ACTIONABLE ADVICE FOR FINANCIAL ADVISORS: Newsletters and Commentaries Focused on Investment Strategy

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2014-04-23 Poker Mentality?! by Jeffrey Saut of Raymond James

have often stated that the rarest trait on Wall Street is ?patience.? I have also repeatedly reprised Charles Dow?s quote that, ?The successful investor/speculator needs to ignore two out of every three potential money making opportunities.?

2014-02-01 Central Banker Throwdown by John Mauldin of Millennium Wave Advisors

The Federal Reserve is signaling that it is going to end quantitative easing at some point in the future; therefore, investors are trying to find the exits before the end actually comes.

2014-01-31 Buy What You Know? Not So Fast by Russ Koesterich of iSharesBlog

Buy what you know. It’s an old admonition, and on the surface a sensible one. Focusing your investments on those companies that you’re most familiar with should help mitigate the risk of a bad investment choice. Unfortunately, like a lot of conventional wisdom, it’s wrong. Concentrating your portfolio to local investments, while comforting, is a mistake for two reasons.

2013-10-22 China's Wake-Up Call from Washington by Stephen Roach of Project Syndicate

With 90 days left to bridge the ideological and partisan divide before another crisis erupts, the fuse on America’s debt bomb is getting shorter and shorter. As a dysfunctional US government peers into the abyss, China America’s largest foreign creditor has much at stake.

2013-10-20 The Damage to the US Brand by John Mauldin of Millennium Wave Advisors

There is no doubt that the image what I will refer to in this letter as the "brand" of the United States has been damaged in the past month. But what are the actual costs? And what does it matter to the average citizen? Can the US recover its tarnished image and go on about business as usual? Is the recent dysfunction in Washington DC now behind us, or is it destined to become part of a bleaker landscape?

2013-09-24 William Bernstein ? “Stocks for the Long Run” by Michael Edesess (Article)

William Bernstein’s reading of history is that if you want to build a nest egg and protect against the “four horsemen” that threaten it over the long term, the best thing to do is invest in a globally diversified stock portfolio.

2013-08-31 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.

2013-07-09 ENERGY MLPs: A Suitable and Sustainable Asset Class by Sponsored Content from ClearBridge Investments (Article)

Greater capitalization. More liquidity. The energy MLP market has grown steadily, with good reason: our constant demand for energy. While oil prices go up and down, volume has stayed consistent. Production is increasing. And the infrastructure is needed to support it. Add some risk, and you’ve got an investment which could fit in a diversified portfolio.

2013-03-19 Understanding the Role of SPIAs in a Retirement Portfolio by David B. Loeper (Article)

Wade Pfau’s recent article, Breaking Free from the Safe Withdrawal Paradigm, was well researched. Its goal was to accurately calculate the benefits of using SPIAs based on certain assumptions. I fear, however, that many readers may have not fully grasped the impact of a few key assumptions that drive his results.

2013-03-05 Understanding the Risk in Bonds by Charles Lieberman (Article)

Treasury bond prices rallied this past week, as sequestration promised to act as a drag on growth, while a very messy election result in Italy also pushed safe haven investors into Treasuries. Both factors are likely to be short lived insofar as they support bond prices. Interest rates are likely to head higher even with Fed policy likely to remain highly accommodative. Initially, longer maturity bond prices will decline and the yield curve will steepen.

2013-02-05 Why Cash Kills by Charles Lieberman (Article)

Many investors remain in cash, earning nothing, out of fear that the rally in the stock market may be unsustainable or that such issues as the fiscal impasse or Europe's fiscal problems may yet start another meltdown. But while they remain focused on potential adverse developments, they suffer from the near zero interest rate they are earning on cash. Even in today's low inflation environment, such investors are experiencing a persistent erosion in the purchasing power of their capital, which will impair their ability to grow their portfolios in the future.

2012-12-18 Pulling Back the Lens in Emerging Markets by Western Asset Management (Article)

Emerging markets remain resilient, according to Western Asset Portfolio Manager Rob Abad. But in the face of so much global uncertainty, investors would be wise to consider the latest trends and dynamics impacting this maturing asset class.

2012-12-18 Three Takeaways from the Fed by David Rosenberg (Article)

The equity market likes the prospect of more money printing and the Fed's more forceful efforts to reflate the economy, and stocks are a far better inflation hedge than bonds.

2012-12-11 Loomis Sayles' Matt Eagan on the Macro and Fixed Income Outlook by David Schawel, CFA (Article)

In this interview, Loomis Sayles' Matt Eagan discusses the fixed income universe, Fed policy and issues facing the global macro economy. Eagan is the co-manager, along with Dan Fuss, of the Loomis Sayles Bond Fund and he manages the Loomis Sayles Strategic Alpha Bond Fund.

2012-12-04 Cliff Diving by Michael Lewitt (Article)

While there may be compromise to avoid the self-inflicted crisis of the fiscal cliff, the course of fiscal policy is unlikely to alter significantly. There is a great deal of bold talk about tax reform, but the odds of our current leaders replacing our profoundly flawed tax regime with one that would breed economic growth and productivity are low. Congress will be lucky to avoid the fiscal cliff; asking it to alter the economy's DNA is unrealistic.

2012-11-13 Emerging Markets: Maintaining Perspective by Robert O. Abad (Article)

In this Q&A, Western Asset Portfolio Manager Robert Abad discusses the latest dynamics and trends within emerging markets (EM). Although EM continue to demonstrate resiliency, Mr. Abad believes that given the amount of global uncertainty today, it is important that investors evaluate opportunities alongside a manager equipped to guide them through the risks and rewards of this evolving asset class.

2012-11-06 ClearBridge Advisors - Market Commentary Q312 by Harry ?Hersh? Cohen (Article)

Vibrant end demand is missing, as consumers have neither the wherewithal nor the will to spend as they did in prior periods.

2012-10-30 The Yield Hunt by Michael Lewitt (Article)

The high-yield market is not in danger of imminent collapse as some have argued. As long as defaults remain relatively low, and interest rates remain invisible, investors will continue to chase yield. But a few things could cause a sharp sell-off in the near future.

2012-10-16 Will Bonds Be ?Burnt to a Crisp?? by David Schawel, CFA (Article)

Bill Gross's recent monthly commentary painted a disturbing picture for investors - he foresees bonds being ?burnt to a crisp.? This isn't just hot air. Such a conflagration is possible, and investors in bond funds, especially those that are constructed similar to the widely followed Barclays bond index, need to heed risks inherent in today''s market.

2012-09-04 Risks in the Search for Yield by Charles Lieberman (Article)

Interest rates are so extraordinarily low that investors have pushed up prices (and pushed down yields) of all the traditional investments used for income, so they have even forced into more esoteric or risky investments. This search for yield has created significant risks that may not be well appreciated. This Commentary discusses these risks.

2012-08-31 Risks in the Search for Yield by Charles Lieberman (Article)

Interest rates are so extraordinarily low that investors have pushed up prices (and pushed down yields) of all the traditional investments used for income, so they have even forced into more esoteric or risky investments. This search for yield has created significant risks that may not be well appreciated. This Commentary discusses these risks.

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!

2012-07-17 Can you Beat SPIAs with Long-Term Bonds? by Michael Edesess (Article)

While single-premium income annuities (SPIAs) guarantee a specific income as long as the purchaser lives, their rates of return generally compare unfavorably with long-term bonds over normal life expectancies. This makes SPIAs look like the inferior investment, notwithstanding their value as longevity insurance. But considering the low level of interest rates and the potential for future volatility, SPIAs are still a good choice for many retirees.

2012-07-09 Disappointing, but Not Terrible by Charles Lieberman (Article)

Job growth has slowed to a disappointing pace over the past three months, insufficient to bring down unemployment, but not so weak that recession is much of a threat. This mediocre performance also leaves the Fed in a quandary, neither making an obvious case to leave policy unchanged or a clear case to implement yet another form of policy accommodation.

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.

2012-05-15 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.

2012-05-01 Q2 Outlook: by OppenheimerFunds (Article)

Chief Economist Jerry Webman explains why he believes the U.S. economic recovery is real and CIO Art Steinmetz talks about how stocks are as cheap compared to bonds as they have been in decades.

2012-04-24 65+5+Dividends: The case for quality dividend stocks in the first five years of retirement by Legg Mason ClearBridge Advisors (Article)

Retirees are living longer than ever before, and for many, outliving their money is a real concern. A good reason to consider quality large-cap dividend stocks in the early years of retirement - which have historically offered higher returns than fixed income with lower volatility than equities overall.

2012-04-24 Why a 60/40 Portfolio isn?t Diversified by Alex Shahidi (Article)

Maintaining a balanced portfolio is critical, especially when predictions of growth and inflation vary as widely as they do today. Investors are always better off spreading risk than aggressively betting on one economic outcome, and that's especially true when the range of possible economic outcomes is so wide.

2012-04-10 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 Senior Loans Attractively Priced Relative to High Yield by OppenheimerFunds, Inc. (Article)

By restoring confidence in the global financial system, the European Central Bank's Long Term Refinancing Operation has allowed global bond investors to participate in attractive opportunities around the world.

2012-03-19 Did You See The 10-Year? by John Petrides (Article)

This week the US 10 year Treasury note spiked from 2% yield on Monday to 2.4% by the end of Wednesday. Around the office we were marveling at this move. Given the recent volatility in the equity market, that might not seem like much to stock investors, but to those in the fixed income world thats quite a change. The sudden spike in Treasuries has several implications: 1. Those investors who rushed into U.S. Treasuries over the past four months out of fear and panic (presumably not in hopes of achieving income) in search of safety, actually have an unrealized loss in their position!

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.

2012-02-21 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.

2012-02-13 Bill Gross vs. Warren Buffett and Larry Fink by Charles Lieberman (Article)

While bonds seem frightfully overvalued, stocks are cheap because investors are so hell bent for safety. Investors continue to shift capital out of stock funds and into bond funds virtually every month. This behavior suggests that they are fixated on the zero risk of default and fail to appreciate how they will be hurt by the loss of buying power.

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.

2012-01-23 The Path of Least Resistance Is Up by Charles Lieberman (Article)

There is so much skepticism with respect to stocks that most everyone who might be scared out of the market has already exited. Investors fear a credit meltdown in Europe following a Greek default. They also fear a weakening domestic economy. As a result, stock prices are depressed, despite solid earnings growth and a healthy corporate sector. If investor's fears are not fulfilled, stocks should move higher.

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.

2011-12-20 Gundlach on the Key Threat to Global Economies by Robert Huebscher (Article)

If class warfare is to be the dominant theme in next year?s presidential campaign, it will revive the premise of Ernest Hemingway's 1937 novel, To Have and Have Not, which he wrote in the midst of the second downturn of the Great Depression. That was also the title Jeffrey Gundlach gave his conference call with investors last week, during which he warned that wealth inequality will threaten European and domestic economies. Last week also saw Morningstar pass over Gundlach as a candidate for its fixed-income manager of the year award, so we?ll look at whether that decision made sense.

2011-11-08 Bill Gross' Revised Paradigm: The New Normal Minus by Robert Huebscher (Article)

Following the financial crisis of 2008, PIMCO articulated its 'new normal' forecast of slow growth and mediocre capital market returns. Appending the even drearier modifier 'minus' to that outlook, Bill Gross said that expectations now appear worse than even he previously feared. Gross was pessimistic in both the near and long terms, and he startled the audience with his premonition that 'capitalism is at risk.'

2011-11-08 Is One Better than Three? by Dave Loeper, CIMA, CIMC (Article)

One way to 'juice' a portfolio is by increasing allocations to small- and mid-caps, as one recently published paper contends. But a careful analysis - properly adjusting for risk - shows how that seemingly appealing approach can destroy client wealth.

2011-10-25 The Questions You Should Ask about PIMCO?s Total Return Fund by Martin Weil (Article)

When a manager's performance slips, the inevitable question is why. Was this a simple misjudgment on the direction of the markets or an incorrect selection of securities in the portfolio? On the other hand, is the slip indicative of a more serious process failure? When the manager in question is Bill Gross, the answers to these questions become crucial to money managers and investors across the country.

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.

2011-09-27 Reexamining Bill Gross' Decision to Sell Treasury Bonds by Geoff Considine (Article)

Bill Gross made headlines in February by asserting that Treasury bonds were not providing enough yield to make them worth the risk and reducing his allocation to zero in the PIMCO Total Return Fund. The subsequent rally forced him to admit his mistake in August, but by then his fund was trailing 90% of its peers and having its worst year since 1995. I will examine Gross' decision in retrospect, to illustrate its tactical and strategic costs and benefits for his shareholders.

2011-09-06 Five Strategies for a Sideways Market by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)

If this slow growth environment coupled with asset price volatility continues for (to steal a quote from Fed Chairman Bernanke) 'an extended period,' what additional portfolio strategies might aid the overall risk/return profile of investor portfolios? More specifically, how do you manage investments in a sideways market?

2011-09-06 No Way Out by Michael Lewitt (Article)

There aren't enough Steve Jobs and Mark Zuckerbergs to innovate our way out of the Everest of debt we have built for ourselves (and will continue to build for the foreseeable future). The good news (a purely relative evaluation) is that astute investors will find enormous opportunities in today's markets as they increasingly reflect unsustainable fiscal and monetary imbalances.

2011-09-06 A Buying Opportunity for Retail Municipal Bond Investors by Chris Shayne, CFA (Article)

While market volatility over the last few weeks drove Treasury yields down, odd-lot municipal bonds yields remained intact. This creates a unique buying opportunity for individual investors.

2011-08-30 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.

2011-08-09 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 Improving on the Ultimate Income Portfolio by Geoff Considine (Article)

The Ultimate Income Portfolio, which was published in this newsletter July 6 of last year, has delivered the risk-adjusted returns that I projected. Here's a detailed look at how last year's portfolio performed and several ways it can be improved in today's environment.

2011-07-12 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.

2011-07-05 Fox in the Henhouse by Joseph Calhoun and Douglas Terry (Article)

In 1971, President Nixon ended the Bretton Woods gold standard currency system. That move set us on a path of debauching our currency through inflation. Ever since, we have counted on the Federal Reserve to preserve the purchasing power of our money. We have depended on the fox to protect our hens.

2011-06-21 The Greek Comedy by Michael Lewitt (Article)

It is no longer prudent to dismiss the possibility of a worst-case outcome for the Greek debt crisis. Greece is not only laying bare the flawed structure of the European Union, but the fragility of the global financial system. An interconnected and networked global economy cannot ignore problems on its so-called periphery because there is no longer any periphery. Derivatives and other counterparty relationships have seen to that.

2011-06-20 Will the End of QE2 Cause Interest Rates to Rise? by Charles Lieberman (Article)

The key to the interest rate outlook is the pace of economic activity, not QE2. If Greece obtains its financing and economic activity rebounds from the supply chain disruption, capital flight into dollar assets will cease and investors will turn their concern to the prospect of losses on Treasuries due to a healthier economy. No one believes 3% yields on 10-year Treasuries are compatible with an improving economy. QE2 is a distraction.

2011-06-14 The Consequences of Policy Failure by Michael Lewitt (Article)

Investment performance for the rest of the year will be determined by the macro-economic views of investment managers. While microeconomic factors are always extremely important in charting investment strategies, they are particularly important today as the U.S. and global economies continue to fight their way through the detritus of the global debt crisis. A compelling case can be made for weaker 2Q112 growth based on a combination of factors.

2011-06-10 Why Bill Gross Doesn?t Like Stocks (or Treasury Bonds) by Sam Parl (Article)

Stocks have come to the end of a ?wonderful journey,? according to PIMCO's Bill Gross, and are now on their own, like ?a baby bird just released from the nest.? The journey Gross spoke of is the multi-decade decline in real interest rates, which have fueled bull markets across ?risk assets,? especially in equities and bonds.

2011-04-19 Gundlach: Treasuries will Rally When QE2 Ends by Robert Huebscher (Article)

The bonds that PIMCO's Bill Gross sold to take a 3% short position in the Treasury market may have found a buyer in Doubleline's Jeffrey Gundlach. In a conference call with investors last week, Gundlach said that Treasury prices would rise in the near term, once QE2 expires on June 30.

2011-04-12 Been Down So Long It Looks Like Up To Me by Michael Lewitt (Article)

"The budget crisis is a crisis of leadership," writes Michael Lewitt in the latest issue of the HCM Market letter. "There is no intellectual mystery involved in cutting the budget - entitlement spending must be reduced through the adoption of tighter eligibility standards... The markets will also have to evaluate whether Congress and the Obama administration can make any meaningful progress on budget reform, which will mean tackling the entitlement issue. The failure to rein in federal deficits remains a profound threat to the dollar and interest rates."

2011-04-12 Dumb, Dumber and Dumbest by Barry M. Ferguson (Article)

The two stupidest characters ever to grace the big screen - Lloyd Christmas and Harry Dunne - were first introduced to the world in Jim Carrey's 1994 movie, Dumb and Dumber. If that movie were made today, its leading characters could easily be our government and the supposedly independent Federal Reserve Bank. Both of these institutions have foisted their misguided policies on the American public, who, in their passive acceptance, have proven themselves to be the dumbest of all.

2011-04-05 A Close Look at the PIMCO-Met Life Retirement Strategy A Marriage Made in Investment Heaven? by Michael Edesess (Article)

If you embrace their recently announced co-marketing strategy, when you're relatively young you use PIMCO's Real Income Funds for stable income in the near term. When you're older Met Life's Longevity Income Guarantee kicks in and takes it from there. You're set with secure income for life. We examine these products more closely and analyze whether they are good deals, either separately or together.

2011-03-16 Economic & Investment Implications of Japan?s Tragedy by Charles Lieberman (Article)

Markets in Japan and elsewhere have sold off fairly sharply, as the full scope of the tragedy in Japan has unfolded day by day. We will focus on the economic and investments implications of the tragedy, strictly from the perspective of our largely U.S.-based investors. Domestic markets have overreacted somewhat, since domestic business prospects are more likely to be helped than weakened, at least in the short-term. Longer-term policies focused on energy policy will likely remain unclear until we can see how policymakers modify U.S. energy policies in response to the reactor problems in Japan

2011-03-14 The End of QE2 by Charles Lieberman (Article)

This week's meeting of the Federal Reserve Open Market Committee is sure to focus on whether to terminate its quantitative easing program early and when it will be time for overnight interests to be returned to more normal levels. While economic growth appears to be much healthier, higher oil prices and credit risks in Europe pose significant risks to the growth outlook. Therefore, we expect no change to policy, although it is our judgment that the Fed should begin to alter its language subtly to remind investors that changes in policy will be coming.

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.

2011-01-11 Tactical Asset Allocation and Market Timing: What's the Difference? by Nancy Opiela (Article)

Why is it that the industry dismisses significant changes to portfolio allocations as "market timing" transactions but embraces the subtler "tactical shifts" many advisors are making in the current, transitional market? As advisors debate the nuances of that question, the more relevant question may be: How would you respond if a client asked you to explain the difference between market timing and tactical asset allocation?

2011-01-11 The Two Elephants Facing the US Economy by Michael Lewitt (Article)

The consensus has reached the conclusion that financial markets will enjoy a strong start to 2011. This is reason enough to approach the markets with caution as the year begins. When everybody is leaning to one side of the boat, the vessel is far more likely to tip over, particularly if it hits an unexpected wave.

2010-12-21 Gundlach: Are Taxes Too Darn Low? by Robert Huebscher (Article)

One way to avert the crisis posed by growing fiscal deficits is a significant tax increase, according to Doubleline's Jeffrey Gundlach. Although he did not advocate this policy, in his conference call with investors last week he said the strain of fiscal deficits poses as yet unanswered challenges to the economy and the markets.

2010-11-09 How Modern Is Your Portfolio Theory? by Direxion Funds (Article)

After 58 Years, is there Another Way to Conquer the Efficient Frontier? In the past, active or "tactical" investment management referred to jumping in and out of stocks and bonds - market timing. With the introduction of sophisticated funds that help the masses harness the power of institutional managers and alternative asset classes and strategies, today, tactical management may help to renovate your portfolios - and help you retain and attract assets.

2010-11-09 A Reading List for 2010 by Vitaliy Katsenelson (Article)

Updated for 2010 and in time for the holidays, here is the latest installment of my recommended books. I originally wrote this list in 2008 and again last year. I intend to keep adding to and revising it every year. It contains seven sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, Risk and Books for the Soul. The first three sections are presented below and the remaining four will be presented next week.

2010-11-09 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.

2010-09-14 Identifying Opportunities in the Municipal Bond Market by RidgeWorth Investments (Article)

Ridgeworth Investments shares its perspective on the muni bond market in a recent white paper entitled "Identifying Opportunities in the Municipal Bond Market" which outlines the historical benefits of municipal bonds, the changing market dynamics in 2009 as well as RidgeWorth's outlook for municipal bonds in 2010 and potentially beyond. RidgeWorth concludes that despite a challenging market environment, munis still offer attractive investment opportunities. We thank them for their sponsorship.

2010-09-14 The Centre Cannot Hold by Michael Lewitt (Article)

"A refusal to shed discredited monetary and fiscal policies and embrace creative and politically bold solutions is keeping our economy mired in high levels of structural unemployment and below-trend growth," writes Michael Lewitt in the latest edition of the HCM Market Letter. He also believes that "misguided faith in Keynesian solutions to debt crises, a near-religious belief that mild deflation must be avoided... and uninformed media hype about the alleged benefits of mergers and acquisitions" should be added to the list of bad ideas that lead economic policy and markets astray.

2010-09-14 Municipal Bonds : Much Healthier than Feared by Jim McDonald (Article)

Investors and advisors are growing increasingly concerned about investing in bonds. Historical levels of flows into the asset class have driven prices up significantly. The extended economic downturn continues to apply pressures to municipalities and states are struggling with their balance sheets. Despite these headwinds investment professionals maintain that municipal bonds should continue to play a role in client portfolios. We thank Northern Trust Investments for their sponsorship.

2010-09-07 It's the Economy, Stupid by Charles Lieberman (Article)

Stocks are so totally out of favor, any excuse will suffice to justify investing elsewhere. Such rationalizations can overcome depressed equity valuations and record low bond yields, at least until the market rallies and investors suddenly confront that new reality. But the key is the economy. If growth is sustained, stocks have enormous upside.

2010-08-24 Build America Bonds Power the US States by Hildy Richelson, Ph.D. (Article)

A skeptical attitude toward new products has long served the best interests of advisors and their clients, almost without fail. However, in this guest contribution, Hildy Richelson argues that advisors should not be afraid to embrace one of the market's most prominent recent innovations: the Build America Bond (BAB).

2010-07-13 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?

2010-07-06 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.

2010-06-08 Dan Fuss: What Keeps Bond Managers Up at Night by Dan Richards (Article)

Highly respected fixed-income manager Dan Fuss of Loomis Sayles recently spoke with Dan Richards about what keeps bond managers up at night. Fuss identifies the critical issues bond investors face. We provide a video and a transcript of the interview.

2010-06-08 The First Thing We Do, Let?s Kill All the Quants by Michael Lewitt (Article)

In the latest issue of the HCM Market Letter, Michael Lewitt draws the parallels between the Gulf of Mexico oil spill and financial reform - both, he says, demonstrate our inability to learn from our mistakes. Lewitt also comments on quantitative trading strategies, economic recovery and the capital markets.

2010-06-01 Municipal Bond Market Insights by Northern Trust Investments (Article)

Not surprisingly, the most profitable investment trends tend to be those with the most staying power. That could be particularly good news for investors in municipal bonds, since structural forces are in place that may make tax-free bonds - and the income they generate - even more valuable in the years to come. Northern Trust provides their secular outlook for municipals, and we thank them for their sponsorship.

2010-05-11 God Is Dead: The Implications of the Goldman Sachs Case by Michael Lewitt (Article)

Michael Lewitt provides us with the most recent issue of the HCM Market Letter, where his discusses the implications of the Goldman Sachs case. Lewitt says Goldman faces a terrible dilemma, and should heed the lessons of the downfall of Drexel Burnham two decades ago. Lewitt also comments on the private equity industry, public pension funds, and bank capital requirements and the ratings agencies.

2010-05-10 Europe Fires the Bazooka by Charles Lieberman (Article)

Greece's risk of default has the potential to disrupt markets globally, depressing stock and most commodity markets, while pushing the safest bonds, Treasuries, to artificially high values. With Greece as a possible disruptive force to global capital markets, the Fed will be hesitant to raise rates. Moreover, restrictive fiscal policies in Greece, Spain, Portugal, Italy and the U.K. will weaken U.S. exports to Europe. While a less expansion oriented monetary policy will still be needed in the U.S., it will come later given the disruptive forces from Europe that will restrain global growth.

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.

2010-04-26 Stocks Still Have Limited Downside by Charles Lieberman (Article)

Stock valuations are still reasonable and they are getting cheaper, despite the market rally. Profits are rebounding strongly and economic growth is still in the early stages of an expansion. With unemployment still at 9.7 percent, the economy and corporate profits have considerable upside and it will take some years for the economy to revert to a normal level. Any slide in stock prices would provide an opportunity for investors who have missed the rally a chance to get in, which implies only limited downside for stocks at this time.

2010-04-20 Letter to the Editor ? The Interest Rate Debate by Various (Article)

As a Treasury bond bear of modest conviction, advisor Martin Weil read with interest Gluskin Sheff's David Rosenberg's piece in our April 12 issue. Though providing little data to support his thesis, Rosenberg makes a solid argument for why it is inflation, not supply and demand, that drives Treasury prices and yields. In taking this position, he pits himself against, among others, Jim Grant, with whom he has been carrying on a running debate.

2010-04-13 Are Public Employees Bankrupting the Nation? by Charlie Curnow (Article)

While markets may be recovering, public debts are still mounting. Charlie Curnow reviews Plunder, the new book by Steven Greenhut, which blames public sector unions for a large portion of these debts. To Greenhut, we the taxpayers are helpless villagers, while corrupt public employee unions are barbarians at the gate, raiding government treasuries and leaving us with nothing but unfunded liabilities.

2010-04-13 Shameless by Michael Lewitt (Article)

The fiscal train wreck in the United States has not been set back on the tracks, and the global imbalances that led to the financial crisis have not gone away. Quite to the contrary, writes Michael Lewittin Shameless, the latest edition of his HCM newsletter. In fact, if progress isn't made with respect to these issues, and if intelligent financial reform is not enacted, future instability is guaranteed.

2010-03-31 Yield Curve Back Near Highs by Team of Bespoke Investment Group

With long-term interest rates rising and short-term interest rates contained, the rising yield curve is once again starting to receive attention. The Fed defines the yield curve as the difference in basis points between the yield on 10-year and 3-month U.S. Treasury bonds. High values in the yield curve are positive for the economy, while an inverted yield curve is a harbinger of weakness. The curve is currently at the high end of its historical range, and has made multiple attempts to break through the 380 bps level in the current period.

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.

2010-03-03 Recommended Bond Allocation by Team of Bespoke Investment Group

Have analysts become more conservative, or will the recommended bond weighting continue to fall as the market goes up? Wall Street strategists currently recommend a 30.5 percent weighting in bonds. Before the run-up in treasury bonds during the financial crisis, the recommended bond weighting ranged between 15 and 20 percent. As bond prices rallied, strategists increased their recommended weighting. Bond prices peaked in December 2008, however, and have been drifting lower since the onset of the current bull market in stocks.

2010-01-26 The Potemkin Market by Michael Lewitt (Article)

We are again privileged to publish the current issue of Michael Lewitt's newsletter, titled The Potemkin Market. Lewitt updates his forecast for the S&P 500, criticizes the current financial reform efforts and the ongoing GSE bailout and Fed Chairman Bernanke. Lewitt argues that risk is overpriced in many segments of the market.

2010-01-04 2010: The Year of Economic Recovery by Charles Lieberman (Article)

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.

2009-11-24 Dan Fuss and the Long-Term Outlook for Interest Rates by Robert Huebscher (Article)

Dan Fuss, the highly respected bond manager at Loomis Sayles in Boston, says we are in the early stages on a long-term rise in interest rates. His view was shared by two other panelists, Carl Kaufman of Osterwies and Margie Patel of Evergreen. If you accept this consensus, you must ask whether your fixed income allocation is appropriate.

2009-11-17 Federal Taxes & Municipal Bonds Historical & Current Perspective by Munder Capital Management (Article)

With income tax increases seemingly around the corner given the budget deficit and a potentially very expensive federal health care plan, the spotlight has returned to municipal bonds and the power of tax-free income. Municipal portfolio managers at the Munder Funds identify the attractiveness of municipal bonds based on projected budget deficits, current spreads over treasuries, and macroeconomic trends. We thank them for their sponsorship.

2009-09-15 Five Reasons to Avoid the Gold Rush (Updated) by Vitaliy Katsenelson (Article)

The reasons why one should sell the cat, pawn the mother-in-law, and use the proceeds to buy gold are well known. However, in this guest contribution, Vitaliy Katsenelson offers arguments why one should think twice before jumping in bed with the gold bugs, or at least remain sober while determining gold's weight in the portfolio.

2009-08-25 Letters to the Editor by Various (Article)

In our letters to the Editor, a reader responds to Dougal Williams' article last week, A Crash Course in Investing: Six Lessons from the Market Meltdown, and other readers respond to our article on Actively Managed TIPS and to an Advisor Market Commentary on healthcare policy.

2009-08-18 Actively Managed TIPS? by Robert Huebscher (Article)

When PIMCO talks, the market listens. But we mustn't forget that the bulk of PIMCO's revenue comes from actively managing bond portfolios so, when they claim that alpha can be earned by actively managing TIPS, a healthy dose of scrutiny is warranted. Our article shows why that scrutiny is justified.

2009-08-18 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.

2009-06-30 Letters to the Editor: The Road to Zimbabwe by Various (Article)

In the second set of our letters to the Editor, we publish responses to to our article, The Road to Zimbabwe.

2009-06-15 What if the Chinese Sell Treasuries? by Charles Lieberman (Article)

2009-06-08 Why are Interest Rates Rising on Treasuries? by Charles Lieberman (Article)

2009-05-19 Opportunities in TIPS by Robert Huebscher (Article)

TIPS offer a perfect hedge against inflation for US investors, but advisors need to understand their risks. We look at the history of TIPS prices and explain why this asset class is more volatile than you might think.


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