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

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2014-07-09 00:00:00 Dealing With Red-Hot Markets by Mark Ungewitter of Charter Trust Company

This summer the streets are sizzling… and so is the stock market. To the chagrin of value investors, US equities have not experienced a normal correction since May 2013. But what is “normal” and what is “hot”? This article discusses a behavioral measure of market extremity, the put/call ratio, and offers some basic advice for dealing with the current environment.

2014-07-01 00:00:00 Chuck Royce on 2Q14: Fundamentals Reassert Their Importance by Chuck Royce of The Royce Funds

Since the May 2013 low for the 10-year Treasury, we have seen the market shift its focus to more fundamentally and financially stronger companies with attractive long-term prospects—qualities that we have always championed at Royce.

2014-06-02 00:00:00 Can Japanese Stocks Defy Sluggish Exports? by Katsuaki Ogata of AllianceBernstein

As Japanese equities struggle to make headway this year after an explosive 2013, new questions are being asked about the economy’s direction. From an investor’s perspective, we think the sluggish export trend may be masking a more positive environment for stocks.

2014-05-05 00:00:00 The 5 Commandments of Warren Buffett and Charlie Munger by William Smead of Smead Capital Management

Here you will find our review of the 2014 Berkshire Hathaway Annual Shareholder Meeting. As we consider these men pioneers of long-duration common stock investing, we wanted to share what we believe were the best nuggets of wisdom from the weekend.

2014-04-15 00:00:00 Running Backwards to Catch Up by Jerry Wagner of Flexible Plan Investments

Did you ever try to run backwards? I find walking backwards difficult enough. Running in reverse can send you tumbling.

2014-04-08 00:00:00 Predatory Trading ? Just How Big an Issue is High-Speed Trading? by Matt Waldner of Columbia Management

High-frequency trading (HFT) is a topic institutional investors and traders have been battling for years. A new book titled Flash Boys by author Michael Lewis of Moneyball fame, investigations out of U.S. regulators and a 60 Minutes spot on a recently developed exchange, IEX, brought this topic from Wall Street to Main Street. In this article, we?ll take a walk around the issue, educate our investors, and hopefully, quell any concerns.

2014-04-05 00:00:00 The Lions in the Grass, Revisited by John Mauldin of Millennium Wave Advisors

Today we explore a few things we can see and then try to foresee a few things that are not quite so obvious. The simple premise is that it is not the lions we can see lounging in plain view that are the most insidious threat, but rather that in trying to avoid those we may stumble upon lions hidden in the grass.

2014-03-16 00:00:00 Inequality and Opportunity by John Mauldin of Millennium Wave Advisors

Today we will continue our thinking about income inequality, and I will respond to some of your letters, as they make good launching points for further discussion of the topic.

2014-03-09 00:00:00 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 00:00:00 Time for Nat Gas Stocks to Come in From the Cold? by Bradford Evans of Heartland Advisors

The prices of natural gas stocks haven’t risen in concert with this winter’s higher commodity prices. Here’s a look at why that might change.

2014-03-03 00:00:00 Six Easy Pieces: Fundamentals of Asset Allocation Explained by Patrick Rudden of AllianceBernstein

Figuring out the best split for your assets often seems daunting. But it doesn?t have to be. This template can help you get started.

2014-02-25 00:00:00 Prepayments and Value in the Non-Agency Market by Harrison Choi, Brian Rosenlund of TCW Asset Management

Non-agency mortgage bond investors look to voluntary prepayment projections as an essential component of assessing future cash flows and returns. Voluntary prepayments are the annualized percentage of the mortgage pool that leaves the pool each month due to refinancing or paying off a mortgage without a loss. Without equity in the home, it is nearly impossible for a non-agency borrower to refinance the mortgage and the sale of a home would generate a loss through a short sale or foreclosure.

2014-02-15 00:00:00 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.

2014-02-07 00:00:00 Knockout Punch for the Stock Markets? by Robert Isbitts of Sungarden Investment Research

Boxers are tough. So are secular bear markets. Whether or not we have been in one since back in 2000 (we say yes) is a subject of constant debate in the investment advisory industry. What is more important to investors today is whether past market behavior tells us anything important about the current environment? We think the answer is yes - human behavior repeats itself over and over again.

2014-01-18 00:00:00 Forecast 2014: 'Mark Twain!' by John Mauldin of Millennium Wave Advisors

The surface of the market waters looks smooth, but the data above suggest caution as we proceed. Perhaps slowing the engine and taking more frequent soundings (or putting in closer stops!) might be in order. The cry should be "Mark twain!" Let’s steam ahead but take more frequent readings and know that a course correction may soon be necessary.

2014-01-04 00:00:00 Forecast 2014: The Human Transformation Revolution by John Mauldin of Millennium Wave Advisors

It is that time of the year when we peer into our darkened crystal balls in hopes of seeing portents of the future in the shadowy mists. This year I see three distinct wisps of vapor coalescing in the coming years. Each deserves its own treatment, so this year the annual forecast issue will in fact be three separate weekly pieces.

2013-12-21 00:00:00 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?

2013-12-07 00:00:00 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.

2013-11-24 00:00:00 Game of Thrones - European Style by John Mauldin of Millennium Wave Advisors

The Eurozone crisis is not over, and it will not end quickly or soon. Even if it seems to unfold in slow motion - like the slow build-up in a Game of Thrones storyline to violent internecine clashes followed by more slow plot developments but never any resolution, the Eurozone debacle has never really gone away. The structural imbalances have still not been fixed; politicians and central bankers have still not agreed to solve major fiscal problems; the overall economy still disintegrates; unemployment is staggeringly high in some countries and still rising; and the people are growing restless.

2013-11-17 00:00:00 The Unintended Consequences of ZIRP by John Mauldin of Millennium Wave Advisors

Two recently released papers make an intellectual and theoretical case for an extended period of very low interest rates and, in combination with other papers from both inside and outside the Fed from heavyweight economists, make a strong case for beginning to taper sooner rather than later, but for accompanying that tapering with a commitment to an even more protracted period of ZIRP. We are going analyze these papers, as they are critical to understanding the future direction of Federal Reserve policy. Secondly, we’ll look at some of the unintended consequences of long-term ZIRP.

2013-11-13 00:00:00 GameStop and Our Long-Term, Contrarian Investment Approach by Jay Kaplan of The Royce Funds

Because our contrarian approach emphasizes a long-term time horizon, we tend to invest in companies that we believe have the financial wherewithal to withstand out of favor periods. GameStop used trying times to build conviction and expand its core business rather than abandoning its discipline to meet outside expectations.

2013-10-20 00:00:00 The Damage to the US Brand by John Mauldin of Millennium Wave Advisors

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

2013-10-12 00:00:00 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.

2013-10-10 00:00:00 Better Beta Is No Monkey Business by Patrick Rudden of AllianceBernstein

The infinite monkey theorem states that a monkey hitting keys at random on a typewriter keyboard for an infinite amount of time will almost surely type a given text, such as the complete works of William Shakespeare. This makes perfect sense to me, but says more about infinity than it does about monkeys.

2013-10-07 00:00:00 Goose Bump Stuff... by Michael Kayes of Willingdon Wealth Management

Scientific research and discovery has always been an important aspect of American life. This, in itself, should make us hopeful.

2013-09-28 00:00:00 The Renminbi: Soon to Be a Reserve Currency? by John Mauldin of Millennium Wave Advisors

Contrary to the thinking of fretful dollar skeptics, my firm belief is that the US dollar is going to become even stronger and will at some point actually deserve to be the reserve currency of choice rather than merely the prettiest girl in the ugly contest the last currency standing, so to speak. But whether the Chinese RMB will become a reserve currency is an entirely different question.

2013-09-25 00:00:00 Muni Market Resurgent by Andrew Clinton of Clinton Investment Management

In light of the recent recovery in fixed income markets and the outperformance of the municipal bond market in particular, I thought I would send a note to provide a brief update since we last sent our market observations in July and August. As you may recall, we stated in the clearest terms that we felt the recent rise in interest rates provided an attractive entry point for municipal bond investors.

2013-09-21 00:00:00 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.

2013-09-07 00:00:00 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.

2013-08-31 00:00:00 How Do I Hate Thee? by John Mauldin of Millennium Wave Advisors

I will list a number of reasons why I hate this market and then suggest a few reasons why that should get you excited. We will look at some charts, and I’ll briefly comment on them. No deep dives this week, just a survey of the general landscape.

2013-08-30 00:00:00 Survey Says... What? by Robert Isbitts of Sungarden Investment Research

During the past week, a survey caught my eye and dropped my jaw. It was published in Investment News, a leading online and print publication for the investment advisory industry last weekend. It covered a survey of individual investors by brokerage firm Edward Jones about the potential impact of rising interest rates on their investment portfolios. According to the article, written by award-winning columnist Jeff Benjamin, “two-thirds of the respondents don’t understand how rising rates will affect their investment portfolios.”

2013-08-25 00:00:00 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.

2013-08-17 00:00:00 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?

2013-08-10 00:00:00 We Can't Take the Chance by John Mauldin of Millennium Wave Advisors

What would it have been like to be a central banker in the midst of the crisis in 2008-09? You’d know that you won’t have the luxury of going back and making better decisions five years later. Instead, you have to act on the torrent of information that’s coming at you, and none of it is good. Major banks are literally collapsing, the interbank market is nonexistent and there is panic in the air. Perhaps you feel that panic in the pit of your stomach. This week we’ll perform a little thought experiment to see if we can extrapolate what is likely to happen in when the nex

2013-08-01 00:00:00 July 2013 Market Commentary by Andrew Clinton of Clinton Investment Management

Fixed income investors have enjoyed a steady move higher in bond prices over the past five years. Given the consistency with which bond values have increased, it is understandable if bond investors were surprised by the just over 0.60%, or 60 basis point rise in ten year Treasury yields and corresponding movement down in bond prices during the second quarter.

2013-07-26 00:00:00 Investing In Bonds When Rates Are Rising by Tom Dalpiaz of Advisors Asset Management

How can investors “stay in the bond game” during these difficult rising rate environments? Here are some suggestions.

2013-07-17 00:00:00 Are Earnings Set to Disappoint? by Mark Ungewitter of Charter Trust Company

With earnings season upon us, it’s time to review market valuation from a trailing and forward perspective. Based on S&P’s forward operating earnings out to 2014, the market is reasonably valued at 13.6x. But this requires sharp EPS projections as detailed below.

2013-07-13 00:00:00 The Bang! Moment Shock by John Mauldin of Millennium Wave Advisors

This week we resume our musings about Cyprus, to see what that tiny island can teach us about our own personal need to engage in ongoing critical analysis of our lives and investment portfolios. Cyprus is not Greece or France or Spain or Japan or the US or (pick a country). I get that. No two situations are the same, but there may be a rhyme or two here that is instructive.

2013-07-10 00:00:00 Employer Mandate: A Pharma Bump in the Road by Bill Smead of Smead Capital Management

As long-duration value investors, we at Smead Capital Management have been very attracted to the conservative accounting, shareholder friendly dividends/buybacks and bright pipeline futures of major pharmaceutical/biotech companies like Merck (MRK), Pfizer (PFE) and Amgen (AMGN). Lately, there has been weakness in these shares and we’d like to review our best theory for recent fears and price weakness, while reviewing the merit of these high quality shares.

2013-07-01 00:00:00 "This Country is Different" by John Mauldin of Millennium Wave Advisors

Cyprus is a very small country, some 800,000 people. Among the leadership, everyone knows everyone. There is much to admire, as we will see. But Cyprus has had a gut-wrenching crisis, proportionately more dire than any in other European countries recently; and precedents are being established here for how future problems will be dealt with in the Eurozone and elsewhere.

2013-07-01 00:00:00 Traveling in Turkey by Frank Holmes of U.S. Global Investors

In recent weeks, protests in Turkey have made headline news, with the instability transferring to the local stock market. Since the riots began around June 3, the Borsa Istanbul Stock Exchange National 100 Index has declined 11.9 percent.

2013-06-17 00:00:00 Sector Distortions Can Be Costly in Passive Investing by Joseph Paul, Kevin Simms of AllianceBernstein

Passive investing strategies that emulate an index have become increasingly popular. But passive investing can go awry when sector concentrations leave investors exposed to unintended risks.

2013-06-15 00:00:00 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.

2013-06-08 00:00:00 Banzai! Banzai! Banzai! by John Mauldin of Millennium Wave Advisors

In practice it may be harder for Japan to grow and generate inflation than it might be for other major nations. Today we’ll focus on Japanese demographics. While the letter is full of graphs and charts, it does not paint a pretty picture. The forces of deflation will not go gently into that good night.

2013-06-01 00:00:00 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.

2013-05-25 00:00:00 The Mother of All Painted-In Corners by John Mauldin of Millennium Wave Advisors

Japan has painted itself into the mother all corners. There will be no clean or easy exit. There is going to be massive economic pain as they the Japanese try and find a way out of their problems, and sadly, the pain will not be confined to Japan. This will be the true test of the theories of neo-Keynesianism writ large. Japan is going to print and monetize and spend more than almost any observer can currently imagine. You like what Paul Krugman prescribes? You think he makes sense? You (we all!) are going to be participants in a real-world experiment on how that works out.

2013-05-23 00:00:00 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

All in all, one’s track record of success, or defeat, is defined by the consistency of one’s methodology and the frequency of positive pulsebeats one can amass over a specific duration.

2013-05-23 00:00:00 Does Behavioral Investing Make Sense Anymore? by Kevin Simms, Joseph Paul of AllianceBernstein

Value investing has faced a crisis of confidence after five tough years. Here’s why we think the behavioral investing principles that underpin the discipline are more relevant than ever.

2013-05-06 00:00:00 Lives versus Profits by Joseph Stiglitz of Project Syndicate

The US Supreme Court recently began deliberations in a case that will determine whether human genes may be patented. But we already know that permitting gene patents results in inefficiencies including monopoly profits and a failure to maximize the use of knowledge that impede the pace of innovation.

2013-04-24 00:00:00 The Road To Omaha by Bill Smead of Smead Capital Management

We have been discussing keys to the investment success of Warren Buffett and Berkshire Hathaway as we approach the 2013 annual meeting. In this week’s edition, we are considering a company which might make a good “elephant” for Berkshire to buy.

2013-04-20 00:00:00 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.

2013-03-21 00:00:00 PMI What Does It Really Tell Us? by Adam Peck of Heartland Advisors

Recently we’ve been seeing positive readings from the Purchasing Managers’ Index (PMI), news that may seem as though it would be good for all stocks. In fact, though, a look at the performance of the S&P 500 and the PMI since 1995 shows that this is not necessarily the case.

2013-03-20 00:00:00 Municipal Market Presents Attractive Entry Point by Andrew Clinton of Clinton Investment Management

Ten year Treasury yields, as recently as last week, were as high as 2.06% which compares to ten year Treasuries yields of 1.75% as of 12/31/12. As Treasury yields have drifted higher, due in part to heavier Treasury issuance and a perceived decline in market risk/volatility, municipal bond yields have risen in sympathy with Treasury yields. Having said that, at the time of the writing of this note, Treasury yields are once again lower and are now below 1.90%.

2013-02-26 00:00:00 The Postman May Not Ring at All by Paul DiGiacomo of Columbia Management

United States Postal Service is technically insolvent. Last year, the agency exhausted its borrowing capacity and failed to pay $11 billion into its retiree health plan. This year, it will not make a $6 billion contribution. While the current cash balance of $2 billion is sufficient for 10 days of operation, management forecasts a $100 million deficit by October. When payments to employees and suppliers end, so too will the mail.

2013-01-29 00:00:00 Economics and the Maximization of Profit (and Lies). by Dan Ariely of Dan Ariely Blog

When a friend sent me this paper the other day, I admit that I took a long hard look at myself and my economist friends. According to this study, economists, it seems, are worse than most when it comes to truth telling. This discovery was made by researchers Ral Lpez-Prez and Eli Spiegelman, who wanted to examine whether certain characteristics (for instance religiosity or gender) made people averse to lying. They measured the preference for honesty by canceling out other motivations, such as altruism or fear of getting caught.

2010-04-05 00:00:00 Unpleasant Skew by John P. Hussman of Hussman Funds

Stock markets are overbought and overvalued, sentiment is too bullish, and yield trends are hostile. These high risk conditions tend to lead markets to successive but slight and marginal new highs. They also tend to invite nearly vertical drops of more than 10 percent over a period of weeks. The present conditions therefore recommend a defensive investment stance. The implied total return for the S&P 500 over the coming decade is just 5.7 percent annually, the lowest level observed in any period prior to the late 1990's met bubble.

2010-03-31 00:00:00 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.

2010-03-26 00:00:00 narrative power by tom brakke of the research puzzle

The investment world illustrates the power of narrative. People up and down the informational food chain use stories to enlighten and deceive. For stock investors, many stories originate with companies and their officers, who learn that crafting a narrative that puts everything in the best light is part of their leadership role. Sell side analysts sometimes reinforce those messages by making the telling of certain stories part of their brands. Investors must therefore read widely and read well, and realize that understanding comes from taking nothing for granted and questioning everything.

2010-02-25 00:00:00 Got My Placebo Back by Dan Ariely of Predictably Irrational

Dan Ariely needed a new placebo after studies showed that Airborne Effervescent Health Formula did nothing to keep him from catching an illness. A placebo will only work if you think that it is doing something. Luckily, his mother sent him a new medicine in the mail.


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