would not result in less deficit reduction. Such a move would have to be "paid for" through an increase in tax revenues and cuts in other forms of spending. However, it would limit the economic damage that would follow.
2013-02-11 Stocks: Why "Risk On" Rules by Milton Ezrati of Lord Abbett
Investors appear to believe the equity market will muddle through its many challenges.
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".
2013-02-05 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.
2013-01-31 Signs of a Solid 2013 for Stocks by Milton Ezrati of Lord Abbett
Yield spreads versus bonds indicate that stock valuations have considerable upside.
2013-01-30 EU Financial Tax Portends Loss of Market Leadership by John Browne of Euro Pacific Capital
Although it was barely noticed by the American press, on January 22nd, EU finance ministers approved a new "Financial Transactions Tax" (FTT) that has implications for market competitiveness around the world.
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.
2013-01-22 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 And That's The Week That Was by Ron Brounes of Brounes & Associates
Tragedy in Algeria brought another reminder about just how dangerous the world can be. Oil prices rose on the enhanced turmoil in the region as well as on news that supplies unexpectedly dropped in the recent gov report. Financials led earnings season in a mostly positive way, though several releases included reminders about the financial crisis and the greed factor of certain professionals. The favorable economic data was well received as S&P 500 index again hit a five-year high though even the optimists remain cautious as the budget negotiations yield little positive results.
2013-01-22 Equities Set to Break Out of the Bear Trap by Catherine Wood of AllianceBernstein
In the face of significant uncertainties, US and global equities rallied in 2012 and at the start of the New Year. We think there might be more to come as stocks break out of the bear trap.
2013-01-18 Is the Euro "Dangerously High"? by Darren Williams of AllianceBernstein
Jean-Claude Juncker's view that the euro is "dangerously high" isn't shared by the European Central Bank (ECB). As long as this is the case, the single currency may continue to defy fundamentals and act as an unwelcome headwind for an economy still struggling to break out of recession.
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 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 Charting the U.S. Employment Situation by Matt Lloyd of Advisors Asset Management
The continuing jobless claims relative to past measurements has been a chart we like to detail to show the more psychological impact of where we stand and the sentiment about the employment situation. As we have shown, the current level is just below the high points of past recessions (recessions denoted by gray rectangles). Although we are approaching the long-term average, currently 6.7% above the 30-year average, the negative sentiment is understandable.
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.
2013-01-07 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The stock market has started the New Year in fine shape, relieved that President Obama's threat to raise taxes to the moon on capital gains and dividends were thwarted with the deal agreed to on New Year's Day.
2013-01-03 The Political Economy of 2013 by Mohamed El-Erian of Project Syndicate
Watching America's national leaders scramble in the closing days of 2012 to avoid a "fiscal cliff" that would plunge the economy into recession was yet another illustration of an inconvenient truth: messy politics remains a major driver of global economic developments. This will become even more evident worldwide in 2013.
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 Jeremy Siegel on 'Dow 15,000' by Robert Huebscher (Article)
Jeremy Siegel was one of very few individuals to have correctly predicted the strong performance of the equity markets over the last year. The Wharton professor and author of the renowned book, Stocks for the Long Run, forecasts continued strong performance for the year ahead.
2012-12-18 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.
2012-12-04 The Big Picture by David Rosenberg (Article)
Our crystal ball says to stick with what works in an uncertain financial and economic climate - in other words, maintain a defensive and income-oriented investment strategy.
2012-11-27 A Critique of Grantham and Gordon: The Prospects for Long-term Growth by Laurence B. Siegel (Article)
The vigorous global economic growth of the last two centuries is over, according to Jeremy Grantham and Robert Gordon. That prediction, if correct, has profound and worrisome implications for investors. And the short-term trend is indeed disquieting: Growth has been close to zero over the last decade in advanced countries. But the most likely outcome is that per capita GDP growth going forward will approximate its U.S. historical average of 1.8%, and it will grow faster in developing markets.
2012-11-27 Over the Cliff: Alan Simpson and Erskine Bowles on the Looming Deficit Crises by Michael Skocpol (Article)
As President Obama and Congressional leaders hurtle Thelma-and-Louise-style toward a budgetary precipice, another deficit-tackling duo hit the road earlier this month to deliver a simple message: This all could have been avoided.
2012-11-20 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 President Obama?s Re-Election and the Impact on the U.S. Economy by Eaton Vance Distributors, Inc. (Article)
President Obama?s re-election resolves a major element of uncertainty that has hung over the political landscape. But what kind of impact will his victory have on the economy and the markets, especially with the House still in Republican control? We posed that question to a roundtable of five investment professionals from Eaton Vance Management, Hexavest and Richard Bernstein Advisors.
2012-11-13 David Rosenberg on Obama's Victory by David Rosenberg (Article)
The election is behind us. The Fed has spent its last bullet. We are at an inflection point of the earnings and sales cycle. The fiscal cliff, the Chinese political transition and the spread of the euro zone recession to the north lie ahead.
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 Bank Loans: Looking Beyond Interest Rate Expectations by John Bell and Kevin Perry (Article)
Portfolio managers of Bank Loan Strategies, John Bell and Kevin Perry, outline the major advantages and risks of bank loan investing and the roles that a bank loan allocation can play in a fixed income portfolio.
2012-11-06 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.
2012-11-06 David Rosenberg on Hurricane Sandy: Missing the Boat by David Rosenberg (Article)
As I read and digest reports estimating the damage from the devastating storm, I sense that there are far too many economists who are relying too heavily on past major hurricanes as they draw their conclusions from the current experience with Sandy.
2012-10-16 Stiglitz vs. Bremmer: What?s Next for the Global Economy? by Ben Huebscher (Article)
On October 3rd, the same night Barack Obama and Mitt Romney were clashing in their first debate, two equally polarized men met in New York City's Kaufmann Concert Hall to discuss the future of economics, both here and abroad.
2012-10-16 The New World of Credit by Michael Lewitt, Editor, The Credit Strategist (Article)
In an era in which economies are driven by the creation of fiat money by central banks, and where the base of hard money is dwarfed by the volume of outstanding debt, every form of capital is tied to credit. In 1919, William Butler Yeats famously wrote that 'the center cannot hold.' A century later, there is no center.
2012-10-02 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.
2012-09-25 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 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?
2012-09-11 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!
2012-08-14 An Imperfect Storm by Janus (Article)
Changing regulations have drained liquidity from the corporate bond markets, as growth in bond ETFs is distorting a shrinking market. These converging forces are likely to result in a more volatile environment, but we see opportunity for managers able to understand the fundamental risk and reward.
2012-08-14 Blind Faith by Michael Lewitt (Article)
Central banks are facing political and practical obstacles that will render it very difficult for them to deliver anything more than anodyne words and actions as summer moves into the always dangerous August holiday season. IPhones should be kept on alert at the beach through Labor Day.
2012-07-31 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.
2012-07-31 Beyond the Ultimate Death Cross by Georg Vrba, P.E. (Article)
Last week, I showed why the 'ultimate death cross' is not a bearish signal. But the methodology behind that signal - what's known as a 'golden-cross trigger' - can indeed offer a reliable guide to investors. And one can do even better with a simple improvement to the trigger that I have devised.
2012-07-31 Letter to the Editor by Various (Article)
A reader responds to Bob Veres' article, Why Are Advisory Fees Lower Than They Have To Be?, which was published on July 10.
2012-07-24 The Ultimate Death Cross - False Harbinger of Doom by Georg Vrba, P.E. (Article)
Skeptics and devotees of technical analysis took notice last week when Albert Edwards, the closely followed investment strategist at Societe Generale, warned the S&P 500 was 'on the verge of an ultimate death cross,' foretelling imminent major losses for the stock market. Edwards' sense of doom is misguided. An ultimate death cross is mathematically impossible unless the S&P were to suffer an immediate and precipitous decline. Moreover, the signal would provide a positive outlook, if it were to occur.
2012-07-17 Breaking Bad by Michael Lewitt (Article)
With our largest business and government institutions committing every conceivable act of legal or moral anomie, we have every right to ask who is going to protect the rest of us from those who have been entrusted with so much power and influence. The institutions that were supposed to be the lifeblood of our economy are the same institutions that inflicted the greatest harm on society. When the family has to be protected from the man who is supposed to protect the family, the family is in serious trouble.
2012-07-10 Recession is Not Imminent by Dwaine van Vuuren (Article)
Perma-bears are bombarding us with alarm bells, sounding the doom of the US economy. We find ourselves in yet another 'summer slowdown scare,' for the third year running. In 2010 and 2011, the purported slowdowns turned out to be soft landings. Investors who ran to the sidelines stared in disbelief as the stock market roared ahead, leaving them behind. We are likely in the same position now.
2012-07-03 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.
2012-07-03 Letter to the Editor by Various (Article)
A reader responds to John Hussman's commentary, Enter, the Blindside Recession, which appeared on June 25.
2012-06-26 A Top Analyst: North America Heading to Energy Independence by Robert Huebscher (Article)
Ed Morse, a managing director of Citigroup Global Markets, said last week that by the end of this decade the US and Canada will have a surplus of oil, leaving it with 'no room for imports.' But the longer-term picture is far less certain, as extraction moves from conventional wells to newer sources, such as deepwater fields and shale-based oil.
2012-06-19 Likelihood Ratios and their use in Recession Indicators by Georg Vrba, P.E. (Article)
In medicine, likelihood ratios improve patient outcomes and refine drug regimens by assessing the reliability of common diagnostic tests. In finance, likelihood ratios can quantify the reliability of an economic indicator such as one designed to identify recessions.
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.
2012-06-12 Letters to the Editor by Various (Article)
A number of readers respond to our article, Can Krugman Fix Our Economy?, which appeared on May 29.
2012-06-05 The Father of Efficient Markets: Is Warren Buffett Smart or Lucky? by Dan Richards (Article)
Eugene Fama is generally regarded the father of modern finance. His research has expanded upon the capital asset pricing model to identify the value and small-capitalization contributions to risk. Dan Richards spoke with him on May 1, the day before his guest talk at the CFA Institute annual meeting. This is the transcript of the interview.
2012-05-29 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.
2012-05-29 The Bargains in Europe's Great Oversell by Bob Veres (Article)
When was the last time we saw negative headlines drive valuations as low as they have in Europe? Evermore's David Marcus, who succeeded Michael Price as manager of the Mutual European Fund, says this period of obsession with Greek debt, bank restructuring and single-digit P/Es may be known as The Great Oversell.
2012-05-22 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.
2012-05-15 An Attack on Paul Krugman by Michael Edesess (Article)
A foundational principle of modern economics is that the creation of credit leads to economic growth. That precept underlies need for quantitative easing, and it is central to the question of what role monetary policy can and should play in stimulating a faster recovery from the Great Recession. It is also the subject of a debate between one of the world's most prominent economic scholars, Paul Krugman, and a feisty Australian economist, Steve Keen.
2012-05-15 Dividends: A Timeless Component of Equity Return by Loomis Sayles & Company, L.P. (Article)
With interest rates at historic lows and many dividend-paying stocks boasting yields comparable to or higher than US Treasurys, it is no wonder that dividends have recently been at the forefront of many investors' minds. But dividends have a long history as a significant component of total return, and today's buzz is just the most recent chapter.
2012-05-15 Ponzi's Children by Michael Lewitt (Article)
Europe, whose economic condition is nothing less than terminal, is about to receive what physicians refer to as a 'zetz' of morphine in the form of M. Hollande. A 'zetz' is the final dose that doctors give to dying patients to hasten their passage to the afterlife. In Europe's case, however, the medicine is not going to be painless, and its administration is not based on mercy but on resentment and stupidity.
2012-05-08 Q2 Outlook: "Sell in May" May Not Work This Year by OppenheimerFunds (Article)
Chief Economist Jerry Webman explains why he believes the U.S. economic recovery is real and CIO Art Steinmetz talks about how stocks are as cheap compared to bonds as they have been in decades.
2012-05-08 Mohamed El-Erian and David McWilliams: The Key to Resolving Europe's Crisis by Robert Huebscher (Article)
Dealing with a crisis requires three things, according to Jack Welch, General Electric's former CEO. Define your reality - not as you would like it to be, but as it is. Do something about it. Then, third, acknowledge that the crisis wasn't half as difficult as you thought it was. Germany is the key player in Europe's crisis today, and it is still struggling to accurately define its reality.
2012-05-01 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 Q2 Outlook: by OppenheimerFunds (Article)
Chief Economist Jerry Webman explains why he believes the U.S. economic recovery is real and CIO Art Steinmetz talks about how stocks are as cheap compared to bonds as they have been in decades.
2012-04-24 Bruce Greenwald on Structural Imbalances in the Economy by Eric Uhlfelder (Article)
Bruce Greenwald likes to say that he is constituted to disagree with everybody about everything, and he was true to his word at the recent Hyman P. Minksy Conference in New York. Taking immediate exception with the virtually unanimous characterization of the economic crisis as a balance-sheet recession, Greenwald, a professor of finance at Columbia University, argued that, far from being unusual, balance-sheet recessions can in fact be found at the heart of almost all business cycles.
2012-04-17 The Unemployment Rate: A Coincident Recession Indicator by Georg Vrba, P.E. and Dwaine van Vuuren (Article)
For what is considered to be a lagging indicator of the economy, the unemployment rate provides surprisingly good signals for the beginnings and ends of recessions. We have developed a model that uses unemployment figures to produce these signals and to determine the probability of when a recession may start.
2012-04-10 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.
2012-04-03 A Q1 Letter to Clients: Bernanke, Buffett and Siegel on the Prospects Ahead by Dan Richards (Article)
Here is a template for a letter to serve as a starting point for advisors looking to send clients a summary of what's happened in the past 90 days and the outlook for the period ahead.
2012-04-03 The Easy Money Saloon by Michael Lewitt (Article)
When two of the world's soundest central banks (Israel and Switzerland) start investing their reserves in stocks (the Bank of Israel is run by the highly respected Stanley Fischer for God's sake!), one has to wonder what the world is coming to. Apparently the global saloon is expanding its boundaries. No doubt we will soon hear the ECB is merging with the London Stock Exchange.
2012-03-20 A Look Back at the Performance of the Holy Grail by Theodore Wong (Article)
Back-tested results often look good on paper because stellar performance could have come from curve-fitting. If that were the case, then my 'Holy Grail' model would not have withstood the test of time. But in the 32 months that have passed since its publication, investors who heeded its advice would have outperformed the market on a risk-adjusted basis.
2012-03-13 Europe's ?Back-door QE?: Good News for Global Bond Investors by OppenheimerFunds, Inc. (Article)
By restoring confidence in the global financial system, the European Central Bank's Long Term Refinancing Operation has allowed global bond investors to participate in attractive opportunities around the world.
2012-03-13 The Gutenberg Economy by Michael Lewitt (Article)
As commentators near and far speculate on what 2012 will bring to the global economy and markets, there is little question that one factor will be decisive: the central banks' printing presses. Both the Federal Reserve and the European Central Bank (ECB) will keep printing dollars and euros around the clock until their presses run out of ink.
2012-02-21 David Rosenberg: "Searching for Certainty in a Sea of Uncertainty" by Katie Southwick (Article)
David Rosenberg is known for his bearish outlook, and he has not yet seen anything in recent economic news that persuades him to change his tune. Contrary to prevailing "bullish complacency" and the widespread belief that central banking systems "have the answers to the ongoing global debt deleveraging cycle," in the United States Rosenberg sees monumental deficits, flat growth, an underlying trend of deflation, and current fiscal policies that will limit future flexibility. In other words, trouble remains on the horizon.
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.
2012-02-21 Evaluating Popular Recession Indicators by Georg Vrba, P.E. (Article)
Recessions are notoriously difficult to forecast. That, of course, hasn't stopped many high-profile analysts from predicting recessions in 2010 and 2011 - incorrectly, at least thus far. Given the wealth of often contradictory economic data that exists today on which to base such forecasts, this should come as little surprise. What's more surprising, however, is that they have based their predictions on models that were ill conceived and insufficiently tested.
2012-02-14 Recession: Just How Much Warning is Useful Anyway? by Dwaine van Vuuren (Article)
In December 2011, ECRI dialled down the urgency of the timing of their call to 'within six months.' That raised the question of just how much recession warning is useful when it comes to forecasting equity market performance.
2012-01-31 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 Bob Doll Believes the Recent Equities Rally Could Continue by BlackRock (Article)
Conditions have improved compared to last quarter, with the US economy showing signs of acceleration and European policymakers moving further along the path of progress. With the bearish tone receding, investors should consider moving into "risk" assets and out of "safe" assets, especially on pullbacks.
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 Dale Mortensen on Addressing Unemployment by Dan Richards (Article)
Dale Mortensen is an economist, a professor at Northwestern University and a co-winner of the 2010 Nobel Prize in Economics. In this interview, he discusses the unemployment situation in the US. This is the transcript.
2012-01-17 Martin Wolf on the Eurozone and Beyond by Robert Huebscher (Article)
Martin Wolf is widely considered to be one of the world's most influential writers on economics. Since joining the Financial Times in 1987, where he is chief economics commentator, he has received numerous awards for excellence in financial journalism. In this interview, he discusses the Eurozone crisis and prospects for global economic growth.
2012-01-17 GMO: Something's Fishy in China by Robert Huebscher (Article)
A wide gulf separates the two most prominent views regarding China's future. Faced with slowing economic growth, one side says its leaders will deftly navigate a soft landing, while the other claims it will face an implosion similar to those that befell Japan 20 years ago and the US in 2008. Count GMO, a firm that has built its reputation on its ability to identify a bubble about to pop, in the latter camp.
2012-01-17 Further Improving the Use of the ECRI WLI by Dwaine van Vuuren and Georg Vrba (Article)
Last week, we described how best to use the growth figure of the ECRI's WLI to predict recessions, but we also highlighted an impediment to our research -an inability of outsiders to replicate the index. Last week, however, the formula to calculate the WLI growth figure was found. Armed with that data, we have made further progress to improving the recession-dating performance of the WLI.
2012-01-10 Gundlach on the Key Risk for Bond Investors by Robert Huebscher (Article)
Watch out if you own a bond fund that underperformed its benchmark by 2% or more last year, as most did. Rather than put their careers at risk by suffering a second year of poor performance, those fund managers will turn to indexation, according to DoubleLine?s Jeffrey Gundlach. And since the Barclay?s Aggregate Index holds nearly 35% of its assets in Treasury bonds with near-zero yields, its investors will endure poor returns.
2012-01-10 Using the ECRI WLI to Flag Recessions by Dwaine van Vuuren (Article)
In September 2011, the ECRI proclaimed a new U.S recession would begin sometime in the coming year. It based its prediction on a host of its own internal long-leading indexes, together with its widely followed weekly leading index (WLI). I want to focus on the proper use of the WLI and examine its accuracy in recession dating, in order to put this current recession call into context.
2012-01-03 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 US Recession - An Opposing View by Dwaine van Vuuren (Article)
A large number of reputable analysts and companies are forecasting a new U.S recession on the immediate horizon. Attracting the most attention is ECRI, which made a public recession call on September 30th and several television reaffirmations since. But an examination of a broader range of other composite economic indicators shows that sole reliance on ECRI's forecast would be misplaced.
2011-12-27 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.
2011-12-13 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.
2011-12-06 The Quality Conundrum by J.J. Abodeely, CFA, CAIA (Article)
We are witnessing the end of a remarkable and confounding era for stocks, best described by the 'quality conundrum' investors faced for much of the last two years. During that time the combined outperformance of low-quality stocks alongside the underperformance of high-quality stocks was unprecedented in the last 30 years. Now, we are embarking on an era where high-quality stocks will likely significantly outperform low-quality stocks, resolving this conundrum.
2011-11-29 Jeremy Siegel on Why Stocks are 'Extremely Attractive' by Robert Huebscher (Article)
Jeremy Siegel is the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania. His book, Stocks for the Long Run, now in its fourth edition, is widely recognized as one of the best books on investing. We spoke to him last week about equity valuations and the prospects for the economy.
2011-11-29 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.
2011-11-15 It's All Greek to Me by Michael Lewitt (Article)
As one who has written that there is little chance of a long-term solution to Europe's problems without a radical rethinking of global economic policy, the Europeans still have little choice once they peer over the cliff to realize other than to step back and buy some time before taking the inevitable leap. For, in the end, they have no other options than to jump.
2011-11-01 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.
2011-10-25 Residential Housing: The Problem and the Solution by Robert Huebscher (Article)
If arresting the decline in residential housing prices is a precondition to a broader economic recovery, then the prospects of a double-dip recessions are more likely. Over the next year home prices will decline 5% to 7%, according to Laurie Goodman. She identified two key policy initiatives that would break what she termed an ongoing 'death spiral' in the housing market.
2011-10-18 Gundlach: Markets Aren?t Cheap Enough Yet by Robert Huebscher (Article)
Prices for risky assets are straddling the extremes of two potential outcomes. A 'hurricane' may hit, in the form of a blow-up in Europe or a move to put the US federal government on an austerity program, driving prices lower. Or world economies will plod along, in which case optimistic pricing makes sense. But prices should be 'truly cheap' against those parallel problems, according to Jeffrey Gundlach, and that is not yet the case.
2011-10-18 Bob Doll: Why the US is Positioned Strongly by BlackRock (Article)
Investor unease has risen dramatically over the past quarter in the face of growing concerns about the world's economic and financial health. The focal point has been the intensifying debt crisis in Europe. The issues facing Europe are highly complex, but essentially are underscored by a single question: Is Europe facing a solvency crisis or a liquidity crisis?
2011-10-11 A Critical Look at Obama?s Economic Team by Laurence B. Siegel (Article)
Confidence Men is an exposé, by the reporter Ron Suskind, of what he claims is incompetence, infighting, and insubordination at the highest levels of economic leadership in the Obama administration during the global financial crisis. Those accusations are largely misdirected. After all, there was no playbook for the administration's economic thinkers to work from - the rapidly unfolding crisis forced them to improvise.
2011-10-11 A Q3 Client Letter Drawing on Buffett?s Optimism 'The U.S. is coming back now' - and why three inves by Dan Richards (Article)
Since 2008, each quarter I have posted a template for a letter to clients; these are consistently among my most popular articles. This quarter's letter provides clients with perspective on the recent market turmoil.
2011-10-04 Moneyball Investing by F. Sean Bonner (Article)
In capital markets, emotions often rule the day, to the benefit of those who best remain well grounded in theory and math. The same holds true in baseball, as the new movie Moneyball reminds us.
2011-09-27 When Greece Defaults by Keith Goddard (Article)
The Greek default is indeed inevitable, but there remain two possible ways the world may learn about it, and financial markets will react very differently depending on which of these two processes for default occurs.
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.
2011-09-13 The Handicap of Experienced Investors by J.J. Abodeely, CFA, CAIA (Article)
In the investment business, assets under management are concentrated with the largest and most established firms. Understandably, investors tend to allocate capital to managers after they've established a good track record. Unfortunately, for many, the analysis stops there. By failing to separate good results from identification of what makes a great investment manager, investors are primed for disappointment.
2011-09-06 Byron Wien Reflects on His List of Surprises by Laurence B. Siegel (Article)
Byron Wien is a senior managing director and vice chairman of Blackstone Advisory Partners, the largest alternative investment firm in the world with $140 billion under management. Each year, for the last 26 years, he has published a list of 10 'surprises' investors should expect in the capital markets and the economy. In this interview, he reflects on his list for 2011 and what see sees ahead.
2011-09-06 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?
2011-08-30 Why High-Yield Bonds Make Sense Today by Geoff Considine, Ph.D. (Article)
None other than Gluskin Sheff's Dave Rosenberg, the widely followed analyst who was been consistently bearish in the current market cycle, said last week that high-yield bonds are 'a good place to be right now.' Recent price declines have made them attractive in the short term, and their risk-adjusted returns make them attractive to longer-term strategic investors.
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 Borking the Budget by Michael Lewitt (Article)
It now appears that the obstreperous approach that succeeded in the Bork nomination fight is being applied to the federal budget. Instead of treating this subject with objectivity and reason, both parties have borrowed the tactics that their most radical elements have historically applied to social issues like abortion.
2011-08-23 A Cautionary Note to my Fellow Gold Bugs by Emilio Vargas (Article)
The volume of missives I receive regarding the evolving debt-bubble collapse rises with the price of gold. The best time to buy gold was in 2001. Don't fall in love with gold now that the crisis is breaking and the price is going vertical.
2011-08-23 A Fundamental Investment Strategy for Today's Environment by Robert Huebscher (Article)
We spoke with Tim Hartch and Michael Keller, who are co-managers of the Morningstar 5-star BBH Core Select Fund (BBTEX) from Brown Brothers Harriman. The fund's strategy is strictly bottom-up, with investments in established, cash-generative businesses that are leading providers of essential products and services with strong management teams and loyal customers.
2011-08-16 A Commentary on the Correction by Michael Nairne (Article)
Market corrections are always painful and this one particularly so because of the lingering anxiety from memories of the 2008-2009 market crash. I explore the history of stock market corrections and examines the dynamics of the recent downturn as well as actions that may be warranted, depending on individual circumstances.
2011-08-09 America's Tarnished Credit Rating by Bob Veres (Article)
In this letter designed to be sent to clients, Bob Veres explains the impact of S&P's downgrade of the US sovereign debt rating.
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.
2011-07-12 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 Titanic Has Sailed by Michael Lewitt (Article)
It was entirely predictable that the U.S. equity market would rally on the news that Greek would not default this month, but it does little to convince me that the long-term outlook for European sovereign debt or the global economy has improved. Markets - particularly the equity markets - are trying to pretend that the global economy is experiencing a self-sustaining recovery. A hard look at the economic numbers would tell an objective observer that no such recovery is occurring.
2011-06-14 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.
2011-05-31 Bookstaber on the Limits of Capitalism by Sam Parl (Article)
What can we do so that we?re not fighting yesterday?s war? That was the question posed by Richard Bookstaber when he spoke at the sixth annual MIT Sloan Investment Management Conference on April 29. Bookstaber, a Senior Policy advisor to the SEC and to the Financial Security Oversight Council, offered an elucidating perspective on the origins of economic crises and the proper role of regulation.
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 Housing Outlook: Where Do We Go From Here? by John Burns (Article)
The housing market will struggle over the next several years, but longer term there is plenty of upside. That was John Burns' message when he recently spoke to a housing industry trade group. Burns is a leading expert on the housing industry, and he shared with us his presentation.
2011-05-10 Lessons from the Farm by Michael Nairne (Article)
Farmers know all about droughts. Droughts occur in nearly all climates and impair all types of crops. They are unpredictable, yet are recurring and can last for years. Likewise, performance droughts abound in the world of investing.
2011-05-03 Gary Shilling - Five Things that can Derail the Recovery by Robert Huebscher (Article)
Die-hard deflationists - those who foresee a continued bull market in bonds - are so few in number these days they could all share an elevator, according to Gary Shilling. One is Gluskin Sheff's David Rosenberg, whose views are considered elsewhere in this issue. But the loudest such voice belongs to Shilling himself, who has advocated for a long position in Treasury bonds continuously since 1980, a stance that has always proved prescient so far.
2011-05-03 Martin Barnes - How Safe is the Equity Market? by Robert Huebscher (Article)
When members of the Federal Reserve Board seek counsel on tough issues, one of the economists to whom they turn first is Martin Barnes. Speaking publicly last week, Barnes addressed two themes in the US economy and markets: the potential for a sustained bear market in equities and the likelihood of higher taxes. These two distinct questions are both critically important to investors.
2011-05-03 P/E: Future on the Horizon by Ed Easterling (Article)
Most people expect P/E to measure current valuation and to show historical patterns. But more features are available from some versions of P/E. The methodology behind the Crestmont P/E enables investors to anticipate the future. It may not precisely predict the market ten years away, but it frames within a relatively tight range the likely outcome. One component from determining the Crestmont P/E is a means to assess the future trend line for EPS using estimates of future economic growth (GDP).
2011-04-26 Why Mid-Cap? by RidgeWorth Investments (Article)
RidgeWorth Investments has published research detailing six distinct reasons why investors should consider a specific allocation to mid-caps. Specifically, it explores historical performance, evaluates current conditions that favor mid-caps as well as examines how mid-caps have performed during different points in market and economic cycles. Finally, the research looks at the incremental benefit of adding an allocation of up to 40% of mid-cap stocks to a portfolio of solely large and small cap stocks. We thank RidgeWorth Investments for their sponsorship.
2011-04-12 Been Down So Long It Looks Like Up To Me by Michael Lewitt (Article)
"The budget crisis is a crisis of leadership," writes Michael Lewitt in the latest issue of the HCM Market letter. "There is no intellectual mystery involved in cutting the budget - entitlement spending must be reduced through the adoption of tighter eligibility standards... The markets will also have to evaluate whether Congress and the Obama administration can make any meaningful progress on budget reform, which will mean tackling the entitlement issue. The failure to rein in federal deficits remains a profound threat to the dollar and interest rates."
2011-03-29 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.
2011-03-22 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 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 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.
2011-02-22 Bruce Berkowitz on the Exceptional Value in the Financial Sector by Robert Huebscher (Article)
Fairholme's Bruce Berkowtiz, US stock-fund manager of the decade, discusses his large position in the financial sector and why he believes the big bets he is making do not amount to Russian roulette. He also comments on his recent nomination of former Florida Governor Charlie Crist to the board of St. Joes.
2011-02-15 Toward an Understanding of Risk by Robert Huebscher (Article)
How should clients think about risk in their portfolios? Advisor Perspectives put that question to a cross-section of prominent advisors and academics. Their answers encompassed diverse opinions and underscored how crucial that question is to the investment process.
2011-02-15 The Stuxnet Paradigm by Michael Lewitt (Article)
Michael Lewitt discusses the situation in Egypt, the economy, rising risk appetites in the market, sovereign debt and municipal bonds. 'It might be very easy,' he writes, 'to be impressed by the 'two years and thousands of man hours' that Ms. Whitney spent researching the fiscal condition of the 15 largest states. What in the world required so much time and effort? It shouldn't have taken nearly so long to determine that these states are in severe financial trouble and that their options for dealing with it are limited.
2011-02-01 Can Economics Save the Economy? by Robert Huebscher (Article)
Christina Romer, Greg Mankiw and Paul Krugman were among a group of thought leaders who spoke at a conference in Cambridge last week. They cited a lack of sufficiently powerful and politically feasible policy options, calling into question whether economists will be able to produce the clear path to the stronger recovery that the Obama administration seeks.
2011-01-18 Refuting Meredith Whitney by Robert Huebscher (Article)
Wealthy investors, seeking safe tax-free income, have historically centered their portfolios on municipal bonds. The fiscal problems faced by many states and local governments, however, are leading many to question that strategy, none more vocally than the analyst Meredith Whitney, who predicted 'hundreds of billions' in municipal bond defaults in a recent 60 Minutes interview. We present the rebuttal to Whitney.
2011-01-18 Richard Bernstein: The Antidote to Pessimism by Robert Huebscher (Article)
For an antidote to the bearish sentiment coming from David Rosenberg, look at Richard Bernstein. In contrast to Rosenberg's vision of Japan's lost decade, Bernstein expects the S&P to outperform emerging markets, at least in the near term.
2011-01-18 Letters to the Editor by Various (Article)
A number of readers respond to Nancy Opiela's article, Tactical Asset Allocation and Market Timing: What's the Difference?, and one reader responds to Michael Lewitt's article, The Wages of Growth. Both articles appeared last week.
2011-01-11 A Bold Forecast for Consumer Spending by Robert Huebscher (Article)
In a world where mainstream media has become overly fond of alliterative headlines, 'frugality fatigue' has emerged to characterize the view that consumers have loosened their belts and begun to spend some money. That's far from the consensus view. However, if it proves to be correct, as one prominent retail analyst claims, it would be the clearest indication that the economy is recovering strongly.
2011-01-11 What's Past is Prologue by Michael Nairne (Article)
With nearly two centuries of stock market performance history now available, investors should be well-armed intellectually to deal with the vicissitudes of equity investing. Many, however, are not. I explore this history and what it means for future performance.
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.
2010-12-21 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.
2010-12-21 Challenging John Hussman?s Forecast by Georg Vrba (Article)
In a recent commentary, John Hussman listed 10 occasions which provided warnings of market declines. My model, Improving on Buy and Hold, does not confirm his current warning.
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.
2010-11-30 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.
2010-11-09 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?
2010-11-02 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.
2010-10-29 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.
2010-10-29 Greg Valliere: The U.S. Political Outlook by Robert Huebscher (Article)
Three questions dominate the political landscape, according to Greg Valliere, and the big one is what will happen to the Bush tax cuts. Valliere is the chief political strategist at the Potomac Research Group. Despite significant challenges, Valliere said the fundamentals in Washington are "better than they have been in several years."
2010-10-26 What Drives High-Yield Bonds (and Why You Should Listen to the Ratings Agencies) by Robert Huebscher (Article)
High-yield bonds are attractively priced - or they aren't - depending on how likely you think a double-dip recession is and how severe you think it might be. What drives the high-yield market was the subject of a talk last week by Martin Fridson, a global credit strategist with BNP Paribas Asset Management who is a highly regarded expert on distressed debt.
2010-10-19 Developed Markets and Capitalism in Crisis by Robert Huebscher (Article)
We are not in a globalized world today, according to Ian Bremmer. "The state is back," said the 40-year old president and founder of Eurasia Group, a political consulting firm. Both in the U.S. and throughout the world, governments are exerting their influence through regulation, trade restriction, subsidies, and bailouts, and are threatening the nature of free markets.
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 Harvard Experts: Economy is Like a Bus Winding Down a Mountain Road by Charlie Curnow (Article)
Five Harvard economists, including Ken Rogoff and John Campbell, emphasized the need for U.S. policymakers and households to cut down on borrowing and increase savings during a panel discussion on Tuesday, October 13 at Harvard University in Cambridge, Massachusetts.
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 Simon Johnson on Why This Crisis Wasn?t the Last by Robert Huebscher (Article)
Is the last financial crisis over? Did we at least fix the problems that caused the crisis? Were those the worst of our problems? Answering those three questions was the focus of a talk by Simon Johnson, formerly the chief economist at the IMF.
2010-10-12 Why Warren Buffett is Optimistic: A Quarterly Letter to Send Clients by Dan Richards (Article)
Dan Richard's quarterly letter is designed to balance some of the extreme pessimism among many investors. Negative sentiment is understandable given the real challenges facing the U.S. and European economies, but is also a function of the overwhelmingly negative media coverage to which clients are exposed. To balance today's disproportionately negative views, you need hard facts.
2010-10-12 Beggar Thy Neighbor, Beggar Thyself by Michael Lewitt (Article)
In the latest edition of the HCM Market Letter, Michael Lewitt argues that reported attempts by countries to devalue their currencies will only result in higher inflation and not economic growth. QE2 will similarly fail, and the necessary "heavy lifting" for the economy should be through fiscal, not monetary, policy. A continuation of Keynesian policies, as advocated by Paul Krugman, will also fail. Lewitt warns of dangers in ETFs and offers his investment recommendations.
2010-10-05 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.
2010-09-28 The Future of Oil by Robert Huebscher (Article)
No commodity impacts the global economy more than oil. When geopolitical threats loom, two questions often dominate discussion: Will the price of oil rise? And what will be the economic consequences? We review the key drivers of recent, current, and forecast oil prices, including a template for the necessary eventual alignment of supply and demand.
2010-09-21 America?s Demographic Advantages by Art Patten (Article)
Joel Kotkin's inherent optimism is a welcome antidote to the gloom and doom that's taken hold of so many in the wake of the great recession. In The Next Hundred Million: America in 2050, he uses copious reference material and broad strokes to paint a relatively cheery vision of America's future, which he believes will be driven largely by people, place, and national character.
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 Jeffrey Gundlach: No Double-Dip Recession ? but by Robert Huebscher (Article)
The economy won't suffer a double-dip recession, according to Jeffrey Gundlach. But that doesn't mean the DoubleLine co-founder, CEO and CIO expects strong economic growth. To the contrary, Gundlach said that we haven't yet recovered from the recession. "The people who are looking for robust and sustained growth are really kidding themselves," he said.
2010-09-21 Two Compelling Articles to Send Clients by Dan Richards (Article)
One of the most important roles for advisors is being an emotional anchor for clients ... preventing the highs from being too high and the lows from being too low. Dan Richards offers two recent articles that counteract the sense of pessimism about the economy ... driven in large measure by daunting headlines about housing prices, unemployment, deficits and political discord in Washington.
2010-09-21 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 Identifying Opportunities in the Municipal Bond Market by RidgeWorth Investments (Article)
Ridgeworth Investments shares its perspective on the muni bond market in a recent white paper entitled "Identifying Opportunities in the Municipal Bond Market" which outlines the historical benefits of municipal bonds, the changing market dynamics in 2009 as well as RidgeWorth's outlook for municipal bonds in 2010 and potentially beyond. RidgeWorth concludes that despite a challenging market environment, munis still offer attractive investment opportunities. We thank them for their sponsorship.
2010-09-14 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.
2010-08-31 Why Mid-Cap? by RidgeWorth Investments (Article)
RidgeWorth Investments has published research detailing six distinct reasons why investors should consider a specific allocation to mid-caps. Specifically, it explores historical performance, evaluates current conditions that favor mid-caps as well as examines how mid-caps have performed during different points in market and economic cycles. Finally, the research looks at the incremental benefit of adding an allocation of up to 40% of mid-cap stocks to a portfolio of solely large and small cap stocks. We thank RidgeWorth Investments for their sponsorship.
2010-08-24 Improving on Buy and Hold: Asset Allocation using Economic Indicators by Georg Vrba, P.E. (Article)
Most long-term stock market investors follow a buy-and-hold strategy, one that makes big losses unavoidable when major downturns strike the stock market. This strategy assumes that an investor cannot know when to switch from one asset to another and that if one avoids the bad days of the market, one is also likely to miss the best days. In this guest contribution, Georg Vrba presents a way to resolve this dilemma, based on various economic indicators that provide timely buy and sell signals for the S&P 500 index.
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.
2010-08-10 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 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 Rebuilding Confidence in Stocks by Dan Richards (Article)
These days, there's a cloud of uncertainty over markets, with questions about economic growth, government deficits, the timing and impact of interest rates increases, unemployment levels and the housing market. As Dan Richards writes, this environment is when advisors can bring value, by providing perspective on both sides of the debate about the value that stocks provide at today's levels.
2010-08-03 Richard Koo: Lessons from Japan's Decline by Dan Richards (Article)
Richard Koo is the Chief Economist of Nomura Research Institute, and has served as an advisor to the Japanese government. In this interview with Dan Richards, Koo explains why Japan's recovery was thwarted by inadequate stimulus spending. This is a transcript of the interview.
2010-07-27 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.
2010-07-20 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.
2010-07-20 The Opportunity in Build America Bonds by Jeff Westergaard (Article)
While the unique aspects of Build America Bonds (BABs) and recent Treasury Department actions are meaningful, the risks to investors have been over-emphasized. BABs remain an attractive vehicle for investors and issuers, and the market for them is likely to grow.
2010-07-13 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."
2010-07-06 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.
2010-06-29 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.
2010-06-15 Today?s Top Economic Historian: The Path to European Stability by Dan Richards (Article)
Harvard's Niall Ferguson is arguably today's leading economic historian. In this interview with Dan Richards, Ferguson discusses the current troubles and future outlook for Europe. We provide a transcript and a video.
2010-06-15 BlackRock Examines an Altered Fiduciary Landscape by BlackRock (Article)
Do your plan sponsors understand what it means to be a fiduciary and act prudently in that capacity? Are they aware of recent regulatory changes and how these may impact their fiduciary duties? Joe Lee, head of BlackRock's Advisor-Sold DC Distribution, discusses the opportunity advisors have to build and strengthen relationships with plan sponsors in the current environment. We thank them for their sponsorship.
2010-06-01 Municipal Bond Market Insights by Northern Trust Investments (Article)
Not surprisingly, the most profitable investment trends tend to be those with the most staying power. That could be particularly good news for investors in municipal bonds, since structural forces are in place that may make tax-free bonds - and the income they generate - even more valuable in the years to come. Northern Trust provides their secular outlook for municipals, and we thank them for their sponsorship.
2010-06-01 Europe: Value or Value Trap? by Dan Trosch, CFA (Article)
European equities seem much cheaper than in the US, says Dan Trosch of Fortigent in this guest contribution. Europe trades at a 26% Price to Book discount and a 20% Price to Cash Earnings discount to the US. Some European industries and stocks are deservedly cheap and value traps; other industries and stocks are attractive and will benefit from global growth in exports and other macro trends.
2010-05-25 Ken Rogoff Expects Slow Growth and Sovereign Defaults by Robert Huebscher (Article)
Among the crush of analysis devoted to the financial crisis, perhaps none has been as influential as that of Kenneth Rogoff and Carmen Reinhart, co-authors of the book This Time is Different. Looking back at 800 years of data on emerging and developed economies, they showed that financial crises - and the recoveries from those crises - follow a highly predictable pattern, and the title of their book was a jab at those who suggest otherwise. Rogoff also spoke at the CFA conference.
2010-05-18 Letters to the Editor by Various (Article)
In a letter to the Editor, a reader responds to Niall Ferguson's thesis in last week's article, A Historical Perspective on the Slight Depression.
2010-05-11 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.
2010-05-04 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.
2010-04-27 China: House of Cards or Emerging Superpower? by Robert Huebscher (Article)
Few topics are as contentious as the fate of the Chinese economy. The bulls argue that its growth will propel the global economic recovery and that China will ultimately supplant the United States as the leading world superpower. According to the bears, the Chinese economy has been fueled by unsustainable fiscal stimuliand is a prototypical bubble poised to burst. Five panelists at the Strategic Investment Conference debated this question.
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.
2010-04-20 Unconventional Wisdom: An Interview with Robert Shiller by John Heins (Article)
"Few macroeconomic prognosticators have been as publicly right as Yale's Robert Shiller,whose first and second editions of the book Irrational Exuberance laid bare, with remarkable timing, the speculative bubbles forming first in the Internet-crazed stock market and next in residential real estate," writes the highly regarded newsletter Value Investor Insight in its preface to this interview with Shiller and excerpt from his latest book. Value Investor Insight, which bills itself as the "Leading Authority on Value Investing, offers a no-obligation, one-month free trial subscription.
2010-04-13 Shameless by Michael Lewitt (Article)
The fiscal train wreck in the United States has not been set back on the tracks, and the global imbalances that led to the financial crisis have not gone away. Quite to the contrary, writes Michael Lewittin Shameless, the latest edition of his HCM newsletter. In fact, if progress isn't made with respect to these issues, and if intelligent financial reform is not enacted, future instability is guaranteed.
2010-04-06 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.
2010-04-01 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.
2010-04-01 Chuck Royce on the First-Quarter Rally by Chuck Royce of The Royce Funds
In this interview, Royce says the first phase of the bull market may be over and returns in the next phase are likely to lag those since March 9. He believes the next phase will favor high-quality stocks, and the US economic recovery will be well under way in the next year.
2010-03-30 America's "Failing" Infrastructure? by Charlie Curnow (Article)
In 2007, the spectacular collapse of the Mississippi River Bridge in Minneapolis killed 13 people and was the catalyst for calls for massive investment in infrastructure projects. Whether that catastrophe was truly symptomatic of systemic failure or simply an unfortunate but relatively isolated incident, however, remains up for debate. In fact, once one looks past the politics of infrastructure investment to the hard data, there's reason to believe the latter.
2010-03-24 No Greece in the American Machine by Nouriel Roubini of RGE Monitor
Sovereign debt risk recently graduated from an emerging economy hitch to an advanced economy problem. The Greek debt crisis occupies center stage of the political and economic debate, and Greece's problems could soon spread to Portugal, Spain, Italy and Ireland. Comparisons between these countries and troubled U.S. states are in vogue. Implicit and explicit backstopping from the federal government, however, should prevent state and municipal debt crises from reaching levels faced by European governments.
2010-03-23 A Tale of Two Depressions: What do the New Data Tell Us? by Barry Eichengreen and Kevin H. O?Rourke (Article)
Barry Eichengreen and Kevin H. O'Rourke offer the fourth installment of their comparison of data from the current recession to those of the Great Depression - A Tale of Two Depressions. Global industrial production continues to recover - something for which policy deserves considerable credit. But before indulging in self-congratulation, policymakers should note that the level of industrial production is still 6% below its previous peak.
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.
2010-03-19 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.
2010-03-17 What Will Lead Equities? by Milton Ezrati of Lord Abbett
If history is any guide, small capitalization stocks will continue to lead the recovery in equities. Small growth stocks led during the recovery phase in seven of the last 10 business cycles, and small value led in two. Large capitalization led only once, in 1953-54. Consistent with the trend, small value has led the present recovery so far by a wide margin. It is unclear, however, whether that margin will last.
2010-03-16 The New Investment Paradigm: Graham Meets Markowitz by Bob Veres (Article)
Broadly speaking, the financial services industry has been divided into two competing paradigms since roughly 1950. One, articulated by Harry Markowitz, suggests advisors add value through diversified portfolios optimized along the efficient frontier. The other, advocated by Benjamin Graham, says advisors add value by purchasing assets at prices less than their fair value. Bob Veres reconciles those views and describes the New Paradigm that has emerged.
2010-03-16 Greeks Bearing Gifts by Michael Lewitt (Article)
We are again privileged to publish the most recent edition of Michael Lewitt's HCM Market Letter, Greeks Bearing Gifts. Lewitt comments on Goldman Sachs' derivative transactions that helped Greece hide its debt and its larger implications for the financial system, for the European periphery and for Spain in particular. Lewitt also addresses the state of decline of the US economy and other topics.
2010-03-16 Latest Unemployment Report Reveals the Growing Problem of the Long-Term Unemployed by Team of American Century Investments
Four out of 10 unemployed workers are designated as long-term unemployed, meaning that they have been seeking a job for at least six months. This rate exceeds any other since the 1940s. As we have evolved towards a service- and knowledge-based economy, people with at least an undergraduate degree have fared better both in terms of lower unemployment rates and higher wages. This trend has become even more pronounced during the recession that began in December 2007 relative to the past two periods of peak unemployment in June 1992 and 2003.
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 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.
2010-03-05 Economic Update by Justin S. Anderson of Cambridge Advisors
In the coming months it will be important to track the changing dynamics in both the domestic labor market and international sovereign debt markets as these represent, quite possibly, the two most significant headwinds to growth in the US economy and stock markets in general.
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.
2010-02-16 Boom and Bust by Michael Lewitt (Article)
The US and global economies are "trapped in a cycle of boom and bust as a result of fiscal and monetary policies from which there is no easy escape," says Michael Lewitt of Harch Capital Management. Lewitt believes the S&P will rally to 1,200-1,250, but says the long-term prognosis is "somewhere between grave and terminal." We are privileged to provide this excerpt from Lewitt's monthly newsletter and encourage our readers to subscribe to it directly.
2010-02-16 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.
2010-02-14 Growing Problems in the Residential Real Estate Market (Part 2) by Team of American Century Investments
The problem of growing housing delinquencies has spread to states not originally affected in the sub-prime crisis and to higher-quality prime mortgages as the nation?s unemployment rate has reached double-digit levels. This commentary looks at the failure to-date of policy initiatives intended to stem defaults, and at the range of possible future policies.
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.
2010-02-09 China?s Quest for a Shortcut to Greatness by Vitaliy Katsenelson (Article)
The Chinese economy must be getting out of control, because the Chinese government is doing the unthinkable: It is desperately trying to put the brakes on its economy. Author and fund manager Vitaliy Katsenelson looks back at how China got into this trouble and looks forward to China's prospects.
2010-02-09 It's Not My Fault by Emilio Vargas (Article)
In this guest contribution, Emilio Vargas says you don't need a Ph.D. in economics or a sophisticated computer model to figure out bubbles. Just look at their recent history.
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 Stiglitz: U.S. Economy Will Falter without More Stimulus by Susan B. Weiner, CFA (Article)
The U.S. government has botched its handling of the economy over the last eight years, according to Nobel Prize-winning economist Joseph Stiglitz. He explained how the U.S. created the global recession - and how we can get out of it - in a public presentation on his new book, Freefall: America, Free Markets, and the Sinking of the World Economy.
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
2010-01-15 Ballooning Treasure Deficits - It Takes both Outlays and Receipts to Tango by Paul Kasriel of Northern Trust
...although high growth in federal spending is contributing mightily to our record federal deficit, the rate of growth in that spending is slowing. What often is forgotten is that the rate of contract
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
2010-01-12 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.
2010-01-09 December Employment Report: Hiring Freeze Yet to Thaw by Asha Bangalore of Northern Trust
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.
2010-01-04 Reviewing Some 2010 Macro and Market Themes by David A. Rosenberg of Gluskin Sheff
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.
2009-12-22 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.
2009-12-22 Stimulus II: A Modest Proposal by Jonathan Tardi (Article)
Our worthy public servants in Congress, not to mention in the White House itself, have worked tirelessly to solve the vexing problem of unemployment. They have courageously ignored their own ignorance in matters of commerce and finance and have unleashed a veritable cornucopia of well-intended solutions on a trusting public. In this guest contribution, Jonathan Tardi offers a modest proposal for reducing the rolls of the unemployed and, while he's at it, eliminating the national deficit.
2009-12-17 Shifting Gears by MacKay of Broadleaf Partners
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.
2009-12-01 Ten Ways to Connect with Your Clients? Children by Nancy Opiela (Article)
When you work with a top client throughout his or her life, you have an opportunity to ensure that the client's family stays with your firm beyond the current generation. Financial legacies are often lost when wealth passes from generation to generation, so building intergenerational connections can ensure both a successful transfer of assets - and an advisory relationship that endures after your original client passes on.
2009-12-01 Allen Sinai: Jobless Recovery and the Failure of Current Economic Policies by Robert Huebscher (Article)
As the Democratic leadership in Congress has looked for ways to simultaneously create jobs and reduce the deficit, a key person they have turned to and continue to rely on is Allen Sinai. Sinai now fears the US is in the "mother of all jobless recoveries" and that the economic policies of the Obama administration are not working.
2009-11-24 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.
2009-11-17 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 Our Steroidally Challenged Economy by Vitaliy Katsenelson (Article)
Vitaliy Katsenelson writes that the US economy is like a marathon runner who, after suffering an injury, takes steroids in order to return to racing. His performance is fine, but what don't see are the risks, just as our economy is now "steroidally challenged."
2009-11-10 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.
2009-10-27 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 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.
2009-10-13 Seven Ways to Reach Prospects in the New Normal by Nancy Opiela (Article)
Extravagance is out and frugality is in. Finding happiness in what we can afford is what sells. With many investors implicitly or explicitly bracing for the New Normal and lower returns from the capital markets, advisors need to rethink their marketing programs to be consistent with their clients' tempered expectations.
2009-10-13 A Tale of Two Depressions: October 2009 Update by Barry Eichengreen and Kevin H. O?Rourke (Article)
Barry Eichengreen and Kevin H. O'Rourke update their article, "A Tale of Two Depressions," and report that global industrial production shows clear signs of recovery, but weak consumer spending in the US may prevent a rapid recovery.
2009-10-06 Retailers Face the New Frugality by Robert Huebscher (Article)
Whether they sell high-end designer clothing or tractors and pet food, retailers across the country are girding for leaner times. Consumer spending has dropped to 10% below its historical trend line, creating a landscape with far too many stores and far too much merchandise for consumers' thinning wallets to support. Along with the CEOs of Fortune 500 retailers, we attended a conference in New York last week looking at trends in consumer behavior, and we file our report.
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.
2009-09-15 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.
2009-08-25 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 The Case for Optimism by Dan Richards (Article)
Only a few months ago, economist's doomsday scenarios caused widespread concerns that we were about to revisit the Great Depression. That consensus view on the economy has shifted remarkably quickly, with a much more positive outlook for the immediate period ahead. Dan Richards cites two recent articles making a persuasive case for optimism.
2009-08-18 A Crash Course in Investing Six Lessons from the Market Meltdown by Dougal Williams, CFA (Article)
The market decline from October 2007 to early March 2009 was the worst since the late 1930's. Stocks dropped 60%, investor uncertainty skyrocketed, and trust and confidence were shattered. The age-old rules for personal investing are now being questioned: Is Buy-and-Hold dead? Has Asset Allocation outlived its usefulness? Does Diversification still work? In this guest contribution, Dougal Williams provides answers to these questions that can serve as a guide for long-term investment success.
2009-08-04 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 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 Moving Average: Holy Grail or Fairy Tale - Part 3 by Theodore Wang (Article)
Buy-and-hold remains deeply entrenched in the financial planning community, despite many of the flaws Ted Wong's previous articles have illustrated. Although many financial advisors suffer dearly from their buy-and-hold practices, they are reluctant to change their approach. Who dares to challenge investment sages like Bogle, Siegel, and Malkiel who emphatically support this long-standing investment principle? Academic research studies overwhelmingly endorse buy-and-hold. How can they all be wrong?
2009-07-21 SIFMA?s Proposed by Ron Rhoades (Article)
On July 17, 2009, the Securities Industry and Financial Markets Association ("SIFMA") announced that its Private Client Group Steering Committee unanimously supports a new federal fiduciary standard for broker-dealers and investment advisors, embracing a proposal advanced by the Obama administration a week earlier in a draft of the "Investor Protection Act of 2009." Ron Rhoades looks at whether this shift in direction by SIFMA poses a radical change in business models, or whether the "new federal fiduciary standard" is something else in disguise.
2009-07-14 Some Signs of Life and Hope for a New Recovery by John P. Calamos and Nick P. Calamos (Article)
Calamos Investments' co-CIOs John P. Calamos, Sr. and Nick P. Calamos discuss the current market climate, implications of Fed and government actions, and investment opportunities in the shorter- and longer-term. Global governmental policies have restored a degree of confidence in the financial markets and many key financial metrics are back to pre-Lehman levels. Many investment opportunities will be available in the future. We thank them for their sponsorship.
2009-07-14 Three Steps to a Referral Conversation that Works Today by Dan Richards (Article)
Recommendations initiated by someone looking for an introduction to an advisor doing a good job for a friend have always been an important driver of referrals, but this will be especially true this summer. In some instances, your clients will be asked outright how they feel about the job you've done and if they are comfortable recommending you. Dan Richards provides a three-step plan to make this happen.
2009-07-14 When the Referee Says ?Game Over? Too Soon by Robert Huebscher (Article)
Robert J. Gordon, an economist at Northwestern University, published a study in early May that found that the recession is all but over. Gordon's statement was remarkable for its audacity and, more so, because for the last three decades he has been a member of the prestigious Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) - the committee charged with setting the official start and end dates of recessions. We examine Gordon's claims.
2009-07-07 Gary Shilling: Recovery is a Year Away by Robert Huebscher (Article)
Among economists, Gary Shilling owns one of the most prescient forecasting records, having accurately predicted the credit crisis and the performance of key asset classes over the last several years. Now, he says, the chances that the current wave of "green shoots" will be the finale to the recession are "pretty low."e
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.
2009-06-30 A Tale of Two Depressions: June 2009 Update by Barry Eichengreen and Kevin H. O'Rourke (Article)
In an update to an article we published two months ago, two economists compare today's global crisis to the Great Depression. World industrial production, trade, and stock markets are diving faster now than during 1929-30. Fortunately, the policy response to date is much better. The update shows that trade and stock markets have shown some improvement without reversing the overall conclusion -- today's crisis is at least as bad as the Great Depression.
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.
2009-06-16 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 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.
2009-06-02 Market Perspectives from Janus' Seven Global Sector Teams by Janus (Article)
The last 18 months have challenged advisors, as they now wait for the market and economy to stabilize. Despite the generally bearish sentiment, Janus believes many individual investment opportunities in the market today offer compelling valuations and risk/reward profiles. We thank them for their sponsorship.
2009-05-26 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.
Facing Reality by Questioning Some Common Beliefs by Ron Surz (Article)
I've decided to do something different in this quarterly commentary. I begin as usual with a review of first quarter market performance. Then I turn my attention to some commonly held beliefs that I regard as mistaken, as shown in the figure below.