More on Related Themes
2014-07-09 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.
2014-07-08 The Importance of Likability by Daniel Solin (Article)
I am fascinated by the disconnect between what advisors say to persuade prospects to become clients and what data indicate would actually work. The truth is that most of us need to radically change our approach to prospect meetings.
2014-07-01 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 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.
2014-05-14 New Mortality Table Recommended by Society of Actuaries by Brian Donohue of October Three Consulting
In February the Retirement Plans Experience Committee (RPEC) of the Society of Actuaries released its Exposure Draft RP-2014 Mortality Tables, recommending new mortality tables for the valuation of defined benefit plan liabilities. In this article we review the SOA RP-2014 report, focusing on its consequences for regulatory purposes. We begin with a discussion of the regulatory framework and then proceed to a discussion of the exposure draft and its implications.
2014-05-13 John Hussman: Really Mean Reversion by Robert Huebscher (Article)
In his most recent commentary, GMO’s Jeremy Grantham said value investors are destined to endure pain in a market bubble, especially in its latter stages, as clients scorn them for missed opportunities. John Hussman is surely one such investor - indeed, Grantham’s commentary drew extensively on Hussman’s research. In a recent talk, Hussman explained why he, Grantham and other long-term value-driven investors should be worried, even if equity markets perform well in the short run.
2014-05-05 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.
2014-04-22 Does Rebalancing Reduce Risk? by Michael Edesess (Article)
In a previous article I asked whether rebalancing increases return, as the term "rebalancing bonus" implies. I concluded that it does not. In this article I ask whether it is a tool for reducing risk. The answer depends on whether you believe that the standard deviation of long-term returns is the appropriate measure of risk. This article will show why it often is not.
2014-04-15 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.
2014-04-09 Take an Active Approach to Selecting Your Active Manager by Robert McConnaughey of Columbia Management
For some time, we have written about the challenges active equity managers face from a market with unusually high cross-correlations. We have also stated our belief that the correlation pendulum would swing back to more normal levels (at least) as the aftershocks of the 2008 financial crisis abated, with a corresponding benefit to active managers. That swing is well under way and a growing number of commentators have begun to echo our observation.
2014-04-08 Predatory Trading ? Just How Big an Issue is High-Speed Trading? by Matt Waldner of Columbia Management
High-frequency trading (HFT) is a topic institutional investors and traders have been battling for years. A new book titled Flash Boys by author Michael Lewis of Moneyball fame, investigations out of U.S. regulators and a 60 Minutes spot on a recently developed exchange, IEX, brought this topic from Wall Street to Main Street. In this article, we?ll take a walk around the issue, educate our investors, and hopefully, quell any concerns.
2014-04-05 The Lions in the Grass, Revisited by John Mauldin of Millennium Wave Advisors
Today we explore a few things we can see and then try to foresee a few things that are not quite so obvious. The simple premise is that it is not the lions we can see lounging in plain view that are the most insidious threat, but rather that in trying to avoid those we may stumble upon lions hidden in the grass.
2014-04-02 Tax Reform: Camp Fires Up the Debate by Milton Ezrati of Lord Abbett
Chances for passage of the congressman's overhaul of the U.S. tax code are slim, but provisions of the bill could point the way to future reform.
2014-04-01 Why I Sold - Part 5: Overcoming the Psychological Resistance to Merging by Jim Whiddon (Article)
Before I made the difficult decision to merge my RIA with a larger partner, I took one last look at the pros and cons. Despite all the positive aspects my research turned up, I hesitated over some lingering issues that were important to resolve. And while the bottom line was compelling, many of my concerns had to do with the psychological effects of the move, both for me and for my clients.
2014-03-16 Inequality and Opportunity by John Mauldin of Millennium Wave Advisors
Today we will continue our thinking about income inequality, and I will respond to some of your letters, as they make good launching points for further discussion of the topic.
2014-03-09 The Problem with Keynesianism by John Mauldin of Millennium Wave Advisors
Keynes himself would appreciate the irony that he has become the defunct economist under whose influence the academic and bureaucratic classes now toil, slaves to what has become as much a religious belief system as it is an economic theory. Men and women who display an appropriate amount of skepticism on all manner of other topics indiscriminately funnel a wide assortment of facts and data through the filter of Keynesianism without ever questioning its basic assumptions. And then some of them go on to prescribe government policies that have profound effects upon the citizens of their nations.
2014-03-04 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 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 Understanding the CAPE Debate: The History of 24 or More by Keith C. Goddard, CFA, Channing S. Smith, CFA, and Monty L. Butts (Article)
At its recent level near 25, the cyclically adjusted price-to-earnings ratio (CAPE) of the U.S. stock market suggests that stocks are very richly priced or that there is something wrong with the CAPE. Debate about these two explanations intensifies each time the ratio ticks higher. This article offers objective data to help readers decide for themselves.
2014-02-25 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 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 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.
2014-01-21 New Research: The Unexpected Variable that Leads to Referrals by Dan Richards (Article)
Few topics get as much attention as the best way to increase referrals. Some of ideas I’ve heard including coaching clients to better understand and communicate your value, becoming the safe choice in a targeted niche and "create raving fans" by delivering an outstanding client experience. Depending on what you read and who you believe, each of these is the key to increased referrals. None of these are what truly drives referrals.
2014-01-18 Forecast 2014: \'Mark Twain!\' by John Mauldin of Millennium Wave Advisors
The surface of the market waters looks smooth, but the data above suggest caution as we proceed. Perhaps slowing the engine and taking more frequent soundings (or putting in closer stops!) might be in order. The cry should be "Mark twain!" Let’s steam ahead but take more frequent readings and know that a course correction may soon be necessary.
2014-01-04 Forecast 2014: The Human Transformation Revolution by John Mauldin of Millennium Wave Advisors
It is that time of the year when we peer into our darkened crystal balls in hopes of seeing portents of the future in the shadowy mists. This year I see three distinct wisps of vapor coalescing in the coming years. Each deserves its own treatment, so this year the annual forecast issue will in fact be three separate weekly pieces.
2013-12-31 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don’t always get the readership they deserve. We’ve posted the 10 most-widely read articles for the past year. Below are another 10 that you might have missed, but I believe merit reading.
2013-12-31 Making Your Research Pay Off in 2014 by Dan Richards (Article)
For all the time that advisors invest in conducting due diligence on managers and markets, most do a miserable job of leveraging the hours they spend in communicating with clients. Here’s how to change that in 2014.
2013-12-31 Organizing Principles for Disorganized Advisors by Beverly Flaxington (Article)
How do I deal with the people on my staff who are disorganized? I have a couple of people who get three days’ worth of work done in one day, but most of the team gets little accomplished each day and keeps screaming for resources.
2013-12-24 How Much Should We Pay to Emit Carbon? by Michael Edesess (Article)
Many consider emissions of greenhouse gases to be what economists call a ’negative externality,’ meaning that they are likely to impose a cost on society through climate change and ocean acidification. The cost of that externality should, in principle, be borne by the emitters, who should pay a price to emit. But what should that price be?
2013-12-24 Calming an Uptight Partner by Beverly Flaxington (Article)
My partner is always anxious and upset about something and everything is urgent. He is a good friend and I respect his intelligence, but he gives me heartburn. Are there strategies I could employ to get him to calm down?
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 Optimizing Asset Location: Is It Worth the Effort? by Joe Tomlinson (Article)
Asset location - the choice of whether to hold stocks and bonds in taxable or sheltered accounts - is receiving increased attention as advisors seek more ways to add value. New research has challenged long-held beliefs. I’ll examine that research and answer a question that should concern every advisor and client: Does the value provided by asset-location advice justify the fees for the work involved?
2013-12-17 Making Brand Communication Work for Your Firm by Beverly Flaxington (Article)
I have sat in on meetings with my staff while they talk to prospects and clients and they say things I would never say. Everyone has their own style but it is important that we say the same things. Is there a way to accomplish this through training?
2013-12-17 Five Strategies for a Rising-Rate Environment Revisited by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)
In June 2010, we recommended five strategies for a rising-rate environment, acknowledging that we had no idea when or how abruptly rates would rise. Indeed, rates fell since we wrote that article. But they are on the rise again. After reviewing how our original five strategies performed, we’ll now present our revised recommendations for investing as rates increase.
2013-12-10 How Much Can Clients Spend in Retirement? A Test of the Two Most Prominent Approaches by Wade Pfau (Article)
In my last article, I described research-based innovations for variable withdrawal strategies from retirement portfolios. In this article, I put Guyton’s and Blanchett’s strategies to the test. My results provide planners with a better understanding about the potential spending paths generated by these different approaches.
2013-12-10 Best Practices for an Effective Teambuilding Exercise by Beverly Flaxington (Article)
I want to hold a teambuilding session. I don’t like to take everyone away from client calls for the day. Should we have this on a weekend? Or stay late one night? Do I include everyone, from our receptionist to senior advisors?
2013-12-07 Interview with Steve Forbes by John Mauldin of Millennium Wave Advisors
For whatever reason, Steve Forbes seems to bring out the passion in me. When I think about what central bank policies are doing to savers and investors, how we are screwing around with the pension system, circumventing rational market expectations because of an untested economic theory held by a relatively small number of academics, I get a little exercised. And Steve gives me the freedom to do it.
2013-12-03 Jeremy Siegel - The Market is 10% to 15% Undervalued by Robert Huebscher (Article)
According to Wharton’s Jeremy Siegel, ’the fair market value for the stocks today is 10% to 15% higher, and that might even be on the conservative side.’
2013-12-03 Why Does the U.S. Have High-Cost Low-Quality Healthcare? by Michael Edesess and Kwok L. Tsui (Article)
The U.S. has worse mortality rates than virtually all other developed nations, and yet it spends twice as much per capita on health care. How on earth has the U.S. racked up such an appallingly bad health-care record, and what is the solution? A recent edition of the Journal of the American Medical Association identified many of the problems but was not persuasive in prescribing a cure.
2013-12-03 How to Keep Prospects from Stealing Your Ideas by Dan Richards (Article)
After multiple meetings with prospective clients during which you provided recommendations on their situation, at some point every advisor has walked away feeling that someone took their advice and implemented it on their own. How do you prevent this from happening?
2013-11-26 Second-Level Thinking: John Hussman Responds to Howard Marks by John Hussman (Article)
While I am a very great admirer of Howard Marks, his fairly sanguine view of equities here seems inconsistent with what he calls "second-level thinking" about how securities are valued, and is almost certainly inconsistent with his observation that "Rule number one, most things will prove to be cyclical. Rule number two, some of the greatest opportunities for gain and loss come when people forget rule number one."
2013-11-26 Making Vendor Relationships Work Effectively by Beverly Flaxington (Article)
We hired an outside contractor to do some marketing work for us. It has been a nightmare. She is difficult to deal with and criticizes every idea we have. Is there something we can do differently to avoid this situation in the future?
2013-11-24 Game of Thrones - European Style by John Mauldin of Millennium Wave Advisors
The Eurozone crisis is not over, and it will not end quickly or soon. Even if it seems to unfold in slow motion - like the slow build-up in a Game of Thrones storyline to violent internecine clashes followed by more slow plot developments but never any resolution, the Eurozone debacle has never really gone away. The structural imbalances have still not been fixed; politicians and central bankers have still not agreed to solve major fiscal problems; the overall economy still disintegrates; unemployment is staggeringly high in some countries and still rising; and the people are growing restless.
2013-11-19 Some New Ideas for Holiday Gifts by Beverly Flaxington (Article)
Holidays are coming. What can we do to stand out from our competition in terms of gifts or events?
2013-11-19 Asset Class Allocation and Portfolios: Critique and Complication by Adam Jared Apt (Article)
In Part 1 of this essay, I explained that for asset class allocation to become an investment practice, it required a foundation of theory. And Modern Portfolio Theory was that foundation. But today, most financial journalists and investment advisors who proffer advice centered on asset class allocation are?if I may judge from their writings?oblivious of this. And why shouldn’t they be? Theory is abstract and difficult to apprehend.
2013-11-17 The Unintended Consequences of ZIRP by John Mauldin of Millennium Wave Advisors
Two recently released papers make an intellectual and theoretical case for an extended period of very low interest rates and, in combination with other papers from both inside and outside the Fed from heavyweight economists, make a strong case for beginning to taper sooner rather than later, but for accompanying that tapering with a commitment to an even more protracted period of ZIRP. We are going analyze these papers, as they are critical to understanding the future direction of Federal Reserve policy. Secondly, we’ll look at some of the unintended consequences of long-term ZIRP.
2013-11-13 GameStop and Our Long-Term, Contrarian Investment Approach by Jay Kaplan of The Royce Funds
Because our contrarian approach emphasizes a long-term time horizon, we tend to invest in companies that we believe have the financial wherewithal to withstand out of favor periods. GameStop used trying times to build conviction and expand its core business rather than abandoning its discipline to meet outside expectations.
2013-11-12 The Bomb Shelter Portfolio: Maximum Income with the Least Risk by Geoff Considine (Article)
Conservative investors are faced with unappealing choices. They can reduce risk and accept low yields and high exposure to rising rates, or they can push the bounds of their risk tolerance to increase yield. My analysis shows a way out of this predicament: a “bomb shelter” portfolio of ETFs, which offers attractive yield with minimal volatility and exposure to rising rates.
2013-11-12 Three Ways to Turn Casual Contacts into Clients by Dan Richards (Article)
Most advisors routinely cross paths with people who are attractive prospects, whether at their golf club, get-togethers with neighbors or through charitable activity in their community. The challenge is how to raise the possibility of working together without appearing to be one of those stereotyped hustlers who give salespeople everywhere a bad name.
2013-11-12 What Twitter’s New Millionaires Can Learn From Google by Dougal Williams (Article)
In what was one of the biggest launches this year for a technology company, social media giant Twitter had its IPO last week. The deal raised approximately $2.1 billion for Twitter, minting the biggest wave of Bay Area millionaires since 2012, when Facebook went public. Those whose bank accounts swelled as a result of Twitter’s IPO should heed the lessons learned by Google’s millionaires.
2013-11-05 The Key Issues in Today’s Muni Bond Market by Hildy Richelson and Stan Richelson (Article)
Investing in high quality municipal bonds paying a predictable cash flow and returning your principal at the end of the investment is a well-trodden system for lifetime economic success. In this article we discuss some key issues in purchasing municipal bonds to help you make wise choices for your investing system.
2013-11-05 How to Help Clients Who Hate the Holidays by Beverly Flaxington (Article)
I deal with a number of clients who are very wealthy but are miserable around the holidays. Some are older and don’t have family members who see them, others are miserly and don’t feel they should use their money for gifts for people they don’t like. The conversation actually comes up with many of them every year, and I want to be prepared this year. Any ideas or tips?
2013-11-05 Letters to the Editor by Various (Article)
Several readers respond to Bob Veres’ article, Why Deficits Don’t Matter, which was published last week. A reader responds to Adam Apt’s article, Is Gold Overpriced?, which was published Oct. 15, and a reader responds to the commentary, Scrooge McDucks, by Bill Gross of PIMCO, which appeared Oct. 31.
2013-10-29 Puerto Rico: “Always the money owing” by Hildy and Stan Richelson (Article)
We have not recommended or purchased Puerto Rico bonds for 12 years. This is not because we thought that Puerto Rico would imminently default. Rather, we did not like the low ratings and the Commonwealth’s ubiquitous and growing debt. We view an investment in bonds as a way to control risk, not to make outsized returns.
2013-10-29 Letters to the Editor by Various (Article)
Readers respond to Michael Edesess and Kwok Tsui’s article, How Many Monkeys Does it Take to Find a Successful Strategy?, which appeared last week.
2013-10-28 The Website is Fixable, Obamacare Isn't by Peter Schiff of Euro Pacific Capital
Since Obamacare made its debut, discussions have focused on Ted Cruz’ efforts to defund the law and the shockingly bad functionality of the Website itself. Fortunately for Obama, polling indicates that Senator Cruz has lost, at least for now, the battle for hearts and minds. The President has not been nearly so lucky on the technological front.
2013-10-22 How Many Monkeys Does it Take to Find a Successful Strategy? by Michael Edesess and Kwok L. Tsui (Article)
Give a monkey enough darts and she will eventually hit the bulls-eye on a dartboard. We wouldn’t dare consider that monkey an expert dart thrower, but investment professionals have been using essentially that same logic to assert that their strategies ? often called “smart betas” ? will outperform the market. New research exposes the faulty mathematics upon which such claims are based.
2013-10-20 The Damage to the US Brand by John Mauldin of Millennium Wave Advisors
There is no doubt that the image what I will refer to in this letter as the "brand" of the United States has been damaged in the past month. But what are the actual costs? And what does it matter to the average citizen? Can the US recover its tarnished image and go on about business as usual? Is the recent dysfunction in Washington DC now behind us, or is it destined to become part of a bleaker landscape?
2013-10-15 Is Gold Overpriced? by Adam Jared Apt (Article)
New research, based on an econometric model of gold prices, has attempted to answer the question, “Is gold overpriced?”
2013-10-15 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.
2013-10-15 Why Customized Content Beats Canned Content by Neil Rhein (Article)
If you’re communicating syndicated (“canned”) content that is similar (or identical) to what every other advisor is saying, you’re just adding to the noise.
2013-10-15 Letters to the Editor by Various (Article)
Readers respond to Robert Huebscher’s article, The Futility of the Endowment Model, which appeared last week.
2013-10-12 Sometimes They Ring a Bell by John Mauldin of Millennium Wave Advisors
Three items have come across my screen in the past month that, taken together, truly do signal a major turning point in how energy is discovered, transported, and transformed. And while we’ll start with a story that most of us are somewhat aware of, there is an even larger transformation happening that I think argues against the negative research that has come out in the last few years about the reduced potential for growth in the world economy.
2013-10-10 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.
2013-10-08 The Futility of the Endowment Model by Robert Huebscher (Article)
In the past two decades, the so-called endowment model has been adopted by hundreds of endowments, foundations and advisors ? particularly those serving ultra-high-net-worth clients. By aggressively allocating to illiquid alternative asset classes, those investors hoped to duplicate the results of Yale and other top-tier institutions. New research exposes the futility of those efforts.
2013-10-07 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.
2013-10-01 Money Can Buy Happiness by Justin Kermond (Article)
Extensive research has shown that the act of buying life experiences and giving money away can make people happier than buying material items does.
2013-10-01 The Eight Principles of Value Investing by Scott Clemons and Michael Kim (Article)
In any environment, but especially one characterized by uncertainty, eight principles of investing are critical. These bedrock beliefs help guide our thinking at the levels of asset allocation, security selection and identification of the third-party managers we engage to help manage our clients’ assets.
2013-10-01 When Employees Can’t Get Along by Beverly Flaxington (Article)
We have two employees who do not like one another. I have talked with them to let them know how disruptive their behavior is. Should I fire one? Should I take sides? I’m a mother at home, but don’t feel like I need to be one in the office.
2013-09-28 The Renminbi: Soon to Be a Reserve Currency? by John Mauldin of Millennium Wave Advisors
Contrary to the thinking of fretful dollar skeptics, my firm belief is that the US dollar is going to become even stronger and will at some point actually deserve to be the reserve currency of choice rather than merely the prettiest girl in the ugly contest the last currency standing, so to speak. But whether the Chinese RMB will become a reserve currency is an entirely different question.
2013-09-25 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.
2013-09-24 William Bernstein ? “Stocks for the Long Run” by Michael Edesess (Article)
William Bernstein’s reading of history is that if you want to build a nest egg and protect against the “four horsemen” that threaten it over the long term, the best thing to do is invest in a globally diversified stock portfolio.
2013-09-24 Why Retirees Should Choose DIAs over SPIAs by Wade Pfau (Article)
Retirement portfolios can be constructed from a mix of asset classes, including stocks, bonds and annuities. In the past, I’ve shown that retirees achieve some of the best outcomes by allocating a portion of those assets to SPIAs. In this column, I extend my analysis to show that DIAs work even better than SPIAs, by providing more liquidity and better longevity protection at a lower cost.
2013-09-24 Four Ways to Attract Affluent Clients by Dan Richards (Article)
Attracting HNW clients is all about credibility ? as a result, it’s typically lower key, takes longer and requires an upfront investment of time and effort to position yourself to interact with HNW prospects.
2013-09-21 Rich City, Poor City by John Mauldin of Millennium Wave Advisors
This week we will conclude our look at pension plans for the nonce with a 30,000-foot overview of the states and then take a deeper dive into one city: mine. This will give you at least one version of how to do your own homework about your own hometown. But fair warning, depending on your locale, you may need medical help or significant quantities of an adult beverage after you finish your research.
2013-09-17 Letter to the Editor by Various (Article)
A reader responds to Joe Tomlinson’s article, A New Tool to Calculate Long-Term Care Needs, which appeared last week.
2013-09-17 Investing for Real People by Sponsored content by Oppenheimer Funds (Article)
Investor goals are the same, but solutions have changed. Today, aiming to meet basic needs requires new solutions. Laser focus on investor goals will help uncover appropriate investment opportunities. Expanding the opportunity set beyond the usual suspects will be critical to long-term success.
2013-09-10 Why DFA’s New Research is Flawed by Michael Edesess (Article)
DFA is a company with a laudable history, founded on solid principles and a valuable product concept. From its launch, the investment firm identified and filled a need at low cost to the client, based on elementary but sound theory and simple, compelling, transparent empirical research. It later increased its value to clients by pioneering passive trading strategies. I admire its founders and their accomplishments. But I am afraid the company has succumbed to a dreadful descent into scientism.
2013-09-10 Why Isn’t Our Practice Growing? by Beverly Flaxington (Article)
Our advisory firm has not grown much over the last five years. Except for death and divorces, we haven’t lost clients. But we haven’t obtained new assets. We have been to conferences and heard other advisors speak about their explosive growth, but I am dubious. Are advisory firms really growing so significantly or are we experiencing what most advisors have been over the last few years?
2013-09-07 Unrealistic Expectations by John Mauldin of Millennium Wave Advisors
Two well-respected analysts of pension funds have produced reports this summer suggesting that pensions are now underfunded by more than $4 trillion and possibly more than $5 trillion. I would like to tell you that the underfunding is all the bad news, but when you probe deeper into the problems facing pension funds, it just gets worse.
2013-09-03 The Hidden Risk in Gold by Robert Huebscher (Article)
Since their introduction a little over a decade ago, gold-backed exchange-traded funds (ETFs) have accumulated more than $500 billion in assets. Investors’ most common rationale for owning gold is that it acts as a hedge against financial instability or a sudden shock to the markets, such as the 9/11 attacks. But what if the flow of assets into gold ETFs plays a greater role in the price of gold than do investors’ fears of instability? Is gold the hedge investors believe it to be?
2013-09-03 The Impact of Severe Drawdowns on Safe Withdrawal Rates by Lloyd Nirenberg, Ph.D. (Article)
A Google search for “safe withdrawal rates” produces 30 million results, but none answers a question that is critical to advisors and investors: How would a sudden market downturn ? a “return shock” ? impair a retiree’s forecast withdrawals?
2013-09-03 Framing the Sales Component of the Advisory Profession by Beverly Flaxington (Article)
I am a relatively new financial advisor, coming to this profession as a second career. I’m finding I spend so much time on sales ? my firm is so focused on selling that even when I have a new client, I don’t have the chance to work with them the way I would like. How can I tactfully tell my employer that I came to this profession for the investment side, not for the sales side?
2013-08-31 How Do I Hate Thee? by John Mauldin of Millennium Wave Advisors
I will list a number of reasons why I hate this market and then suggest a few reasons why that should get you excited. We will look at some charts, and I’ll briefly comment on them. No deep dives this week, just a survey of the general landscape.
2013-08-30 Survey Says... What? by Robert Isbitts of Sungarden Investment Research
During the past week, a survey caught my eye and dropped my jaw. It was published in Investment News, a leading online and print publication for the investment advisory industry last weekend. It covered a survey of individual investors by brokerage firm Edward Jones about the potential impact of rising interest rates on their investment portfolios. According to the article, written by award-winning columnist Jeff Benjamin, “two-thirds of the respondents don’t understand how rising rates will affect their investment portfolios.”
2013-08-27 Five Tips for Managing Stress by Beverly Flaxington (Article)
What are your tips for managing stress? Financial advisory work has become increasingly stressful and neither I nor my staff do a good job of managing it.
2013-08-25 France: On the Edge of the Periphery by John Mauldin of Millennium Wave Advisors
Charles de Gaulle said that "France cannot be France without greatness." The current path that France is on will not take it to renewed greatness but rather to insolvency and turmoil. Is France destined to be grouped with its Mediterranean peripheral cousins, or to be seen as part of the solid North Atlantic core? The world is far better off with a great France, but France can achieve greatness only by its own actions.
2013-08-20 Target-Date Funds: Why Higher Equity Allocations Work by Joe Tomlinson (Article)
Following the 2008 financial crisis, target-date funds (TDFs) were criticized for exposing investors nearing retirement to excessive equity allocations. Were those criticisms justified? How well do TDFs stack up against the venerable strategy of matching one’s bond allocation to one’s age? My research has yielded surprising answers to those questions and to the proper role of single-premium immediate annuities (SPIAs) alongside TDFs.
2013-08-20 Which Crowd? Mulling the Investment Wisdom of the Masses by Steven Grey (Article)
With every investment or trade, the profits that accrue with the passage of time eventually prove one party the wiser. But of what practical value is the notion of collective wisdom if investors can’t consistently identify the ’wise’ crowd before the fact?
2013-08-20 How Much Communication is Too Much? by Beverly Flaxington (Article)
How much communication is too much? We meet with clients once per quarter and were surprised when one told us they didn’t need to see us so often. I think we need to stay in front of them.
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 Why Clients Don’t Give You Credit for Your Hard Work ? And What to do About it by Dan Richards (Article)
Advisors work incredibly hard, but clients take that effort for granted. How can advisors get credit for all they do for clients?
2013-08-10 We Can't Take the Chance by John Mauldin of Millennium Wave Advisors
What would it have been like to be a central banker in the midst of the crisis in 2008-09? You’d know that you won’t have the luxury of going back and making better decisions five years later. Instead, you have to act on the torrent of information that’s coming at you, and none of it is good. Major banks are literally collapsing, the interbank market is nonexistent and there is panic in the air. Perhaps you feel that panic in the pit of your stomach. This week we’ll perform a little thought experiment to see if we can extrapolate what is likely to happen in when the nex
2013-08-06 Unlocking the Two Mysteries behind SPIAs by Wade Pfau (Article)
Two mysteries confound planners who purchase single-premium immediate annuities (SPIAs) for their clients: Why does the present value of a SPIA often exceed its cost, and why do equity allocations appear to increase when a SPIA is purchased? Unlocking those mysteries requires advisors to use a different framework ? based on the household balance sheet ? for the withdrawal phase of retirement.
2013-08-06 Human Capital in the Digital Economy by Alan Winger (Article)
Human capital is a key asset that planners manage as they strive to maximize consumption throughout clients’ lives. Human capital, or lifetime income, often peaks in value early in their careers. Moreover, today’s digital economy means human capital is more volatile and less predictable than in the past, and that carries important implications for financial planners.
2013-08-05 Weak Job Growth? RX: Buy Stocks by Charles Lieberman (Article)
At dinner with friends on Saturday evening, I was asked if I’m still bullish. Another investment guy is now cautious, bordering on bearish. A discussion ensued. The case for being bearish remains weak and unconvincing, hardly even believable in my judgment. Much of the case seems to be driven by the notion that stocks have rallied a lot, so surely they must decline.
2013-08-01 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.
2013-07-30 The Power of Diversification and Safe Withdrawal Rates by Geoff Considine (Article)
When Bill Bengen published his seminal research in 1994, a 4% safe withdrawal rate (SWR) was clearly attainable with a variety of asset allocations. But bond yields are lower now than they were then, and equity returns for the next 20 years are unlikely to exceed those of the prior two decades. Indeed, a new paper by three highly respected researchers showed that SWRs for stock-bond portfolios are well below 4%. But as I will demonstrate, a 4% SWR is still possible with a more diversified portfolio ? and without subjecting clients to additional risk.
2013-07-26 Investing In Bonds When Rates Are Rising by Tom Dalpiaz of Advisors Asset Management
How can investors “stay in the bond game” during these difficult rising rate environments? Here are some suggestions.
2013-07-22 Don\'t Follow the Yellow Brick Road by David Lieberman (Article)
Gold has been in a broad sell off, falling from a high of about $1,900 an ounce to about $1,250 an ounce within a year. However, gold remains incredibly difficult to properly value, and is something that we suggest that clients avoid. Here’s why.
2013-07-17 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.
2013-07-16 Letters to the Editor by Advisor Perspectives (Article)
A reader responds to the ongoing exchange of letters regarding socially responsible investing, and a reader responds to Joe Tomlinson’s article, Retirement Portfolios: Fears over Rising Rates are Overblown, which appeared last week.
2013-07-16 Herbert Huebscher (1926-2013) by Robert Huebscher (Article)
My dad passed away on July 8. My eulogy is below.
2013-07-13 The Bang! Moment Shock by John Mauldin of Millennium Wave Advisors
This week we resume our musings about Cyprus, to see what that tiny island can teach us about our own personal need to engage in ongoing critical analysis of our lives and investment portfolios. Cyprus is not Greece or France or Spain or Japan or the US or (pick a country). I get that. No two situations are the same, but there may be a rhyme or two here that is instructive.
2013-07-10 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.
2013-07-09 Retirement Portfolios: Fears over Rising Rates are Overblown by Joe Tomlinson (Article)
The second quarter saw increases in interest rates, losses in every category of bonds and investors abandoning fixed-income markets. The distress has been particularly acute among retirement investors who considered bond funds to be safe. But are fears of bond losses overblown? I will make the case that the rise in interest rates is actually good for retirement portfolios. To see this, one has to look beyond the quarterly statement losses and focus on overall retirement outcomes.
2013-07-09 Business Building for Advisors by Beverly Flaxington (Article)
I have received so many questions related to sales skills and business building that I will offer some basic tips for readers who want to energize their sales process and grow their firms. It’s no surprise that most advisors don’t sell naturally and in most cases think of selling as unpleasant. ’I want to clients to refer on their own ? I don’t want to sell them on doing so,’ is a refrain I hear over and over again.
2013-07-09 U.S. Stocks Continue to Dominate ? What’s Next? by Ron Surz (Article)
U.S. stocks earned 2.5% in the second quarter, bringing the year-to-date return up to a lofty 14%. By contrast, the EAFE index lost 1% in the quarter, bringing its year-to-date return down to 4%. In fact, as shown in the following graph, no other asset class comes even close to the return on U.S. stocks so far this year.
2013-07-02 Avoiding the Interest Rate Freight Train with Individual Bonds by Stephen J. Huxley, Jeremy Fletcher and Brent Burns (Article)
For bond funds, rising rates mean that total return has to fight losses on the underlying portfolio. As a fund’s net asset value (NAV) declines, coupon interest may not be enough to overcome the price loss. Making the same fixed-income allocation to high-quality individual bonds instead and holding them to maturity is a superior strategy when rates rise.
2013-07-02 The Practical Application of Behavioral Finance by Mitchell D. Eichen and John M. Longo (Article)
From the Dot-Com bubble onward, traditional investment models have repeatedly disappointed those who relied on them. When compared to mathematically based models, behavioral finance provides a superior foundation. Here is an alternative investment paradigm, grounded in behavioral finance, that is practical and effective over time periods that are relevant for a significant portion of investors.
2013-07-02 When the Boss’ Daughter Gets in the Way by Beverly Flaxington (Article)
We have a situation where our founder’s daughter is now involved in the business. She is aggressive, nasty and condescending to the people who work here. She likes me so I haven’t had a problem. But I see how she treats others. It’s a small advisory firm and she is creating a toxic climate. The worst part is that the clients, for the most part, don’t like her either. I tried to broach this with our founder in a nice way but he thinks she walks on water. I am afraid we are going to lose staff and clients if we don’t address this issue.
2013-07-01 \"This Country is Different\" by John Mauldin of Millennium Wave Advisors
Cyprus is a very small country, some 800,000 people. Among the leadership, everyone knows everyone. There is much to admire, as we will see. But Cyprus has had a gut-wrenching crisis, proportionately more dire than any in other European countries recently; and precedents are being established here for how future problems will be dealt with in the Eurozone and elsewhere.
2013-07-01 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.
2013-06-25 The Great Debate on Inequality: Stiglitz versus Krugman by Michael Edesess (Article)
Economics Nobel laureate Joseph Stiglitz is the chief alarmist warning that income and wealth inequality in the U.S. is a very serious threat to the economy. So it comes as a surprise that his fellow Nobelist Paul Krugman ? Stiglitz’s intellectual comrade-in-arms ? disagrees with him. Their disagreement goes to the heart of today’s economic problem.
2013-06-25 The Price Your Clients Pay for Using Safe Withdrawal Rates by David B. Loeper (Article)
Safe-withdrawal rates (SWRs) are perhaps the most extensively studied topic in financial planning literature. But applying a single SWR-driven methodology to all clients neglects their unique and individual needs. A better approach is for advisors to assist clients in defining their ideal and acceptable goals and the relative priorities among them. Then they can demonstrate through Monte Carlo simulation the likelihood of the recommended plan becoming over- or under-funded relative to those goals.
2013-06-25 Measuring the ROI of Advisor Marketing by Beverly Flaxington (Article)
Our practice has grown by word-of-mouth. A couple of my advisors want me to advertise and spend on expensive marketing programs. No one can show me the ROI for this. Is aggressive marketing a predictable way for advisors to get new clients? I just don’t see someone answering an ad who has $2 million (our minimum) to invest.
2013-06-24 On the Radar: Let\'s Get Fiscal by Milton Ezrati of Lord Abbett
This is the second in a three-part series on longer-term issues that could either sustain or stall the current equity rally once stock prices fully capture their current, still-attractive values. The first in this series took up the prospective policy change by the Federal Reserve. This discussion considers future fiscal developments.
2013-06-19 The Art of Low Turnover by Bill Smead of Smead Capital Management
We have argued vociferously that active managers have given up their preferred position in the investing marketplace to passive indexes because of high turnover. A recent Wall Street Journal article referenced 78% turnover as being the average among large-cap US equity funds. Studies have shown that as much as 144 basis points each year in return is chewed up by trading costs. Explaining turnover and its impact is one thing, but it is more important to ask a question. How do you practice low turnover while seeking maximal long-term performance?
2013-06-18 GMO’s Montier on Why to Hold Cash by Robert Huebscher (Article)
Central bank policies have distorted markets to such a degree that investors are devoid of any buy-and-hold asset classes, according to James Montier. But according to Richard Bernstein, the flood of liquidity unleashed through quantitative easing (QE) now offers investors compelling opportunities.
2013-06-18 What Advisors Need to Know about Health-Care Planning by Dinesh Sharma (Article)
Guiding clients through the maze of the health-care choices retirees face is a way advisors can provide meaningful value. Here’s an overview of the Medicare and Medicaid programs to help advisors understand the key economic considerations that will impact their clients.
2013-06-18 Getting Your Team to Communicate Your “Story” by Beverly Flaxington (Article)
We recently rebranded our firm and made a large investment in how we communicate our value proposition ? “our story.” We want to teach our staff how to tell the story in a similar fashion, but allow each person the chance to tell it their own way. How do we accomplish this?
2013-06-17 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.
2013-06-17 Anecdotal Insights into the Housing Market by Charles Lieberman (Article)
The current obsession is over when the Fed will begin to withdraw some of its quantitative easing policy and how this will affect markets. This is adding some volatility back into the markets, even though this change in policy has been expected for a long time. Since Fed policy is likely to change only gradually and will do little to tip the valuation balance between stocks and bonds for quite some time, we see little reason to temper our fundamentally bullish stance towards stocks and bearish view of bonds.
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.
2013-06-10 Worry de Jour by Charles Lieberman (Article)
The current obsession is over when the Fed will begin to withdraw some of its quantitative easing policy and how this will affect markets. This is adding some volatility back into the markets, even though this change in policy has been expected for a long time. Since Fed policy is likely to change only gradually and will do little to tip the valuation balance between stocks and bonds for quite some time, we see little reason to temper our fundamentally bullish stance towards stocks and bearish view of bonds.
2013-06-08 Banzai! Banzai! Banzai! by John Mauldin of Millennium Wave Advisors
In practice it may be harder for Japan to grow and generate inflation than it might be for other major nations. Today we’ll focus on Japanese demographics. While the letter is full of graphs and charts, it does not paint a pretty picture. The forces of deflation will not go gently into that good night.
2013-06-04 Vincent Reinhart on Debt and Growth in the U.S. and Japan by Robert Huebscher (Article)
High debt levels translate to slower growth, according to Vincent Reinhart. That conclusion will be disheartening to those who jumped on the errors several University of Massachusetts scholars found last month in Carmen Reinhart (Vincent’s wife) and Ken Rogoff’s research. But Vincent Reinhart is the author, along with his wife and Rogoff, of a study published in 2012 that documented the degree to which high debt-to-GDP levels correlate with slower economic growth in developed countries.
2013-06-04 Your Value Proposition: A Precursor to the Elevator Pitch by Teresa Riccobuono (Article)
Every business should stand on four legs: values, a mission statement, a vision statement and a value proposition. This fourth item, a value proposition, must provide concrete data about your organization, why it exists and who you serve.
2013-06-04 The Beginning of the End (for Bonds) by Charles Lieberman (Article)
Attention has been focused on the stock market, because of its relentless surge to new highs, but the decline in bond prices is also worthy of note. Bond prices declined more in May than in any prior single month in nine years. Moreover, bond prices are likely to continue getting clobbered as interest rates revert to normal, even as individual investors have more exposure to bonds than ever before. The decline experienced so far is just the beginning. Investors who fled to bonds seeking safe investments are bound to be severely disappointed.
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.
2013-05-28 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 State and Local Pensions: What Now? by John Minahan (Article)
Alicia Munnell’s book, State and Local Pensions: What Now? is a comprehensive introduction to public pension funds for the newcomer and a useful reference for seasoned professionals. Munnell stakes out a position on an important debate between economists and actuaries regarding liability valuation, and develops a background narrative portraying economists as impulsive, argumentative and clueless.
2013-05-28 When Your Coworkers Don’t Measure Up by Beverly Flaxington (Article)
I work in a large financial organization. I’m frustrated that many of my coworkers don’t pull their weight. I work hard and am very committed, but those around me run out the door at 5 p.m. I want to talk to those in charge, but I am not sure how to go about doing it.
2013-05-28 Corrections Remain Modest by Charles Lieberman (Article)
Many investors are waiting for the proverbial market correction, so they have an opportunity to get into the market rally. Many investors are holding back because they don’t want to buy at a market top after such a major run. This approach has been a disaster, since the market has given them no such buying windows so far. A correction must eventually occur of course, but quite possibly only from higher levels. Stocks remain the place to be.
2013-05-25 The Mother of All Painted-In Corners by John Mauldin of Millennium Wave Advisors
Japan has painted itself into the mother all corners. There will be no clean or easy exit. There is going to be massive economic pain as they the Japanese try and find a way out of their problems, and sadly, the pain will not be confined to Japan. This will be the true test of the theories of neo-Keynesianism writ large. Japan is going to print and monetize and spend more than almost any observer can currently imagine. You like what Paul Krugman prescribes? You think he makes sense? You (we all!) are going to be participants in a real-world experiment on how that works out.
2013-05-23 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 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.
2013-05-21 How Responding to Client Requests is Like Returning a Sweater to Sears by Dan Richards (Article)
A source of frustration for many advisors is the amount of time that’s consumed by mundane administrative requests ? things that clients don’t value and chew up a ton of time. But there is a way to take the time spent on routine matters and turn it into something that clients see as delivering quantifiable value. A veteran advisor told me how he did exactly that ? and enhanced relationships with the accountants for key clients in the process.
2013-05-21 Five Tips for Winning in the “Trust and Value” Economy by Meridith Elliott Powell (Article)
In this our economy, the consumer is in control. What advisors sell is a luxury, and an advisor’s competitive advantage is how he or she sells it. Success depends on your ability to build and expand relationships in what I call the “trust and value” economy.
2013-05-14 Framing the Referral Discussion by Beverly Flaxington (Article)
Last week, I was training a group of very successful Florida-based advisors who brought up what is a common issue with regard to client referrals. Even the best advisors, with the most satisfied clients, offering the highest levels of service often struggle with obtaining referrals.
2013-05-14 Letter to the Editor by Various (Article)
A reader responds to Robert Huebscher’s article, Niall Ferguson: Four Reasons Why the U.S. is Failing, which appeared last week.
2013-05-07 How to Construct a Low-Cost Conservative Portfolio by Geoff Considine (Article)
One of the greatest challenges for investors today is constructing low-risk portfolios that provide the best returns using low-cost funds or ETFs. Doing so requires advisors to define risk as the potential for retirees to fail to achieve their financial goals, instead of as volatility, as it is traditionally measured. I will show how to construct a low-cost portfolio that minimizes this definition of risk while generating a reasonable real return.
2013-05-07 Eight Ways to Improve Your Relationship with Your Boss The Art of Managing Up by Beverly Flaxington (Article)
Many advisors with whom I work want their employees to work with them more effectively ? what I call “managing up.” Advisors are often at a loss as to how to motivate staff and get them to jump on board with new initiatives ? and those problems can be addressed by helping your charges improve their working relationship with you.
2013-05-06 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.
2013-04-30 The Best Solution for Protecting Retirement Portfolios: Put and Call Options versus GLWBs by Joe Tomlinson (Article)
Retirees cannot be exposed to severe ? or even modest ? market losses. They need to protect their savings in a cost-effective manner. I will compare the projected outcomes for two types of strategies: options, which can reduce volatility, and products that guarantee lifetime income, such as variable annuities with guaranteed lifetime withdrawal benefits.
2013-04-30 Implementing Behavioral Portfolio Management by C. Thomas Howard, PhD (Article)
Behavioral portfolio management is based on the notion that if the advisor can redirect his or her emotions and mitigate the impact of client emotions, it is possible to build superior portfolios by harnessing market emotions. This article describes how this can be done and presents evidence of the superiority of focusing on investor behavior when constructing and managing portfolios.
2013-04-30 Best Practices for Following Up After a Prospecting Event by Beverly Flaxington (Article)
Based on your experience, what are the best practices for following up with prospects after an event that my firm sponsors?
2013-04-24 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.
2013-04-23 The New Challenges to Reinhart and Rogoff by Robert Huebscher (Article)
Advocates for debt reduction and austerity have had no more authoritative sources than Carmen Reinhart and Ken Rogoff. But last week, these two professors had to defend claims that errors in their research ? ranging from a typo in a spreadsheet to the failure to include data from New Zealand ? invalidated their much-acclaimed findings.
2013-04-23 Venerated Voices? Q1 2013 by Advisor Perspectives (Article)
Advisor Perspectives, a leading publisher serving financial advisors and the financial advisory community, has published its Venerated Voices awards for articles published in Q1 2013.
2013-04-23 Create Mission and Vision Statements That Drive Your Business by Teresa Riccobuono (Article)
We often hear that advisors should create mission and vision statements for their businesses. I agree, but with one caveat.
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.
2013-04-16 Making the Numbers by Steven Grey (Article)
Among the innumerable clichés littering the financial pages, few are as perversely ironic as the phrase “making the number.” Anyone unfamiliar with investing would almost automatically take this as an explicit warning: ’Beware! These numbers are made.’ And yet the same declaration is almost universally received by the investment community as reassurance. It’s a twisted, dangerous dynamic that only reinforces careless reliance on the most potentially manipulated of all available financial information.
2013-04-16 Dealing with an Obnoxious Wholesaler by Beverly Flaxington (Article)
We have a wholesaler who calls on our office. He is completely and utterly obnoxious. I understand they are supposed to sell but he is over the top. I don’t like to be pushed into things. Is there a right way to tell a salesperson like this to back off?
2013-04-09 John Hussman ? Why Prospective Returns Are Low by Robert Huebscher (Article)
Monetary and fiscal policies have driven our economy into an unstable equilibrium, pushing investors into higher-yielding securities, according to John Hussman. But those higher yields are illusory, he said, because corporate profit margins are too high to be sustainable.
2013-04-09 Four Steps to Becoming the Primary Advisor for Top Clients by Dan Richards (Article)
Recently, an advisor who had successfully persuaded an investor with many millions of dollars to open an account asked me how to turn this foothold into a larger share of this client’s assets.
2013-04-09 Tips for Building a Compelling Web Site by Wendy Cook (Article)
Is your current website still living in the “online brochure” days or even non-existent? Don’t dwell on what’s been holding you up. Let’s move your site ? and you along with it ? into the 21st century.
2013-04-02 Choosing an Actively Managed Fund: What Works and What Doesn’t by Joe Tomlinson (Article)
Few topics have been studied as closely as selecting actively managed funds that will outperform the market. Advisors who use such funds need to be confident in their choices ? and justify their methodology to clients. Here’s what the latest academic research says on this highly contentious issue.
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.
2013-04-02 When the Boss is the Bottleneck by Beverly Flaxington (Article)
I have a thriving practice and am very proud of the way it has grown. I have reached a point where everything has to come through me. Every decision, new idea and project needs my attention or response. I have a competent staff, but I don’t have someone to whom I can delegate.
2013-03-26 How to Invest Like Buffett by Robert Huebscher (Article)
Listen to Jim Cramer or his cohorts on CNBC and you’ll hear statements like, “Don’t settle for the mediocre returns of a market index!” and “It’s not that hard for investors to pick stocks that will beat the market!” Unless you possess the skills of Warren Buffett, that’s not true. But in the book Think, Act and Invest Like Warren Buffett, Larry Swedroe says you indeed can invest like Buffett ? just not by stock-picking.
2013-03-26 How to Communicate Your Account Minimum by Dan Richards (Article)
Over the past decade, there’s been increasing pressure on advisors to establish a minimum account size for new clients. The challenge is how to communicate that ? should you be direct and upfront, or subtle and indirect?
2013-03-26 Contagious: Why Things Catch On by Justin Kermond (Article)
How do you create something so contagious that people can’t stop talking about it? A little-known appliance company did just that with a video of its president grinding up Justin Bieber CDs in a blender. Every advisor hopes to achieve that same contagion with social-media marketing: a presence that “goes viral” and attracts scores of retail investors.
2013-03-21 PMI What Does It Really Tell Us? by Adam Peck of Heartland Advisors
Recently we’ve been seeing positive readings from the Purchasing Managers’ Index (PMI), news that may seem as though it would be good for all stocks. In fact, though, a look at the performance of the S&P 500 and the PMI since 1995 shows that this is not necessarily the case.
2013-03-20 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%.
2013-03-19 Putting GMO’s Ideas to Work: Protected Leveraged Investing by Geoff Considine (Article)
Fears of market overvaluation lead many advisors to seek to protect against downside movements while retaining as much upside potential as possible. Recent research from GMO illustrates a low-cost way to accomplish this: decreasing equity exposure and concentrating that allocation in high-beta securities.
2013-03-19 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.
2013-03-18 In-Plan Roth 401(k) Conversions Part 2 by Jon Vogler of Invesco
In Part 1, I cited a recent Aon Hewitt survey indicating many employers are considering adding a Roth option to their retirement plans. In this second part, I’ll explore who might want to consider taking advantage of this conversion opportunity.
2013-03-12 Letters to the Editor by Various (Article)
Two readers respond to Joe Tomlinson's article, Can Advisors Add Value Through Fund Selection?, which appeared on February 26, and a reader responds to Wade Pfau's article, Breaking Free from the Safe Withdrawal Rate Paradigm: Extending the Efficient Frontier for Retirement Income, which appeared last week.
2013-03-12 Bill Ackman on What Makes a Great Investment by John Heins (Article)
In addition to commenting on his high-profile current investments, Pershing Square Capital's Bill Ackman in a recent interview with Value Investor Insight describes the general company traits he looks for in both active and passive investments, why a high public profile is an important element of his strategy, whether his thesis on J.C. Penney has evolved, what lessons he's learned from a few prominent mistakes, and why his short conviction on Herbalife is as high as ever.
2013-03-07 Three Dimensions of Discipline by Team of Franklin Templeton Investments
As New Year's resolutions fade into guilty memories, it's a bitter reminder that maintaining discipline, in life and investing, is just plain hard. Despite best intentions, bear markets can tempt investors to sell everything, while bull markets can whip people into a buying frenzy, both courses of action that rarely end happily.
2013-03-05 Breaking Free from the Safe Withdrawal Rate Paradigm: Extending the Efficient Frontier for Retiremen by Wade Pfau (Article)
The traditional safe withdrawal rate approach that relies on a portfolio of only stocks and bonds produces among the worst possible outcomes for meeting spending needs and preserving financial assets for other uses. My research demonstrates there is a better approach.
2013-03-05 What Economists can Learn from Downton Abbey by Robert Huebscher (Article)
Economists warn that the U.S. economy could be heading toward one of two catastrophes: the two-decade long stagnation that has befallen Japan, or the hyperinflation that struck Zimbabwe and the Weimar Republic. Such cautionary tales alert policymakers to the failed efforts of their predecessors. But the most relevant comparison is rarely cited ? to Great Britain in the 1920s, as depicted in the highly popular PBS series Downton Abbey.
2013-03-05 Increasing Center-of-Influence Referrals by Beverly Flaxington (Article)
I'm frustrated by the lack of success my advisors are having with centers-of-influence (COIs). I know all of the supposed tips but nothing works in practice. I was led to believe that if we follow the right process we will get referrals from them. It doesn't work this way. Do you have any ideas for increasing COI referrals?
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.
2013-02-27 Impending Decline in Stock Prices by Charles Lieberman (Article)
It is a popular view that stocks have run up excessively, rising more than 125% off the March 9 2009 low, and are now highly vulnerable to a sizable retrenchment. This is a sexy idea, but also quite contentious. Nonetheless, it is worth considering seriously.
2013-02-26 Howard Marks? Warnings and How to Protect your Portfolio by Geoff Considine (Article)
Howard Marks, founder and chairman of Oaktree Capital Management, wrote in a recent memo that the biggest danger to investors is their willingness to buy risky assets that are likely to provide low returns. Market conditions may not fully reflect current risk; option prices, for example, are very low. Some firms ? notably PIMCO ? recommend investors buy put options to protect their portfolios. I propose an alternative strategy that will be resilient to the potential shocks of increased volatility and higher interest rates, without incurring the cost of options.
2013-02-26 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.
2013-02-19 Tough Times for Classic Value Investors by Laurence B. Siegel (Article)
While the U.S. equity market has performed exceptionally well since its bottom in March 2009, Warren Buffett's Berkshire Hathaway has trailed the index by nearly 6%. Buffett is among a number of prominent classic-value investors who have fared poorly over this period. Over long time horizons, value investing has consistently outperformed growth strategies and the broad market index. So what is causing this recent phenomenon?
2013-02-19 Kyle Bass on Inflation and How to Protect Against It by Mark Quam (Article)
Kyle Bass, the founder of Hayman Capital, foresaw the collapse of the sub-prime mortgage bond market in 2008 and the foreign sovereign debt crisis in Greece. Bass' latest warning is about looming Inflation ? and he advises how to protect against it.
2013-02-19 Letter to the Editor by Various (Article)
A reader responds to Gary Halbert's commentary, The Economy: Worst Five Years Since the Depression, which appeared on February 13.
2013-02-19 Ketchup vs Cash by John Petrides (Article)
Last week Warren Buffet’s Berkshire Hathaway, along with 3G Capital, bought Heinz (ticker HNZ) for $28 billion, paying a 20% premium to the prior trading day’s closing price (as well as Buffet rewarding himself with preferred stock yielding 9%). Heinz is a mature company trying to reestablish growth by selling ketchup and other condiments in developing countries. However, Heinz is a classic "steady-eddy."
2013-02-12 From Humdrum to WOW by John L. Evans, Jr. (Article)
I challenge you to deliver a unique, emotionally engaging experience that goes beyond expectations ? what I call a WOW event ? to a client or prospect. Do this once a week. If you don't see a noticeable updraft in your practice after two months, I will take you to lunch.
2013-02-11 Distracting Dividends by John Petrides (Article)
With interest rates at historic lows, bonds have become a difficult place to find income (although paradoxically, in 2012, asset flows into bond mutual funds have outpaced that of stock mutual funds yet again), so investors have looked to other assets for yield, most notably high dividend paying stocks. Stocks continue to be attractively valued relative to fixed income and cash. In addition, high dividend paying stocks offer investors the ability to grow the income to help offset inflation, whereas in bonds, the income is fixed.
2013-02-05 Comparing Advisors to Jim Cramer: Measuring your Professional Alpha by Bob Veres (Article)
Jim Cramer, Suze Orman and other so-called investment pundits and gurus are constantly telling consumers that they can do a great job of managing their portfolios on their own. Let's look at what the research has to say about the various investment performance benefits that advisors should be able to give their clients during the accumulation phase of their lives ? excess returns above what do-it-yourself investors could obtain on their own. I call those excess returns 'professional alpha.'
2013-02-05 Four Steps to Get in Front of Million-dollar Prospects by Dan Richards (Article)
Most advisors tell me that once you're face-to-face with a prospect, you have an excellent chance of signing them up. It's not the slam dunk that it might have been 15 or 20 years ago, but good odds nevertheless. The big challenge is getting that face-to-face meeting.
2013-02-05 Apple the Next Microsoft?We Could Be So Lucky by Keith C. Goddard, CFA (Article)
Investors' fears over a sluggish future for Apple's stock are misplaced. Even as Apple's business succumbs to the same economic forces that humbled Microsoft a dozen years ago, the future for Apple's stock is vastly more hopeful.
2013-02-05 Why Don?t Satisfied, Happy Clients Refer? by Beverly Flaxington (Article)
Many factors underlie this issue, and here are the four most important of them.
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.
2013-01-29 How to Hire the Best People by Beverly Flaxington (Article)
Numbers rule. Investments, financial plans and future goals can be assessed quantitatively. But the fundamental component of an advisor's practice is the people. Having the right people on your team to work with your clients and support your efforts is crucial to your long-term success, which is why I created a structured process for hiring the best employees.
2013-01-29 Strategies for Speculating on the Crisis in Japan by Simit Patel (Article)
Bears on Japan are finally, after nearly two decades of being on the wrong side of the market, getting some vindication. The end of 2012 was marked by a significant decline in the Japanese yen and a rise in the yield on 30-year Japanese Government Bonds (JGBs). Should those trends continue, the conventional wisdom is that investors will do best by shorting JGBs. But a superior strategy is to short the yen itself.
2013-01-29 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.
2013-01-28 Conflicted Objectives by Charles Lieberman (Article)
Policymakers in the U.S., Europe, Japan, and elsewhere all seek to weaken their currencies to stimulate exports and domestic growth. It is not possible for all of them to succeed, since some currencies must rise in value, if others decline. Although their individual objectives may be in conflict, their efforts are actually mutually supportive. As each country runs an accommodative monetary policy to weaken its currency, they are also simultaneously promoting stronger domestic growth directly. Indirectly, they are also stimulating demand for their trading partners.
2013-01-22 Sunglasses and Cockroaches ? Six Rules for Surviving in a Bear Market by Michael Skocpol (Article)
After more than three decades investing in Japanese securities, Peter Tasker has little patience for other investors' self-pity ? and he doesn't want to hear your horror stories from 2008. Overcoming the challenges posed by bear markets requires the adaptive instincts of a cockroach, and Tasker identified six lessons investors can take away from those lowly insects.
2013-01-22 Shoulder Pads and Supply Chains by Mariko Gordon (Article)
As an investor, it's essential that you keep your eyes on the ever-swinging pendulum of "best practices," whether these relate to business models, client service, or something else entirely. Here's an example of a company whose "80s style" approach to vendor relations keeps it ahead of the profitability pack in the 21st century.
2013-01-15 Demographics and the Decline of Equity Mutual Funds by Paul Franchi (Article)
Until the last few years, mutual fund flows followed performance. Recently, however, money has flowed disproportionately into bond funds and out of US equity funds despite a strong rally in the equity markets. Changing demographics explain this shift, which has important implications for advisors and the mutual fund industry.
2013-01-15 The Nothing That Is by Michael Lewitt (Article)
The world is awash in money. But money isn't what it used to be. I would point to two characteristics of modern money that should be keeping portfolio managers up at night (they certainly keep me up at night).
2013-01-15 Letters to the Editor by Various (Article)
Readers respond to two of Dan Richards' columns, Six Lessons for Advisors from the Mayo Clinic, which appeared last week, and, How to Turn Acquaintances into Clients, which appeared on December 4. A reader responds to Richard Vodra's article, Is Fracking a 'Happy Solution' to our Energy Needs?, which appeared on January 2.
2013-01-14 Investing in Risk, Without Much Return by Charles Lieberman (Article)
The outlook for the bond market is absolutely dreadful. The full scope for the potential damage to bond portfolios as interest rates rise is not fully appreciated. A very small taste of this upcoming event is evident in the performance of the U.S. Treasury market in the first few days of this year. So, we strongly favor reducing interest rate risk by accepting more credit risk, if investors insist on owning bonds. But, a far better choice is to curtail bond exposure by accepting more equity risk.
2013-01-08 A New Year?s Message from the Publisher by Robert Huebscher (Article)
Advisor Perspectives just wrapped up a momentous year, and I'd like to share with you some of our accomplishments from 2012 as well as our plans for next year.
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.
2013-01-07 Investments That May Keep Me Up at Night in 2013 by Charles Lieberman (Article)
The outlook for 2013 is quite improved compared with 2012. Domestic economic growth prospects are significantly less troublesome. The election is over. Europe has (painfully) slowly made progress in reducing its own budget problems. It is not all clear sailing, however. (It never is.) Europe remains a work in progress. All of the geopolitical risks of 2012, notably North Korea, Iran, and all of the rest of the Middle East, remain on the docket in 2013. And the battle over the U.S. budget will resume in the near future.
2013-01-03 Lessons Learned by Jeffrey Saut of Raymond James
Beginning of the year letters are always hard to write because there is a tendency to talk about the year gone by, or worse, attempt to predict the year ahead. Therefore, we are titling this year's letter in an attempt to share some of the lessons that should have been learned over the past few years.
2013-01-02 How to Boost Your Team?s Morale by Beverly Flaxington (Article)
With the new year rapidly approaching, I want to instill enthusiasm and excitement for my team. We are concerned about the events in Washington and the price we will pay for inaction by our politicians. In the face of this, I want to remind my team of the value we provide for our clients. How can I instill the boost I'm seeking without seeming fake or forced?
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 The Ten Key Benefits of Investment Committees by Bob Veres (Article)
In this first part of a two-part report, I'll identify ten core purposes that investment committees serve in different types of firms, ranking them in order of the number of responses I received. If your investment committee is serving all ten purposes, based on the survey, you're among a select minority - which means that many advisors may find new ways to use this versatile new tool in their RIA practices.
2012-12-26 Putting Clients' Cash to Work by Dan Richards (Article)
A central challenge advisors face are is clients who need mid- to high-single-digit returns to achieve their long-term goals, but who have an overweight position in cash. A recent luncheon with a group of highly successful advisors highlighted this challenge and illuminated a way to overcome it.
2012-12-26 How to Develop Unsinkable Conviction by Mariko Gordon (Article)
In our tumultuous business, conviction is a necessary ingredient for ensuring clear decision making and success. Here are two unconventional techniques for boosting yours.
2012-12-26 Managing Client Interpersonal Dynamics by Beverly Flaxington (Article)
I run a high-end family office firm. A couple of families are dealing with significant interpersonal dynamics. In one case, I fear a client's son is emotionally unstable and could be harmful to someone. In another case, I have seen unnecessary confrontation among siblings.
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 Comparing Long-Term Care Alternatives by Joe Tomlinson (Article)
Should clients buy expensive long-term care insurance they might never need, or go without insurance and risk a big hit to their life savings? For advisors whose clients face this critical dilemma, there's now a third option: life insurance and annuity products that also incorporate long-term care insurance.
2012-12-18 Three Takeaways from the Fed by David Rosenberg (Article)
The equity market likes the prospect of more money printing and the Fed's more forceful efforts to reflate the economy, and stocks are a far better inflation hedge than bonds.
2012-12-18 Better Angels by Michael Lewitt (Article)
If all else fails, President Obama should lock the members of Congress inside the Capital about a week before Christmas, post the military at the door, hang big-screen television in each chamber, tune them to CNBC, and turn up the volume up. Faced with listening to endless repetitions of the words "rising above" or "fiscal cliff" or "kick the can down the road," our legislators will have no trouble reaching a compromise quickly.
2012-12-18 Should Your Firm Write its Own Marketing Copy? by Beverly Flaxington (Article)
My new marketing person has ideas for client outreach and communication. He says we would have more impact if we wrote our own articles and emails instead of using the vendor we have utilized for many years. Will we get more out of our communication if we write our own copy?
2012-12-11 Loomis Sayles' Matt Eagan on the Macro and Fixed Income Outlook by David Schawel, CFA (Article)
In this interview, Loomis Sayles' Matt Eagan discusses the fixed income universe, Fed policy and issues facing the global macro economy. Eagan is the co-manager, along with Dan Fuss, of the Loomis Sayles Bond Fund and he manages the Loomis Sayles Strategic Alpha Bond Fund.
2012-12-11 The Next Generation of Income Guarantee Riders: Part 3 (The Income Phase) by Wade Pfau (Article)
In this third and final installment in my series on guarantee riders, I'll focus on the post-retirement income supported by income guarantee riders for variable annuities (VA/GLWBs), stand-alone living benefit riders (SALBs), and an unguaranteed portfolio of mutual funds. I'll highlight how differences among these products affect their end results, while also investigating what roles guarantees can most appropriately play in a retirement portfolio.
2012-12-11 The Most Memorable Client Thank You Ever by Dan Richards (Article)
Two advisors hosted client events earlier this year with entirely different outcomes, despite the fact that their costs were similar. The first advisor invited clients to an event at her office that was a waste of money; the other organized a thank you for his top client that resonated at the highest level.
2012-12-11 Fine Wine - Why it's for More than Just Drinking by Mark E. Ricardo, JD, LLM, AAMS (Article)
For many investors, an ideal asset class would combine superior long-term absolute and risk-adjusted returns with a hedge against inflation and stock market volatility. There's a way to get all of that, in an asset class you might never have thought of until now: fine wine. Investment-grade wine deserves careful consideration, particularly now that - unlike other collectibles, such as art and rare books - it can be traded on a regulated exchange.
2012-12-11 Dealing with Lazy Employees by Beverly Flaxington (Article)
We are doing everything by the book in terms of hiring and team development in our firm. We use a recruiter, have an on-boarding process, team-up new hires with existing staff members, and conduct regular performance reviews. So why are my employees still lackadaisical?
2012-12-11 Letters to the Editor by Various (Article)
Readers respond to a series of articles that appeared over the last several weeks.
2012-12-10 Food, Water, Electricity & Shelter by John Petrides (Article)
As investors continue to grapple with near term, well documented, uncertainties surrounding the fiscal cliff and global economy, the market continues to present some interesting long term investment opportunities, particularly in our Growth strategy.
2012-12-04 Nate Silver's Message for Financial Advisors by Ben Huebscher and Michael Edesess (Article)
By now you are likely aware that Nate Silver of the New York Times correctly predicted the results for all 50 states (plus DC) in this year's presidential election and all but two Senate races. Silver's predictive capabilities across a range of disciplines have made him a near-deity among those whose livelihood depends on accurate forecasting - from poker players to counter-terrorism units. It's clear why: His methods work - at least in some cases. And their strengths and limitations carry important lessons for financial advisors.
2012-12-04 The Big Picture by David Rosenberg (Article)
Our crystal ball says to stick with what works in an uncertain financial and economic climate - in other words, maintain a defensive and income-oriented investment strategy.
2012-12-04 Surprising Choices in the Search for Safety Near-Certain Loss of Purchasing Power versus Short-Term by Jason Petitte, CFA (Article)
Risk, in its many guises, is unavoidable, and investors today are taking on significant amounts of credit risk, duration, and leverage to obtain high yields from many presumably safe bonds. But certain types of risk are often mispriced. By overweighting one's portfolio to those sectors that currently offer attractive risk-adjusted returns, investors will be better positioned to meet their long-term goals.
2012-12-04 Cliff Diving by Michael Lewitt (Article)
While there may be compromise to avoid the self-inflicted crisis of the fiscal cliff, the course of fiscal policy is unlikely to alter significantly. There is a great deal of bold talk about tax reform, but the odds of our current leaders replacing our profoundly flawed tax regime with one that would breed economic growth and productivity are low. Congress will be lucky to avoid the fiscal cliff; asking it to alter the economy's DNA is unrealistic.
2012-12-04 What to Give Clients for the Holidays by Beverly Flaxington (Article)
During the holidays we have always sent tasteful gifts to our clients. This year the other partners are encouraging me to abandon the tradition in favor of a donation to a favorite charity. It would be our choice of a charity and not the client's choice. I am uneasy about this.
2012-11-27 Dealing with a Ruthless Competitor by Beverly Flaxington (Article)
An advisor in the same town as I am is winning business that should be going to my firm. Prospects tell me that he makes claims that I know are patently untrue. Is it appropriate in sales meetings to tell prospects that this guy lies?
2012-11-27 The Superiority of Dividends: A Comparison of Value Strategies by Geoff Considine (Article)
Dividend-focused strategies have won the allegiance of many prominent investors, including Rob Arnott, Bill Gross and Jeremy Siegel. Others claim value-based strategies offer superior risk-adjusted returns. Both sides can claim a partial victory in this debate, but I will show that, when understood properly, dividend strategies offer a crucial edge - one that many investors will find attractive.
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.
2012-11-26 Negativity Creates Value; What if the Mayans are Wrong? by Charles Lieberman (Article)
Being negative is easy and sophisticated, so it is attractive for pundits, analysts and the media to play the part. But, it also creates tremendous opportunity. The market seems to be discounting the possibility that the world will come to an end along with the Mayan calendar in near term. If the market is correct, investment strategy doesn't matter. But if the market is incorrect, there are tremendous investment opportunities.
2012-11-20 President Obama?s Re-Election and the Impact on the U.S. Economy by Eaton Vance Distributors, Inc. (Article)
President Obama?s re-election resolves a major element of uncertainty that has hung over the political landscape. But what kind of impact will his victory have on the economy and the markets, especially with the House still in Republican control? We posed that question to a roundtable of five investment professionals from Eaton Vance Management, Hexavest and Richard Bernstein Advisors.
2012-11-20 Are Inflation-Adjusted Annuities Right for Clients? The Product and Its Prospects by Joe Tomlinson (Article)
Many economists and retirement experts favor inflation-adjusted SPIAs, but advisors and the investing public have never shared their enthusiasm. Detractors contend that the product is fundamentally flawed and will never gain broad acceptance. My own view is more optimistic, but significant obstacles will, nonetheless, continue to impede wider adoption.
2012-11-20 Working with Clients when Markets are Tough by Beverly Flaxington (Article)
It's hard for me to get clients excited and upbeat these days. The markets have been disastrous and unpredictable for too long. How can I get myself back on track?
2012-11-20 Mad Max Rides Again by Mariko Gordon (Article)
It's been a sometimes gruesome, often fierce ride here in the New York area since Sandy hit last month. There's a parallel between the changes brought by the hurricane and those in today's investment environment.
2012-11-20 Letters to the Editor by Various (Article)
Readers respond to our articles, The Downside to Socially Responsible Investing, which appeared last week, and, Lacy Hunt on Our Economic Future, which appeared on November 6.
2012-11-20 The Fallacies in Today?s Retirement Plan Assumptions: Putting the Hedonic Pleasure Index to Work by Bob Veres (Article)
Are you dramatically underestimating your clients' retirement lifestyle expenditures when you use Monte Carlo software? If you stop and look at a number of important assumptions hidden in the current models, you'll suddenly have a lot less confidence in the retirement plans you?re mapping out for your clients.
2012-11-13 How Well Does the Next Generation of Guarantee Riders Protect Your Income? Part 2 - Starting the Inc by Wade Pfau (Article)
Unlike traditional VA/GLWBs, the future payments from stand-alone income riders are tied to 10-year Treasury rates. That's bad news for retirees, who may find their future benefits compromised if interest rates remain at historically low levels - regardless of how the stock market performs.
2012-11-13 The Downside to Socially Responsible Investing by Robert Huebscher (Article)
Who wouldn't want a cleaner environment or a more just society? We can all agree these are worthy goals. But it's an established fact that pursuing them through one's investing is costly; environmental-, social- and governance-based investing (ESG) does fine on a gross basis, but loses money net of fees. Now, a recently published paper argues that that ESG is basically a waste of time.
2012-11-13 Harvard's #1 Strategy Guru on the Key Decision for Your Business by Dan Richards (Article)
Competition has brought many once-dominant names to the brink of survival - General Motors, Kodak, Sears and Xerox. Michael Porter, Harvard's top expert on strategy, explains why advisors ignoring the important lesson here do so at their peril.
2012-11-13 Voyages by Michael Lewitt (Article)
Anything short of drastic entitlement reform, serious cutbacks in defense spending, and serious tax reform that alters incentives away from speculation in favor of production will leave this country stuck on the dangerous path it is on today.
2012-11-13 The New Dynamics of Referral Generation by Beverly Flaxington (Article)
Discussion of financial advice among acquaintances has gone totally off the grid. It has become an almost universally taboo subject. People are loath to broach any conversation about personal finances. What are your thoughts?
2012-11-13 Bank Loans: Looking Beyond Interest Rate Expectations by John Bell and Kevin Perry (Article)
Portfolio managers of Bank Loan Strategies, John Bell and Kevin Perry, outline the major advantages and risks of bank loan investing and the roles that a bank loan allocation can play in a fixed income portfolio.
2012-11-06 ClearBridge Advisors - Market Commentary Q312 by Harry ?Hersh? Cohen (Article)
Vibrant end demand is missing, as consumers have neither the wherewithal nor the will to spend as they did in prior periods.
2012-11-06 Asset Location: Nine Tips to Create ?Tax Alpha? by Glenn Frank (Article)
With campaign season finally over, taxes are going to dominate the debate in Washington in the months ahead ? however things shake out at the polls today. It's going to be confusing; it's going to be uncertain. But many of the most critical questions advisors will ask can be answered with an analytical approach to deciding where to 'house' assets ? in taxable or tax-sheltered accounts.
2012-11-06 The Three Most Important Hours for Your Business by Dan Richards (Article)
Rocky markets mean that you can't rely on referrals alone. If you've built a significant client base, you want to continue to dedicate the bulk of your time to communicating with them. But for your business to stay healthy, you need to bring in new clients ? advisors need to carve out three hours a week to focus on reaching out to prospective clients.
2012-11-06 The Prize for the Fiduciary Standard: Global Market Leadership by Stephen Winks (Article)
Tough times in the brokerage business are about to get tougher. A difficult investment environment and damage to its reputation are threatening the industry, and now it faces regulatory challenges under Dodd-Frank as it evolves from its current sales-driven culture to a professional services culture focused on advice and the fiduciary standard. Bold leadership will be necessary to navigate this challenge; without it, the brokerage industry and their clients will suffer.
2012-11-06 Overcoming Meeting Mania by Beverly Flaxington (Article)
My company is going to win the award for ?Meeting Mania.? When clients want to meet, I can?t accommodate them because of all the meetings we are required to attend: update meetings, investment meetings, focus groups, team breakouts, etc. It?s crazy, and I am not productive in this environment. How can I stop the insanity of these meetings?
2012-11-06 Letters to the Editor by Various (Article)
A reader responds to Gary Halbert's commentary, What Really Happened in Benghazi on Sept. 11, which appeared on October 31, and a reader responds to David Schawel's article, Will Bonds Be 'Burnt to a Crisp?', which appeared on October 16.
2012-10-30 Building Portfolios that Beat their Benchmark: Measuring Nanometers with a Yardstick by Bob Veres (Article)
Using tools he co-developed with the Nobel-prize winning economist Bill Sharpe, one advisor has found that he can reliably outperform an appropriate benchmark. His work proves it is possible to build a portfolio knowledgably. You just need the right tools to get the job done.
2012-10-30 The Next Generation of Income Guarantee Riders: Part 1 - The Deferral Phase by Wade Pfau (Article)
Clients no longer need to move their assets to a variable annuity with a rider to guarantee lifetime withdrawal benefits, thanks to the RetireOne stand-alone living benefit (SALB) rider from Aria Retirement Solutions, which can be applied to a portfolio of mutual funds and ETFs. Despite this enticing promise, however, the SALB may not offer as much downside protection as advisors and clients expect.
2012-10-30 The Dangers of Mortgage REITs: Does Doubling the Leverage Make Them a Good Investment? by David Schawel, CFA (Article)
Levered mortgage-backed REITs are dangerous. Many of those who invest in the underlying REITs have little idea what is generating 10%+ yields, nor do they understand what scenarios could lead share prices to drop precipitously. These investors need to recall the lesson we all learned so vividly in 2008 - leverage may increase returns, but it does so by significantly magnifying risk.
2012-10-30 The Essential Skill for Advising Women: Building Trust by Kathleen Burns Kingsbury (Article)
Creating trust with a client is not a one-time event. It is a journey that starts at the first meeting and continues throughout the life of the advisor-client relationship. And, while trust is an integral part of any client relationship, it's especially important for your female clients.
2012-10-30 The Yield Hunt by Michael Lewitt (Article)
The high-yield market is not in danger of imminent collapse as some have argued. As long as defaults remain relatively low, and interest rates remain invisible, investors will continue to chase yield. But a few things could cause a sharp sell-off in the near future.
2012-10-30 Overcoming Employee Finger-Pointing by Beverly Flaxington (Article)
We have a team-selling approach. We have portfolio advisors, salespeople and client-servicing people who all go on calls together. I own the firm and I'm tired of hearing each of them complain to me about one another. It's always someone else's fault. What advice can you give me so that I don't say something that I will regret?
2012-10-23 Chip Roame on the Next Big Problem by Robert Huebscher (Article)
The financial crisis decimated consumer wealth, and scandals such as J.P. Morgan's 'whale' and MF Global's collapse have plagued the investment industry. But the next challenge advisors and money managers face may be even worse.
2012-10-23 Understanding the Central Issue behind Entitlements by Michael Edesess (Article)
How should our government assure that its citizens have enough to get by - enough food, enough shelter, good enough health, etc.? It is easy to forget that today's fiercest political battles ultimately revolve around this simple question.
2012-10-23 When Portfolio Managers are Asked to be Marketers by Beverly Flaxington (Article)
I work for a large firm as a portfolio manager. We are increasingly asked to make sales presentations and find new business. Is managing money no longer important in this business?
2012-10-23 She Turns Sea Shells by the Sea Shore by Mariko Gordon (Article)
I love the sea. Always have. I explain how my seaside search for shells while unplugging on the Gulf Coast of Florida led to some useful insights related to uncovering an investment manager's process.
2012-10-16 When Strong Client Relationships Aren?t Enough by Beverly Flaxington (Article)
Building strong personal relationships with your clients and consistently exceeding their expectations for direct, personal service ? these traditionally were the best ways to generate referrals. But what if that's no longer enough?
2012-10-16 The New World of Credit by Michael Lewitt, Editor, The Credit Strategist (Article)
In an era in which economies are driven by the creation of fiat money by central banks, and where the base of hard money is dwarfed by the volume of outstanding debt, every form of capital is tied to credit. In 1919, William Butler Yeats famously wrote that 'the center cannot hold.' A century later, there is no center.
2012-10-16 A Partnering Approach for Women Clients by Tony DiLeonardi and Barbara Kay (Article)
You probably hear a lot of talk about 'landing' and 'retaining' clients ? implying that a client is a passive object, for you to win and hoard. This terminology, which we are all guilty of using, casts advising as some sort of grand competition. Men may be comfortable with a competitive approach. But women are not!
2012-10-09 Dividend Income: Music to Our Ears by ClearBridge Advisors (Article)
The hunger for income among investors is helping put dividends in the spotlight, say Hersh Cohen and Mike Clarfeld of ClearBridge.
2012-10-09 We Need a Bold Solution to Fix the Retirement System by Joe Tomlinson (Article)
Our retirement system is broken. The average American isn't saving enough to comfortably retire, and the fault lies in our reliance on defined-contribution (DC) plans, such as 401(k)s. Tinkering with DC plans won't solve the problem, and the other extreme - a federally mandated guarantee - isn't likely to gain support. But a number of compromises that lie between those approaches offer a better way forward for future generations.
2012-10-09 High-Dividend Yield Strategy under the Microscope by Michael Nairne (Article)
High-dividend yield stocks have become the favorite recommendation of a host of advisors, but an undue focus on income alone obscures the irreducible fact that long-term investment success is based on the total return of a portfolio including both income and capital growth. This raises two questions. How has the total return of a high-dividend yield strategy fared relative to the market? How does its total-return performance compare to the returns of other possible stock-selection strategies?
2012-10-09 How to Manage an Overextended Team by Beverly Flaxington (Article)
I work for a large financial firm. I am continually frustrated by the fact that we generate lots of good ideas and talk about what we need to do, but rarely get things done. Many things stay open-ended, or up for discussion. I am part of the problem because I am so busy, as is my team. How can I be more of a doer and less of a talker?
2012-10-09 The Yin and Yang of 2012 Stock Markets Through September by Ron Surz (Article)
Despite investor concerns about the economy, stock markets delivered substantial returns in the year-to-date, with the S&P 500 returning more than 16% and Europe, Australasia, Far East (the EAFE index) delivering more than 10%. This growth has been in the face of investor withdrawals from equity mutual funds. So if mutual fund investors are selling, who is buying?
2012-10-02 Confronting the Unemployment Crisis by Robert Huebscher (Article)
Policymakers seeking a path to economic recovery must first answer one crucial question: Is our persistently high unemployment structural or cyclical? If it's cyclical, then monetary and fiscal measures designed to boost consumer spending will restore the US to full employment in due course. But if we face a structural problem, then quick fixes won't work until we correct deeper imbalances that have left 12.5 million Americans without jobs.
2012-10-02 Woody Brock on Why to Own Stocks Now by Robert Huebscher (Article)
Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions and the author of American Gridlock. In a recent talk, he explained why investors should own stocks - particularly those with stable dividends - and why bonds are very risky in today's environment. This is the transcript; a video of this talk is also available.
2012-10-02 A Daily Reading Plan That Attracts New Clients by Dan Richards (Article)
Digesting news and sharing it with clients is part of every advisor's daily routine. Doing that efficiently, however, in such a way as to better position yourself with your clients, requires a structured approach that is far from obvious.
2012-10-02 Connection is Key When it Comes to Women by Tony DiLeonardi and Barbara Kay (Article)
Men and women connect differently. Male relationships tend to be task-focused and independent, whereas women are relationship-focused and cooperative. For advisors seeking to build rapport with female clients, it's vital to understand their approach, and conduct yourself appropriately to win their trust.
2012-10-02 When Centers-of-Influence Don?t Refer Clients by Beverly Flaxington (Article)
Everyone tells me I can sell more through relationships with attorneys and accountants. I have some that I know well. I refer to them, but they don't reciprocate. What am I doing wrong?
2012-10-02 Letters to the Editor by Various (Article)
Two readers respond to Rob Arnott's commentary, The Glidepath Illusion, which was published on September 25. A reader responds to Adam Apt's article, How to Build a Portfolio, which appeared last week.
2012-10-01 Understanding the Equity Market's Valuation by Charles Lieberman (Article)
An excellent interview with a highly regarded value investor Bill Nygren in the latest issue of Barron's provides a good review of the math that demonstrates objectively that stocks remain cheap. At current valuations, stocks are sufficiently cheap that companies can use free cash flow to buy back shares at a pace sufficient to grow earnings per share by about 10% annually, consistent with the market's long-term historical record and dramatically above the 4% growth suggested by bond manager Bill Gross.
2012-09-25 Bill Gross: Hedging Your Bet on Deflation versus Inflation by Ben Huebscher (Article)
Will deflation or inflation prevail? The answer to that one question determines portfolio construction, according to Bill Gross, founder, managing director, and co-CIO of PIMCO.
2012-09-25 A Woman's View of Choosing a Financial Advisor by Beverly Flaxington (Article)
Here are five things I've learned about what women seek in the marketplace.
2012-09-25 The Best Question to Engage Affluent Prospects by Dan Richards (Article)
There are no magic solutions when it comes to getting affluent prospects to meet with you. But your chances of success go up significantly by tapping into high-value concerns and positioning yourself as an advisor who can help address those issues.
2012-09-25 Value Investing in a Macro-Driven Environment by Robert Huebscher (Article)
The GoodHaven Fund (GOODX) is managed by Larry Pitkowsky and Keith Trauner. For most of the previous decade, Larry and Keith held research, portfolio management, and executive positions with the Fairholme Fund. I spoke with them last week.
2012-09-25 How to Build a Portfolio by Adams Jared Apt (Article)
This is the first of a set of three articles intended for the educated layman, in which I will combine the core ideas presented in my preceding articles into a comprehensive description of how to put together a portfolio. In this one, I'll explain what is often called Modern Portfolio Theory.
2012-09-24 Some Parting of the Clouds by Charles Lieberman (Article)
The ongoing rally in the equity market and corresponding rise in Treasury yields mirror the slow improvement in financial market conditions in Europe and moderate gains in domestic economic data. This still leaves more progress to be made on both fronts, but uncertainty remains elevated over the fiscal cliff, the threat of military conflict in the Middle East, the upcoming election, and tax policy.
2012-09-18 The Trend is Your Friend by Keith C. Goddard, CFA (Article)
John Hussman's recent market commentary, The Trend is Your Fickle Friend, highlighted the limitations of trend-following investment strategies that rely on moving-average crossover rules as a primary filter. But an extensive study conducted by our firm demonstrated that a simple moving-average crossover system outperforms buy-and-hold, while reducing drawdown risk and volatility.
2012-09-18 Your Clients' Toughest Retirement Decision by Wade Pfau (Article)
Want to trigger an impassioned debate? Ask a group of advisors about the choice between systematic withdrawal plans and single-premium immediate annuities. Fee-only advisors are loath to cede control of client assets to an insurance company that might someday default, while annuity advocates fire back that only their strategies provide a lifetime income guarantee.
2012-09-18 Recognize the Relative Advantages of Natural Resource Equities vs. Commodities by RS Investments (Article)
This RS Investments research brief examines how shifts in commodity fundamentals presents the case for employing natural resource equities as a means to benefit from favorable long-term secular trends, while achieving superior risk-adjusted returns, similar diversification benefits, and more reliable inflation protection relative to commodities.
2012-09-18 Gundlach ? The End of the Bond Bull Market by Robert Huebscher (Article)
Likening bullishness on Treasury bonds to a 'mass psychosis,' Jeffrey Gundlach made his strongest statement yet that interest rates are about to rise. In a conference call with investors last Tuesday, he said that the rate on the benchmark 10-year Treasury bond could increase by 100 basis points by the end of the year.
2012-09-18 Selling Your Practice ? After Negotiations Fall Apart by Beverly Flaxington (Article)
I was hoping to sell my firm to another financial advisor. When the time came to close the deal, he turned into a different person, trying to negotiate for all kinds of things and generally being very nasty. The deal fell apart. How do I find a suitable buyer who will treat me with respect and negotiate fairly?
2012-09-18 Letters to the Editor by Various (Article)
Several readers respond to our article, Can Our Retirement System be Fixed?, which appeared last week. A reader responds to Bill Gross' commentary, The Lending Lindy, which appeared on September 5, and a reader responds to David Schawel's article, Three Bond Funds for Rising or Falling Rates, which appeared last week.
2012-09-17 Ben Wants You To Spend Cash by John Petrides (Article)
This week the Federal Reserve launched its third round of monetary policy easing in as many years. Under QE3 (quantitative easing), the Fed will purchase $40 billion of mortgage backed securities on a monthly basis with the purpose of continuing to fuel the housing market. Under QE3, the Fed said it will keep its zero interest rate policy until mid-2015, with the goal of removing market assumptions of a rising rate environment. The Fed is and always will be data dependent, so all of these actions are subject to change.
2012-09-11 Can Our Retirement System be Fixed? by Robert Huebscher (Article)
Google 'Teresa Ghilarducci' and you'll find countless references to her as the most dangerous woman in America. That dubious distinction stems from her 2008 book, When I'm Sixty-Four, in which she advocated replacing voluntary 401(k) plans with government-mandated savings accounts. Ghilarducci was attempting to address a problem that thus far has eluded solution, so it's important to consider her arguments, which have drawn praise from some quarters, too.
2012-09-11 Three Bond Funds for Rising or Falling Rates by David Schawel, CFA (Article)
Several actively managed bond funds have achieved significant outperformance relative to their benchmarks despite recent low interest rates. The strategies employed by these funds can and will continue to outperform without needing rates to fall further.
2012-09-11 Ten Ways to Recapture Your Passion This Fall by Dan Richards (Article)
Think for a moment what it would take to hit the ground running truly excited about your business. If you struggle to figure out the formula to reach that goal, try these 10 strategies.
2012-09-11 Dealing with Facebook-Addicted Employees by Beverly Flaxington (Article)
Is it reasonable to expect my younger staff to stay off Facebook and their phones, and concentrate on what they need to do to be successful? Is there anything I can do to get them to unplug and concentrate on our work during work hours?
2012-09-11 Ponzi Games by Michael Lewitt (Article)
Whatever schemes the European Central Bank may cook up over the next few months will only prove short-term liquidity relief to what are long-term insolvency problems. Like any Ponzi scheme, the last money in is going to be hurt the worst when the charade comes to an end. In the meantime, investors proceed at their own risk.
2012-09-11 Stalking the Wild Stock Pick by Mariko Gordon (Article)
Summer already feels long gone. Happily, I came away from my time on the shore last month with more than just sand between my toes. Here are four lessons learned from watching 'creatures eating other creatures!'
2012-09-11 Hedged Equity Value Goes Beyond Performance by Emmett Maguire III, CFA (Article)
Advisors often overlook the value a hedged equity manager can inject into a portfolio, as recent outperformance of long only indices (S&P 500) has overridden other considerations. The case for hedged strategies, however, goes beyond relative returns.
2012-09-04 The Ultimate Income Strategy - Higher Yield and Lower Volatility by Geoff Considine (Article)
Investors, especially those in the de-accumulation phase of their retirement, count on high income and low volatility. Achieving the best possible tradeoff between yield and risk is a major challenge for advisors. Over the last two years, I've shown how to construct a low-risk portfolio - the ultimate income portfolio (UIP) - that yields over 9.0%. Let's look back at how those portfolios performed and the components of this year's UIP.
2012-09-04 Overcoming Client Inertia by Beverly Flaxington (Article)
I have clients with whom I have worked for some time, and they just don't make the decisions they need to. They will say they have a referral for me, for example, but never give me a name or contact info. They will say they are going to come to a client event, but then not bother to show up. What can I do to make them more active and responsive?
2012-09-04 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 The Key Obstacles to Succession Planning by Bob Veres (Article)
At every financial services conference, you hear complaints about all those clients who never managed to get around to implementing the fancy, creative, tax-saving estate plans that their advisor created for them. But are financial planners any better?
2012-08-28 Who Benefits from High-Speed Trading? by Michael Edesess (Article)
Speed is a virtue in most competitive pursuits; the combination of speed and accuracy is almost always the ultimate advantage. No one knows this better than the purveyors of high-speed trading technology, who have profited mightily -not only by executing rapid-fire algorithmic trades, but also by exploiting the arcane rules that govern the stock exchanges. But at whose expense are they profiting, and how long is their advantage likely to persist?
2012-08-28 The Wrong Way to Ask for Referrals by Dan Richards (Article)
There's no shortage of ideas about how advisors should operate - which means you have to be discerning about whose guidance you take. Recently, though, I disagreed with some advice from a top practice-management expert on the topic of referrals.
2012-08-28 Why Don't Your Female Clients Like You? by Kathleen Burns Kingsbury (Article)
Over the next 40 years, women will inherit 70% of the $41 trillion in intergenerational wealth transfers, and the first thing they will probably do after receiving the money is fire you. The reasons are not what you think: not poor investment performance, not lack of expertise.
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!
2012-08-28 Managing an Unmotivated Employee by Beverly Flaxington (Article)
What do I do when I have staff members who don't seem interested in self improvement? They aren't bad workers per se; just not motivated to improve. It frustrates me no end that I can't light a fire under them.
2012-08-21 The Profession's Faulty Assumptions: A Top Ten List by Bob Veres (Article)
In the financial planning profession, we make a lot of assumptions about the world in order to run spreadsheet models, retirement projections and sufficiency analyses, and generally determine how much a client should save and invest for the future. But many of the industry-standard inputs into our models are (how can I say this delicately?) garbage. Here are my top ten garbage inputs, with an explanation of how we might possibly improve on them.
2012-08-21 Secrets of a Great PowerPoint Presentation by Wade Pfau (Article)
Achieving your goals as a public speaker is never easy, and modern tools - especially Microsoft PowerPoint - can hinder as much as help, if used improperly. But a carefully prepared presentation with a clear underlying message, memorable visuals and a focus on making the message useful for the audience can strongly differentiate your speech and help you make a lasting impression.
2012-08-21 Hype and Reality in the Muni Bond Market by Hildy Richelson (Article)
Meredith Whitney's prediction last year of billions of dollars in municipal bond defaults stirred investors' fears. Earlier this summer, bankruptcies in three California cities reignited them, and last week a Federal Reserve study revealed that muni bonds have defaulted at a higher rate than previously reported. But no crisis has befallen the municipal bond market, and it is highly unlikely that one ever will.
2012-08-21 Dealing with Gossip in a Small Firm by Beverly Flaxington (Article)
Is gossip bad in a small firm, or can it be useful? I like to have employees tell me what's going on in our eight-person advisory firm. For me, it's where I get my best information about what's really going on. Is there a better way for me to manage? I don't want to be destructive but I don't want to cut off my best sources of information.
2012-08-21 Take My Stuff. Please by Mariko Gordon (Article)
We're all familiar with the benefits of removing clutter from our personal lives. Here's why you should impose a 'decluttering regimen' on your portfolios and lose your attachment to the past and future that those investments represent.
2012-08-20 The Basis For Fear by Charles Lieberman (Article)
Last week, I wrote about how stocks are cheap historically and also with respect to other asset classes, such as bonds. This week, I want to focus on the reasons for this. Stocks are not cheap by accident. Investor concerns over Europe, renewed recession in the U.S., the fiscal cliff and the huge budget deficits provide ample reason for caution. However, not all of these concerns are well placed and some of the issues can be resolved favorably.
2012-08-14 How Safe are Annuities? by Joe Tomlinson (Article)
For many advisors, the possibility that insurance companies will run into financial difficulties makes recommending annuities a nonstarter. But annuities are the best way to mitigate longevity risk, which may pose a greater danger, and advisors can take steps to help protect clients from insurers' financial problems.
2012-08-14 An Imperfect Storm by Janus (Article)
Changing regulations have drained liquidity from the corporate bond markets, as growth in bond ETFs is distorting a shrinking market. These converging forces are likely to result in a more volatile environment, but we see opportunity for managers able to understand the fundamental risk and reward.
2012-08-14 How One Advisor Adds Three Clients a Month by Dan Richards (Article)
I've had several emails in response to last week's article on how investors are using LinkedIn to help select advisors. Indeed, one advisor told me of a systematic approach that is consistently yielding new business. Let's look at how this advisor is capitalizing on his online presence to attract an average of three new clients per month.
2012-08-14 Blind Faith by Michael Lewitt (Article)
Central banks are facing political and practical obstacles that will render it very difficult for them to deliver anything more than anodyne words and actions as summer moves into the always dangerous August holiday season. IPhones should be kept on alert at the beach through Labor Day.
2012-08-14 Dealing with a Lazy Partner by Beverly Flaxington (Article)
What do you do in a partnership where one advisor (me) is aggressive, works late every night, brings in a lot of new business and the other (my partner) is lazy? It's beginning to annoy me that while I work hard, he just reaps the benefits without an equal contribution.
2012-08-14 Letters to the Editor - Bob Veres on AUM-based Fees by Various (Article)
Several readers respond to Bob Veres' article, The Alternative to AUM-Based Fees: The Total Profitability Retainer Formula, which appeared on July 31.
2012-08-07 Why Hedge Funds Destroy Investor Wealth by Michael Edesess (Article)
If all the money that's ever been invested in hedge funds had been put in Treasury bills instead, the results would have been twice as good. So claims Simon Lack - a former JPMorgan executive whose job was once to help steer billions into hedge funds - in his recent book, The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to Be True. You'd think hedge fund advocates would immediately pounce on this and refute it; but it's irrefutable.
2012-08-07 Robert Shiller on the Social Benefits of Finance by Laurence B. Siegel (Article)
It's a bad sign for the finance industry that one of its leading minds - the distinguished Yale economist Robert Shiller - has felt compelled to write a book in order to defend the idea that finance itself is a constructive pursuit, worthwhile to modern society. Have things really gotten that bad?
2012-08-07 The Game-Changer for Attracting Affluent Clients by Dan Richards (Article)
Until now I've been a skeptic on the value of social media for attracting affluent clients. You can use Facebook and Twitter to connect with investors in their 20's and 30's - but not the older, more prosperous clients advisors target. But last week, three separate conversations changed my mind on this.
2012-08-07 When Clients are on the Verge of Divorce by Beverly Flaxington (Article)
What do you do when you are pretty sure your clients are on the verge of divorce?
2012-08-07 Letter to the Editor by Various (Article)
A reader responds to Bob Veres' article, The Alternative to AUM-Based Fees: The Total Profitability Retainer Formula , which was published last week.
2012-07-31 The False Promise of Gold as an Inflation Hedge by Michael Edesess (Article)
If you were a time traveler, hopping from one point in history 2,000 years forward or back, you'd best carry with you - if your time machine will allow it - a small stash of gold. Gold has been an effective hedge against inflation over the very, very long term. But that's about all it's good for. The other common reasons for owning gold - in particular, to use as a short-term or even a long-term hedge against inflation - are baseless.
2012-07-31 The Alternative to AUM-Based Fees: The Total Profitability Retainer Formula by Bob Veres (Article)
Many - perhaps most - advisors are overcharging a few of their clients and undercharging the rest. In other words, a small number of investment advisor clients are subsidizing the services that the others are receiving. Here's a way to address that.
2012-07-31 Expect Headwinds for Stocks If Hoisington is Right about Bonds by Keith C. Goddard, CFA (Article)
Might today's historically low interest rates in the U.S. persist for years to come? The latest Quarterly Review and Outlook from Hoisington Investment Management forces readers to consider that possibility, refuting the reversion-to-the-mean mindset that causes many people to expect higher interest rates in the not-too-distant future. If the Hoisington model for the economy turns out to be right, the implications for the stock market are unfavorable.
2012-07-31 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 Dealing with Elderly Clients by Beverly Flaxington (Article)
What do you do when your client base is largely made up of elderly people and they are starting to fail - especially mentally? I have a number of clients who seem to be suffering from early dementia and memory loss. I don't want to be offensive to them, but I don't trust they even understand what I am saying sometimes about their financial situation.
2012-07-24 High Yield and Low Risk: Finding the Best Closed-End Funds by Geoff Considine (Article)
Yield-starved investors have ventured into exotic - and often risky - assets, including hedge funds, non-traded REITs and private placements. But an asset class that has been around since 1893 offers a compelling combination of low risk and high income. A carefully selected portfolio of closed-end funds (CEFs) will yield 8% with less volatility than the S&P 500.
2012-07-24 How to Tell If You're Not Charging Enough by Dan Richards (Article)
Delivering strong value is only half the equation when it comes to optimizing the profitability in the business you run - the other half relates to charging a fair price for that value. Here's a simple test to determine if you're not charging enough.
2012-07-24 Deciphering the Annuity Puzzle: Practical Guidance for Advisors by Wade Pfau (Article)
Economists love to try to explain why people may act irrationally; such 'puzzles' inspire numerous researchers to probe their possible solutions. The annuity puzzle, which ponders why retirees do not buy more annuities, is a classic example. After describing the basic theory behind why this is so puzzling, I will address a variety of potential explanations, and then turn to the practical guidance the puzzle offers for advisors and their clients.
2012-07-24 The Ultimate Death Cross - False Harbinger of Doom by Georg Vrba, P.E. (Article)
Skeptics and devotees of technical analysis took notice last week when Albert Edwards, the closely followed investment strategist at Societe Generale, warned the S&P 500 was 'on the verge of an ultimate death cross,' foretelling imminent major losses for the stock market. Edwards' sense of doom is misguided. An ultimate death cross is mathematically impossible unless the S&P were to suffer an immediate and precipitous decline. Moreover, the signal would provide a positive outlook, if it were to occur.
2012-07-24 Optimal Strategies for Secular Market Cycles by Michael Kitces (Article)
With alternative investments and active management strategies growing ever more popular, an advisor recently told me, 'It's just a fad and will end with heartache as all investment fads do. I've watched it play out over and over during my 30-year career.' But I am not persuaded. The secular market cycle today is different from the bear market 30 years ago, and not all market cycles favor the same investment strategies.
2012-07-24 Integrating a Salesperson into Your Practice by Beverly Flaxington (Article)
I'm about to hire a salesperson for the first time. We need a go-getter who will find us new business. How do I avoid conflict between this new person and my advisors? I want everyone to work together. Do I wait for tensions to dissipate or are there things I can do to set up for success?
2012-07-24 The Secret to Eternal Investment Youth by Mariko Gordon (Article)
Sometimes the best investment decisions are made with the tools and information readily at hand. The trick, as my experience this month with two of my favorite nonagenarians reveals, is taking advantage of them.
2012-07-23 How Can the Market Possibly Do Well? by Charles Lieberman (Article)
Investors remain rightfully concerned that our leaders have been unable to address major domestic and international issues. Domestic growth is sluggish, job growth is weak, unemployment remains high, the fiscal cliff looms at the end of the year and our politicians can't agree on the time of day. Moreover, none of this is likely to become clarified until after the election, if then.
2012-07-17 Should You Wait to Buy a SPIA? by Joe Tomlinson (Article)
Advisors may be reluctant to recommend single-premium immediate annuities (SPIAs) with interest rates currently so low. It may be better to wait for rates to rise, which will bring more attractive SPIA pricing. But that leaves the question about how long we will wait for better pricing. In this article, I'll show how the decision to delay can turn out well or poorly, depending on the timing and size of rate increases.
2012-07-17 Can you Beat SPIAs with Long-Term Bonds? by Michael Edesess (Article)
While single-premium income annuities (SPIAs) guarantee a specific income as long as the purchaser lives, their rates of return generally compare unfavorably with long-term bonds over normal life expectancies. This makes SPIAs look like the inferior investment, notwithstanding their value as longevity insurance. But considering the low level of interest rates and the potential for future volatility, SPIAs are still a good choice for many retirees.
2012-07-17 Breaking Bad by Michael Lewitt (Article)
With our largest business and government institutions committing every conceivable act of legal or moral anomie, we have every right to ask who is going to protect the rest of us from those who have been entrusted with so much power and influence. The institutions that were supposed to be the lifeblood of our economy are the same institutions that inflicted the greatest harm on society. When the family has to be protected from the man who is supposed to protect the family, the family is in serious trouble.
2012-07-17 Happy Clients - But No Referrals? by Beverly Flaxington (Article)
We have very satisfied clients. Our last client satisfaction survey showed a 98% 'high satisfaction' rate. However, we don't get many referrals. It's frustrating because we do everything to serve our clients well - and we ask for referrals. Why don't happy clients refer to us?
2012-07-17 Letters to the Editor by Various (Article)
Two readers respond to Bob Veres' article, Why Are Advisory Fees Lower Than They Have To Be?, which appeared last week, and a reader responds to Larry Siegel's article, Benchmarking Your Retirement Portfolio With a Risk-Free Strategy, which also appeared last week.
2012-07-17 Gundlach ? Avoid Riskier Assets by Robert Huebscher (Article)
Since early this year, Jeffrey Gundlach has warned investors to avoid exposure to riskier assets ? among them, equities, non-dollar-denominated securities and sovereign debt. Still reluctant to move to a more aggressive position, Gundlach said on Thursday that 'substantial opportunities await,' but they may be as much as a year away.
2012-07-11 Advisor Perspectives Marketing Case Study: A Small Fund with Large Ambitions by Team (Article)
For many smaller investment firms, growing a fund?s assets can be an enormous challenge, typically constrained by labor-intensive lead generation and qualification processes, lengthy sales cycles, and limited resources. One Boston-based firm found a way to eliminate these bottlenecks?and nearly double their assets as a result.
2012-07-10 Why Are Advisory Fees Lower Than They Have To Be? by Bob Veres (Article)
How much should you charge for your services? Is there any way to objectively calculate a fair price? Doctors, lawyers and accountants all charge relatively similar prices for their services. Why does the financial planning profession have fees that are all over the map?
2012-07-10 Benchmarking Your Retirement Portfolio With a Risk-Free Strategy by Laurence B. Siegel (Article)
Making the savings from 35 or 40 years of work pay for a retirement of the same length is a real challenge. At a zero real rate of return, you would have to save half of your income to enjoy a retirement that long without taking a cut in your living standard. There is, of course, a better way - judicious use of TIPS and annuities. A riskless strategy using those asset classes can safeguard one's retirement assets and can serve as a benchmark against which riskier portfolios can be measured.
2012-07-10 A Mid-Year Client Letter: Wisdom from Three Wall Street Veterans by Dan Richards (Article)
Here is a template for a letter to serve as a starting point for advisors looking to send clients an overview of the past 90 days and the outlook for the period ahead.
2012-07-10 The Plight of the Conservative Retiree by Michael Nairne (Article)
Today's extraordinarily low rates on top of a lower equity premium leave conservative retirees with the risk of heightened capital depletion as poorer portfolio returns may be inadequate to offset the combined impact of withdrawals and inflation.
2012-07-10 Are You Ever Asking for It: Client Referrals by Wendy J. Cook (Article)
Are you in the habit of routinely asking for client referrals? If so, fantastic. Consider this a pep talk. If not, well, it's still a pep talk. But it's also a call to action.
2012-07-10 The Disruptive Rainmaker by Beverly Flaxington (Article)
We brought a new advisor into our firm two years ago - a rainmaker. In the beginning he added a lot of value and we were excited to have him. Lately he has been disruptive - boldly and publicly questioning some of the decisions my partners and I have made. Should I put up with the behavior?
2012-07-10 Insights into the First Half of 2012 by Ron Surz (Article)
U.S. stock markets at mid-year have earned a respectable 9.5% return. A euphoric first quarter 12.6% gain gave way to a 2.8% minor setback in the second quarter. Foreign markets have not fared as well, earning only 3.4% over the first half of the year. The graph below provides the details, and adds a look at gold's performance.
2012-07-10 Letters to the Editor by Various (Article)
Several readers respond to Bob Veres' article, The Profession's Faulty Assumptions: A Top Ten List, which appeared last week. Also, a reader responds to Joe Tomlinson's article, How Safe are Annuities?, which appeared on August 14, and a reader responds to Beverly Flaxington's column, Dealing with Gossip in a Small Firm, which appeared last week.
2012-07-03 Bond Funds: You Get What You Don't Pay For by Michael Edesess (Article)
Innumerable studies have shown that it's well-nigh impossible to beat the averages consistently investing in equity funds. But what about bonds? Bonds, after all, have more structure - perhaps there are ways an expert fund manager could exploit that structure and gain an edge over other investors. Is it possible to predict how well a bond fund will perform relative to other funds?
2012-07-03 The Value of Planning by Bob Veres (Article)
How much do you charge for your services? When you look hard at the value you provide, the answer may be: 'not enough.'
2012-07-03 Regaining Confidence Amid Layoffs by Beverly Flaxington (Article)
We had to lay off a couple of people in our investment firm. As the founder and leader of the firm, the turmoil that resulted upsets me but I don't know what to do to give everyone confidence that I don't feel myself. Can you give me some tips about how to minimize the fear without being dishonest?
2012-06-26 Jeremy Grantham: US Stocks are Expensive and Bonds are Disgusting by Robert Huebscher (Article)
Jeremy Grantham, who has consistently identified overpricing in the US equity markets - he flagged both the Dot Com bubble and the irrational pricing that preceded the financial crisis, for instance - said last week that US stocks are 'a little expensive' and bonds are 'disgusting.' But his sternest warning to investors concerned the longer-term threat posed by global resource constraints.
2012-06-26 Ensuring That Clients Feel Valued by Dan Richards (Article)
Ask advisors whether they value their clients - especially top clients - and care about their future success, and you'll get a funny look wondering what you've been smoking. The answer is so obvious that the question isn't worth asking. But ask clients the corresponding question and the response is often quite different.
2012-06-26 Ask Bev: Lessons from the Human Side by Beverly Flaxington (Article)
Here is the initial installment in what we hope will become a regular column from Beverly Flaxington, a practice management consultant. She answers questions from advisors facing human resource issues.
2012-06-19 How to Follow Up Without Being a Pest by Dan Richards (Article)
How do you value your business? We all know the obvious candidates: assets, income, recurring revenue, client loyalty or the extent to which you've built a strong team. But a recent discussion with some top-performing advisors illuminated one metric that is absolutely critical - and typically overlooked.
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 Investing for Retirement: SPIAs, TIPS, Stocks and the 4% Rule by Joe Tomlinson (Article)
Relying only on stocks and bonds to fund a decumulation strategy may no longer be feasible, given today's low interest rate environment and the prospect of muted returns from the equities market. Investors should instead consider using single-premium immediate annuities (SPIAs) to fund at least a portion of retirement needs.
2012-06-12 The End of Economics by Michael Edesess (Article)
If Australian economist Steve Keen's book, Debunking Economics, doesn't end, once and for all, the terminally convoluted discourse that afflicts mainstream economics, nothing will. Although the book's purpose is to show that neoclassical economics is all bunk, however, it is also, remarkably, as good an introduction to neoclassical economics as any you're likely to find.
2012-06-12 The Problems with Trying to Benchmark Unconstrained Portfolios by Ken Solow (Article)
Benchmarking unconstrained, 'go-anywhere' managers is difficult. Common methods to determine an appropriate benchmark - such as an ex-post regression of how the fund was invested - can obscure the actions of the manager. Is the only solution to simply select an arbitrary benchmark and proceed accordingly?
2012-06-05 Finding the Best Dividend Fund by Geoff Considine (Article)
Assets are flowing into dividend-stock funds. But many experts are warning that those investors are setting themselves up for significant losses. Using an objective methodology that assesses tradeoff between yield and risk, we can determine those funds that investors should prefer - and a few they should avoid.
2012-06-05 Energy and the Wealth of Nations by Richard Vodra, JD, CFP (Article)
It is time for a new and different approach to understanding the economy, according to ecologist Charles Hall and economist Kent Klitgaard, who together are pioneering the discipline of biophysical economics. They advocate a novel methodology that properly accounts for the realities of global energy supplies and consumption.
2012-06-05 The Father of Efficient Markets: Is Warren Buffett Smart or Lucky? by Dan Richards (Article)
Eugene Fama is generally regarded the father of modern finance. His research has expanded upon the capital asset pricing model to identify the value and small-capitalization contributions to risk. Dan Richards spoke with him on May 1, the day before his guest talk at the CFA Institute annual meeting. This is the transcript of the interview.
2012-06-05 In Whom Do We Trust? by Justin Locke (Article)
Confidence, either in the banking system or the markets, is really about trust. Metrics like consumer confidence answer nothing more than the question, 'How much do we trust the people running our institutions to create conditions for future growth?' That being the case, you would think our leaders in government and industry might do a better job of maintaining our trust.
2012-05-29 The Bargains in Europe's Great Oversell by Bob Veres (Article)
When was the last time we saw negative headlines drive valuations as low as they have in Europe? Evermore's David Marcus, who succeeded Michael Price as manager of the Mutual European Fund, says this period of obsession with Greek debt, bank restructuring and single-digit P/Es may be known as The Great Oversell.
2012-05-29 The Essential Ingredient for Exceptional Success by Dan Richards (Article)
Advisors often ask me what they have to do to truly excel. They expect an answer based on their value proposition, the prospective clients they focus on, how effectively they get in front of those prospects, or their discipline and work ethic. A talk I attended last fall provided a clear cut - and surprising - answer.
2012-05-29 What Does a Dividend Tax Hike Mean for Dividend-paying Stocks? by Steve Chun (Article)
The Bush tax cuts are due to expire at the end of this year, but owners of dividend-paying stocks need not be afraid. Historically, changes in tax regimes have had little effect on the value of the aggregate stock market. Historical data show that even vulnerable asset sub-classes - high-yield stocks, for example - have not lost value long-term as a result of similar tax increases.
2012-05-29 Letters to the Editor - An Attack on Paul Krugman by Various (Article)
Two readers respond to Michael Edesess' article, An Attack on Paul Krugman, which appeared on May 15.
2012-05-29 Unraveling the Mess in Europe by Charles Lieberman (Article)
There is considerable nonsense written about the European debt crisis. Greece must balance its books, whether they remain inside the Euro or not. There are major benefits and costs to both remaining inside the Euro and to exiting. There is no silver bullet that will solve their problems easily. More broadly, banks need to be recapitalized all across Europe. This has not been done as yet, perhaps for political reasons, which only compounds the economic problems and allows them to fester. It seems like the Europeans are working towards solutions, but painfully slowly.
2012-05-22 Life-cycle Finance and the Dimensional Managed DC® Pension by Wade Pfau (Article)
Pension plans are like cars, according to Nobel laureate Robert Merton. People want a car they can drive and a pension that will maintain their standard of living in retirement; they do not care about what goes on under the hood. Advisors, however, must care. So when a new pension-like option hits the market, as DFA's recently did, it's important to go beyond simply kicking the tires and carefully examine how it works as a retirement-saving vehicle.
2012-05-22 What History Tells Us about a Potential Greek Exit by David Schawel (Article)
Greece's future is less certain given the recent elections. Is an exit now possible or probable? What would an exit from the euro look like, and how would it be accomplished? Some historical examples give us a clue to the repercussions.
2012-05-22 Letter to the Editor by Various (Article)
A reader responds to Richard Skagg's article, Dividends: A Timeless Component of Equity Return, which appeared on May 15.
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 Lacy Hunt on Debt, Austerity and Recovery by Robert Huebscher (Article)
Global economies are experiencing unsustainable debt disequilibrium, according to Lacy Hunt. Economic textbooks preach that equilibrium, rather than transition, should be the predominant condition. But our attempts to reduce our indebtedness by taking on more ? and less productive ? debt are weakening our economy and creating unstable conditions.
2012-05-15 James Montier on the Failures of Modern Finance by Robert Huebscher (Article)
The seeds of the next crisis have already been sown, according to James Montier - and they are fundamental flaws buried deep within the current theory and practice of finance. Bad models were the root of the financial crisis, Montier said, and a slew of behavioral biases are reinforcing financial instability.
2012-05-15 Optimizing Social Security Benefits by Wade Pfau (Article)
My dissertation was about Social Security reform, so I've read more of the Social Security Handbook than any human being should be forced to digest. Despite this background, William Reichenstein and William Meyer's new book, Social Security Strategies: How to Optimize Benefits, taught me a lot about how to strategize to get the most out of Social Security.
2012-05-15 Ponzi's Children by Michael Lewitt (Article)
Europe, whose economic condition is nothing less than terminal, is about to receive what physicians refer to as a 'zetz' of morphine in the form of M. Hollande. A 'zetz' is the final dose that doctors give to dying patients to hasten their passage to the afterlife. In Europe's case, however, the medicine is not going to be painless, and its administration is not based on mercy but on resentment and stupidity.
2012-05-14 Time to Face Reality by Charles Lieberman (Article)
European markets remain in turmoil, even as these governments prefer to keep their heads buried in the sand. Sooner or later, reality intrudes. Greece and Spain are in the vanguard of being forced out of their fantasy world and a second default, following closely on the first, now appears likely. Greece is small enough so its problems will impinge little on markets, if Spain can handle its bank issues sensibly. Europe's attention will soon shift towards protecting Spain.
2012-05-08 Richard Bernstein: US Assets will Outperform over the Next Decade by Robert Huebscher (Article)
Prior to founding the firm that now bears his name, Richard Bernstein was the chief investment strategist at Merrill Lynch & Co. In this interview, he discusses why he expects US assets - both equities and fixed income - to be the outperformers among global markets over the next decade.
2012-05-08 Annuities versus Systematic Withdrawals: Understanding Tax Effects by Joe Tomlinson (Article)
Given the complexity of most annuities, analysis of them typically only considers pre-tax results. But taxes matter. As we will see, tax impacts vary by the specific type of annuity you're considering, and will make the difference between annuities being cost effective or a drain on cash flow.
2012-05-08 Mohamed El-Erian and David McWilliams: The Key to Resolving Europe's Crisis by Robert Huebscher (Article)
Dealing with a crisis requires three things, according to Jack Welch, General Electric's former CEO. Define your reality - not as you would like it to be, but as it is. Do something about it. Then, third, acknowledge that the crisis wasn't half as difficult as you thought it was. Germany is the key player in Europe's crisis today, and it is still struggling to accurately define its reality.
2012-05-08 The Adjusted Gold/XAU Ratio as an Indicator of Forward Returns for Gold Stocks - An Update by Georg Vrba, P.E. (Article)
The latest data have a clear message for investors: gold stocks are attractively priced.
2012-05-08 Letter to the Editor by Various (Article)
A reader responds to Bob Veres' article, How to Respond to the Bachus-McCarthy Bill, which appeared last week.
2012-05-01 Making the Right Wager on Client Longevity by Manish Malhotra (Article)
Using annuities to fund retirement is anathema to most advisors, who view the loss of control over one's capital and impossibility of a bequest as nonstarters for their clients. But as clients reach the later stages of their retirement, those arguments no longer apply. A single-premium immediate annuity is superior to a TIPS ladder or a systematic-withdrawal portfolio for funding the last phase of retirement.
2012-05-01 The Asymmetric Value of Delaying Social Security Benefits by Michael Kitces (Article)
Despite a compelling body of research arguing that most retirees would benefit by delaying the onset of Social Security payments, the majority who are eligible still elect to begin receiving them as early as possible. But delaying Social Security benefits is one of the best triple-hedges available to any retiree - simultaneously protecting against poor returns, high inflation, and longevity.
2012-05-01 Another Story of Too Much Debt: Investing During Unsustainable Economic Conditions by Brian McAuley (Article)
US-based investors cannot ignore the macro environment, and therefore must consider the consequences of our increasing indebtedness and its impact on capital markets. We can gain valuable insights into our fiscal problems from the housing bubble and the European sovereign debt crisis - lessons which every value investor should heed.
2012-05-01 Congress Needs to Stop a Dividend Tax Hike by Richard McMahon (Article)
Bad news is lurking right around the corner for investors, businesses and the nation's economy. Unless Congress acts before the end of the year, dividend income will be taxed at individual tax rates instead of at the same rate as long-term capital gains.
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 The Number One Priority for Advisors by Dan Richards (Article)
What's the single most critical need for advisors to succeed? There are lots of candidates ? investment knowledge, communication skills, the ability to sell, and attracting and motivating a strong team.
2012-04-24 Letter to the Editor - Jeremy Grantham by Various (Article)
A reader responds to Jeremy Grantham's commentary, My Sister's Pension Assets and Agency Problems, which appeared on April 19.
2012-04-20 Venerated Voices Q1 2012 Awards by Advisor Perspectives (Article)
We published our quarterly update for the Venerated Voices awards. Rankings were issued in three categories: The Top 25 Venerated Voices by Firm, The Top 25 Venerated Voices by Author and The Top 10 Venerated Voices by Commentary.
2012-04-17 Rethinking Safe Withdrawal Rates: The Meaning of Failure by Wade Pfau (Article)
Merely knowing the probability that an investor's wealth will be depleted at some point is not enough to build a retirement strategy. That is the traditional measure of failure in safe withdrawal studies, and it's time to move beyond it.
2012-04-17 Two Words to Get in Front of Prospects by Dan Richards (Article)
Even advisors who are successful in every aspect of their business struggle when it comes to getting meetings with prospects. The key is to understand how prospective clients look at requests for action - and to frame anything you ask with two words in mind.
2012-04-17 The Rebalancing Problem by Michael Nairne (Article)
Selling winning asset classes to buy losers runs counter to human nature. But doing so with discipline can increase the potential return of a portfolio while critically maintaining its risk profile. The rebalancing premium is an important and often overlooked addition to returns of properly managed portfolios.
2012-04-17 Muppet Capers by Michael Lewitt (Article)
Investors enjoyed strong stock market and credit market gains during the first quarter of the year, but storm clouds may be forming on the horizon. Corporate profits have likely peaked. Stocks may be the best house in a bad neighborhood, but houses in that neighborhood appear to be fully priced for now. There are also some troubling signs in the bond markets, particularly the long end.
2012-04-17 The Unemployment Rate: A Coincident Recession Indicator by Georg Vrba, P.E. and Dwaine van Vuuren (Article)
For what is considered to be a lagging indicator of the economy, the unemployment rate provides surprisingly good signals for the beginnings and ends of recessions. We have developed a model that uses unemployment figures to produce these signals and to determine the probability of when a recession may start.
2012-04-10 Flexible Strategies for Longevity Protection: Comparing Two Products by Joe Tomlinson (Article)
Products that guarantee income for life can be useful for retirement planning, but many clients also want flexibility and control over their investments. Two products that can meet these objectives are variable annuities with guaranteed lifetime withdrawal benefits (VA/GLWBs) and deferred income annuities (DIAs).
2012-04-10 Allocating to Real Assets: Why Diversification Matters by Cohen & Steers (Article)
One way to extend the long-term purchasing power of a traditional stock and bond portfolio is through an allocation to real assets. But individually, categories like commodities, natural resource equities and REITs can be volatile. Cohen & Steers meets the challenge with a focus on broad asset-class diversification.
2012-04-10 HBS Research: The Role of Business in Society by Michael Edesess (Article)
Many people believe that society needs to change for market capitalism to be sustainable - and it turns out a surprising number of business leaders are among them. That's the finding of a recent series of forums, organized by three Harvard Business School professors. Based on these discussions, the HBS professors advance a bold proposal - that business itself - not government, or even public-spirited nonprofits - should lead the charge to make the necessary changes to our capitalist system.
2012-04-10 Super Macro - A Fundamental Timing Model by Theodore Wong (Article)
Rather than endure losses in bear markets - as passive investors must - I have shown that a simple trend-following model dramatically improves results, most recently in an Advisor Perspectives article last month. Now it's time to extend my approach by showing how this methodology can be applied to fundamental indicators to further improve performance.
2012-04-10 Down the Rabbit Hole of Cognitive Dissonance by Mariko Gordon (Article)
What you see is not always what you get. It is easy to misinterpret signals and leap to the wrong conclusions, and it is vital to keep working until you get to the truth.
2012-04-03 Fewer, Richer, Greener: Why Jeremy Grantham is (Partly) Wrong by Laurence B. Siegel (Article)
Is the human experience getting better or worse? This is a big question investors are rarely asked to confront, yet its answer has profound consequences for market returns.
2012-04-03 Senior Loans Attractively Priced Relative to High Yield by OppenheimerFunds, Inc. (Article)
By restoring confidence in the global financial system, the European Central Bank's Long Term Refinancing Operation has allowed global bond investors to participate in attractive opportunities around the world.
2012-04-03 Gassed Up but No Place to Go by Geoff Considine, PhD (Article)
When a great investor points to a vastly underpriced asset, a natural first reaction is to devise the best strategy for buying it. Sometimes, however, the impediments to that strategy prove too great, something anyone will soon discover who listens to Jeremy Grantham's assertion that 'everyone who has a brain should be thinking of how to make money' long-term on natural gas.
2012-04-03 A Q1 Letter to Clients: Bernanke, Buffett and Siegel on the Prospects Ahead by Dan Richards (Article)
Here is a template for a letter to serve as a starting point for advisors looking to send clients a summary of what's happened in the past 90 days and the outlook for the period ahead.
2012-04-03 Reigniting Your Passion for the Business by Dan Richards (Article)
Successful advisors consistently tell me they've lost enthusiasm and passion for their work compared to 10 or 15 years ago. Advisors have two choices when this happens - either accept it as a sad reality or put in place strategies to rekindle the fire that burned earlier in their career.
2012-04-03 The Easy Money Saloon by Michael Lewitt (Article)
When two of the world's soundest central banks (Israel and Switzerland) start investing their reserves in stocks (the Bank of Israel is run by the highly respected Stanley Fischer for God's sake!), one has to wonder what the world is coming to. Apparently the global saloon is expanding its boundaries. No doubt we will soon hear the ECB is merging with the London Stock Exchange.
2012-03-27 GMO: Two Questions We Can't Answer by Robert Huebscher (Article)
Its reputation was built on stellar returns achieved with long-term bets on undervalued asset classes. Current market conditions, however, pose two unanswerable questions for GMO ? leaving the firm with an uncertain strategy for its equities and fixed-income allocations.
2012-03-27 Jack Bogle: The Triumph of the Index Fund by Robert Huebscher (Article)
Jack Bogle has spent his career selling investors on virtues of index funds. In a talk last week, he spoke triumphantly, as if the battle is all but over.
2012-03-27 Questions of Character by Michael Lewitt (Article)
As a long-time investor in leveraged companies, the character of management has long informed my decisions of where to direct capital. There is no margin of safety when you invest in a company managed by dishonest or reckless managers, or a management team that has a history of placing its own interests before those of its shareholders or creditors. The same is true of choosing an investment manager.
2012-03-26 Did Steve Jobs Despise Shareholders? by Charles Lieberman (Article)
Last week, Apple announced it will initiate a $2.65 per share quarterly dividend and a $10 billion share repurchase program. Clearly, since the passing of Mr. Jobs, management has focused more of its attention on shareholders, something uninteresting to Mr. Jobs. He wanted to make "cool things" and everything else was secondary. Mr. Jobs didn't have much patience for people, as revealed in his recent biography; I would imagine the same went for shareholders. For a man who seized on technological opportunities, Steve Jobs' ignorance for shareholders missed some great financial ones.
2012-03-20 Jeremy Grantham: This Time is Different by Michael Edesess (Article)
Jeremy Grantham is a paradox. A man who has said many times, 'This time it's different are the four most dangerous words in the English language,' is now saying - loud and clear - this time it really is different.
2012-03-20 Bob Rodriguez on the Dangers in Today's Markets by Robert Huebscher (Article)
Bob Rodriguez is the managing partner and chief executive officer of Los Angeles-based First Pacific Advisors. In this interview, he discusses how the challenges faced by the US economy will impact the capital markets.
2012-03-20 Hot Buttons that Motivate Prospects by Dan Richards (Article)
If you spend $12,000 to promote an event for prospects, you should expect results. That didn't happen for an advisor whose recent prospecting events failed. Here's how he could have created a successful event - by focusing on the hot buttons that motivate prospects.
2012-03-20 The Wages of Denial by Michael Lewitt (Article)
Europe is insolvent, and hopelessly so. Her procurer - the European Central Bank (ECB) - can front her some money for a while, but in the end she is either going to have to repay him or suffer a very rough consequence. In the meantime, however, she can continue to entertain her customers, in this case those willing to extend her credit in one form or another. Sooner rather than later, however, these creditors are going to grow tired of her tricks and turn their attention otherwise. At that point, she will be left to deal with the ECB because nobody else will have her.
2012-03-20 A Look Back at the Performance of the Holy Grail by Theodore Wong (Article)
Back-tested results often look good on paper because stellar performance could have come from curve-fitting. If that were the case, then my 'Holy Grail' model would not have withstood the test of time. But in the 32 months that have passed since its publication, investors who heeded its advice would have outperformed the market on a risk-adjusted basis.
2012-03-13 How Do Spending Needs Evolve During Retirement? by Wade Pfau (Article)
Most people's spending patterns change over the course of retirement - expenses look very different at 90 than they do at 65. Yet most research on retirement withdrawal rates relies on constant inflation-adjusted withdrawals to develop a client's forward-looking budget. Such an unrealistic, one-size-fits-all approach can be disastrous if a client inadvertently retires with insufficient savings. Is there a better way?
2012-03-13 Concentrated Equity Triple Play Higher Returns, Lower Risk, Lower Correlations by C. Thomas Howard, Ph.D. (Article)
Concentrating a portfolio on a few choice assets dramatically increases an investor's chance of superior performance. Nonetheless, most advisors and investors shun portfolio concentration as unacceptably risky. To a great extent, this is driven by the myth that adequate diversification is impossible unless one holds many stocks - a myth I will debunk.
2012-03-13 The Gutenberg Economy by Michael Lewitt (Article)
As commentators near and far speculate on what 2012 will bring to the global economy and markets, there is little question that one factor will be decisive: the central banks' printing presses. Both the Federal Reserve and the European Central Bank (ECB) will keep printing dollars and euros around the clock until their presses run out of ink.
2012-03-13 Letter to the Editor - Tactical Asset Allocation v. Behavioral Finance by Various (Article)
Ken Solow, Michael Kitces and Sauro Locatelli respond to Christopher Sidoni's article, The Conflict between Tactical Asset Allocation and Behavioral Finance, which appeared on February 21.
2012-03-12 To Hell and Back In by Charles Lieberman (Article)
This past week saw the three year anniversary of the market low on March 9, 2009. The most crucial lesson that investors should have learned is that good investments recover, no matter how dramatically the market may decline, no matter how volatile it may be at times, and they should approach investing with a long-term plan in mind. Many investors were shaken out of the market over the past few years now have account values that are well behind where they would be if they had simply held on for the vicious ride.
2012-03-06 New Tools to Manage Longevity Risk by Joe Tomlinson (Article)
If you could guarantee yourself an inflation-protected stream of income for the rest of your life, would you take it? For many retirees, the answer is yes, and that is rightfully sparking new interest in deferred-income annuities (DIAs). By combining a DIA with a TIPS ladder or more aggressive equity-centric investments, retirees can obtain inflation-protected lifetime income. But they will face important tradeoffs, as I will explain.
2012-03-06 Five Business Tips from a Top Entrepreneur by Dan Richards (Article)
Financial advisors are classic entrepreneurs, typically starting a business from scratch with the goal of achieving financial security for themselves and their families. That's why lessons from entrepreneurs with a pattern of demonstrated success ? even outside the financial industry ? are tremendously helpful.
2012-03-06 Why Invest? - Part 2 by Adam Jared Apt (Article)
Risk tolerance is a quality inherent in an individual or an institution. Whether quantified or not, risk tolerance is the amount of return the investor requires as compensation for the extra risk that comes with investing. It's a concept that is essential for making investment decisions, yet it is elusive and maddeningly difficult to specify. Even so, many investment advisors like to give the public the impression that they're proficient at determining it.
2012-02-28 Jim O?Shaughnessy: What Now Works on Wall Street by Katie Southwick (Article)
Understanding the science of investing has been the lifelong passion of Jim O'Shaughnessy, whose 1996 book, What Works on Wall Street, was among the first to explain the benefits of quantitative, empirical methods. Now, with the hindsight of the two bear markets since, he has refined his approach - rejecting some of his original ideas in favor of improved ways to forecast market performance. His new and improved approach finds that a dividend-oriented global strategy is best in today's environment.
2012-02-28 Woody Brock on Healthcare Reform and Trade Relations with China by Robert Huebscher (Article)
Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions, an economic research and consulting service. In the second part of this two-part interview, he discusses his recently published book, American Gridlock, and focuses on how to fix two of our nation's most pressing problems: the crisis in health care - made worse by ObamaCare - and our trade relations with China.
2012-02-28 A Simple Strategy to Triple Client Savings Rates by Dan Richards (Article)
Whether dieting, exercising, turning off American Idol to read that book on our side table or spending versus saving, maintaining focus on our resolutions is a universal issue. While attending the American Economic Association meeting in early January, I had three conversations with leading academics concerning experiments to help people stick to their plans, including one that tripled savings rates among employees.
2012-02-28 Letters to the Editor by Various (Article)
Readers respond to Christopher Sidoni's article, The Conflict between Tactical Asset Allocation and Behavioral Finance, which appeared last week, and to Simon Johnson's commentary, Too Big to Jail, which appeared on February 21.
2012-02-27 Are Individuals Going Back into Stocks? by Charles Lieberman (Article)
The strong rally in equities in the early part of 2012 raises the question as to whether households will stop buying bonds and will resume buying stocks. I think the answer is no, which I also believe is unfortunate. While the equity market rally has no doubt captured the attention of households, I doubt those who have exited the stock market will venture back into this perceived risky arena until they get badly hurt owning bonds. Thats coming, but it hasnt happened yet.
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 ?The Greatest Anomaly in Finance' by Geoff Considine (Article)
If I told you that there is an easy-to-exploit market anomaly that has enabled investors to consistently and substantially outperform the market with less risk for more than four decades, your first instinct might be to roll your eyes. After all, the unending quest to improve returns while lowering risk has yielded countless methods with initial promise that subsequently collapse under further scrutiny.
2012-02-14 The Safety-first, Goals-based Approach to Financial Planning by Wade Pfau (Article)
Little of what is taught in traditional investment textbooks is of value in personal financial planning. Risk is not standard deviation; it is the probability and consequences of not meeting one's goals. That real-world perspective animates a new book by Zvi Bodie and Rachelle Taqqu that implores advisors and their clients to lock in the funding of their essential expenses before worrying about their discretionary goals.
2012-02-14 The Dividend Yield Love Affair by Michael Nairne (Article)
Employee share-based compensation is now a significant expense deduction for public companies and hence, is already accounted for on the financial statements. Concerns that options-related stock issuance nullifies the impact of stock buybacks are accordingly overstated. This bolsters the view that you need to look at stock buybacks as an additional form of cash remittance to shareholders and not simply at dividends.
2012-02-14 Is a Picture Worth a Thousand Basis Points? by Mariko Gordon (Article)
Lately I'm seeing twins everywhere - both the human kind and in the investment patterns of our business. I will explain why the positive results we've seen when selling stocks after a big break in price can often lead to equally negative results - a mirror image twin - when applied on the buy side.
2012-02-14 Letters to the Editor by Various (Article)
A reader responds to Larry Siegel's article, Jeremy Siegel, Rob Arnott and Other Experts Forecast Equity Returns, and another reader responds to Joe Tomlinson's article, An Innovative Solution to Retirement Income, both of which appeared last week.
2012-02-13 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.
2012-02-07 A Conversation that Tripled Referrals by Dan Richards (Article)
Last fall, a veteran advisor contacted his retired clients with the suggestion that they meet to discuss one simple goal - to lay out detailed monthly cash flow forecasts matching funds coming in with cash going out. Not only did this exercise benefit those clients, he was able to leverage his efforts to triple his referrals.
2012-02-07 Neel Kashkari on PIMCO's Equity Strategy by John Heins (Article)
Bond titan PIMCO has been methodically building its equity-investing expertise. Here the architect of that effort, Neel Kashkari, and his first major hires describe their strategy and how they're uncovering value in today's market.
2012-02-07 Letters to the Editor by Various (Article)
Readers respond to past articles, including Robert Huebscher's article, The Misreading of Reinhart and Rogoff, our interview with Lacy Hunt, and Wade Pfau's article, Safe Withdrawal Rates: A Do-It-Yourself Approach.
2012-01-31 Lacy Hunt on the Roadblock to Recovery by Robert Huebscher (Article)
'The fundamental key to prosperity is not governmental financial transactions, or even private sector financial transactions,' according to Lacy Hunt, the widely respected economist at Hoisington Investment Management, with whom we spoke last week. 'The key to prosperity is the hard work and creativity of our individuals in businesses.'
2012-01-31 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 A 13-Point Plan for Top Clients by Dan Richards (Article)
Time is our scarcest currency. We must be cautious about taking on significant new commitments, and the only exception is when there's absolutely clear cut evidence of a substantial return. That's why a simple way to get your top clients to look forward to your meetings is incredibly important.
2012-01-31 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 Michael Lewis on the True Depth of the Crisis in Europe by Larry Siegel (Article)
Michael Lewis is a financial writer and author, most recently of Boomerang: Travels in the New Third World, in which he reported on the European debt crisis from several of the affected countries. In this interview, he discusses a range of topics, including the future of Wall Street and the challenges of great financial writing.
2012-01-24 Beyond Reinhart and Rogoff by Robert Huebscher (Article)
My article two weeks ago, The Misreading of Reinhart and Rogoff, elicited a number of challenges, both from those who argued that excessive debt imperils our economic growth and from those who claimed that my proposed solution was unworkable. Among those challengers was Lacy Hunt, who raised several valid concerns. I will explain why I disagree with Hunt and others, and why the dollar's position as the reserve currency increases our borrowing capacity. But our ability to borrow cannot be a license to spend unwisely, and I will conclude by expanding on the policy choices the US must pursue.
2012-01-24 Must Bond Investors Fear Rising Interest Rates? by Andrew D. Martin (Article)
Thirty-one years ago, in 1981, the one-year Treasury reached its all time high of 14%. Today it hovers around 0.10%. Never before have interest rates fallen so far. Many economists and investment advisors, seeing nowhere to go but up, expect interest rates to climb from these historic lows. But that would not be the catastrophe that many bond investors fear.
2012-01-17 Martin Wolf on the Eurozone and Beyond by Robert Huebscher (Article)
Martin Wolf is widely considered to be one of the world's most influential writers on economics. Since joining the Financial Times in 1987, where he is chief economics commentator, he has received numerous awards for excellence in financial journalism. In this interview, he discusses the Eurozone crisis and prospects for global economic growth.
2012-01-17 Income Annuities versus GLWBs: A Product Comparison by Joe Tomlinson (Article)
The variable annuity with a guaranteed lifetime withdrawal benefit (VA/GLWB) has become the most popular form of annuity, as retirees seek income protection and equity-market participation. But VA/GLWBs are often costly, and the typical purchaser has few tools with which to assess the costs. Investors need a straightforward way to gauge the fees for VA/GLWBs versus other retirement income alternatives.
2012-01-17 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 Letters to the Editor - the Misreading of Reinhart and Rogoff by Various (Article)
Many readers responded to Robert Huebscher's article, The Misreading of Reinhart and Rogoff, which appeared last week.
2012-01-17 Letter to the Editor - GLWBs by Various (Article)
A reader responds to Wade Pfau's article, GLWBs: Retiree Protection or Money Illusion?, which appeared on December 13, 2011.
2012-01-10 Gundlach on the Key Risk for Bond Investors by Robert Huebscher (Article)
Watch out if you own a bond fund that underperformed its benchmark by 2% or more last year, as most did. Rather than put their careers at risk by suffering a second year of poor performance, those fund managers will turn to indexation, according to DoubleLine?s Jeffrey Gundlach. And since the Barclay?s Aggregate Index holds nearly 35% of its assets in Treasury bonds with near-zero yields, its investors will endure poor returns.
2012-01-10 2011: The Famine That Followed the Feast That Followed the Fiasco by Ron Surz (Article)
Ron Surz provides his award-winning commentary on the US and global markets.
2012-01-10 I Can See Clearly Now... by Mariko Gordon (Article)
There is a lot to learn by bringing in an objective third party to weigh in on one's investment process. I highlight the benefits we realized by allowing a trusted adviser behind the curtain.
2012-01-03 How Top Execs Game Retirement Plans by Michael Edesess (Article)
Corporate executives and employee-benefits consultants have engineered a cascade of arcane methods to deprive ordinary retirees of benefits they thought they were promised, in order to fatten corporate profits and the benefit packages of top executives. That is the harsh message of Wall Street Journal reporter Ellen E. Schultz's meticulously-researched book, Retirement Heist.
2012-01-03 Ghosts of Christmas Past by Michael Lewitt (Article)
While Europe desperately needs the liquidity that the latest bailout scheme provides, nobody should mistake liquidity for solvency and think for a moment that the crisis is over. Much more work is needed to heal the wounds that European policy makers and business leaders have inflicted on their societies since the European Union was formed.
2011-12-27 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don't always get the readership they deserve. Here are 10 articles that you might have missed, but I believe merit reading.
2011-12-27 The Ten Most-Read Articles in 2011 by Robert Huebscher (Article)
As is our custom, we conclude the year by reflecting on the 10 most-read articles over the past 12 months.
2011-12-27 Vitaliy Katsenelson on Krugman?s Missed Call by Robert Huebscher (Article)
Vitaliy Katsenelson is the chief investment officer at Investment Management Associates, a Denver-based money management firm, and the author of two highly acclaimed books on value investing. In this interview, he identifies what Paul Krugman failed to see with regard to China, discusses the prospects for the European and domestic economies, and explains why Microsoft is a grossly undervalued stock.
2011-12-27 Seven Critical Words to Share with Top Clients by Dan Richards (Article)
Successful advisors focus on talking to their top clients. But even when advisors talk to clients frequently, one important sentiment and seven critical words often get missed.
2011-12-27 Letters to the Editor by Various (Article)
Readers respond to three recent articles and commentaries: Wade Pfau's article, GLWBs: Retiree Protection or Money Illusion?, which appeared on December 13; PIMCO's commentary, Hot Potato, which appeared on December 21; and Kay Conheady's commentary, Does the Trend Matter?, which appeared on December 20.
2011-12-20 Do-It-Yourself Equity-Indexed Annuities by Geoff Considine, Ph.D. (Article)
Equity indexed annuities offer retirees a compelling combination of guaranteed income and participation in the market?s upside. But EIAs are exceedingly complex and have been the subject of numerous regulatory challenges. For those who seek a simpler alternative with a comparable return profile, a combination of fixed-income securities and options is viable choice.
2011-12-13 GLWBs: Retiree Protection or Money Illusion? by Wade Pfau (Article)
One of the most popular variable annuity riders is the guaranteed lifetime withdrawal benefit (GLWB), which offers downside protection through lifetime income, upside potential with step-ups based on market performance, and minimal surrender penalties. But, examining historical data, I have found that those riders carry a cost that will not be readily apparent to retirees: their cash flows rapidly decrease on an inflation-adjusted basis.
2011-12-13 Did Congress Cash In on Insider Stock Trading? by Michael Edesess (Article)
Are members of Congress profiting from insider information on companies their legislation affects, or is something more complicated - and less nefarious - going on? Those who watched the November 13 segment on 60 Minutes that accused members of Congress of insider trading are outraged at these public servants' behavior. But that outrage should be aimed at 60 Minutes itself, along with Peter Schweizer, whose new book, Throw Them All Out, provided the misleading data that was the basis for the broadcast.
2011-12-13 Has Financial Planning Made Itself Appealing Only To Risk Takers? by Michael Kitces (Article)
Financial planning advice may be so equity-centric, that people who don't want equity-style investment risk forgo the use of a financial planner altogether, as a recent Journal of Personal Finance article revealed.
2011-12-13 Harnessing the Power of Momentum by Michael Nairne (Article)
A market phenomena that we can harness on behalf of our clients is momentum - the propensity for price trends to persist in the short-term. I examine the origins of momentum, illustrate its return premium and consider how managers can leverage momentum on behalf of investors.
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.
2011-12-13 Letter to the Editor by Various (Article)
A reader responds to Michael Edesess' article, The Unspoken Truth about Hedge Funds, which appeared last week.
2011-12-06 Why Shiller and Soros May Be Wrong about Farmland Investing by Robert Huebscher (Article)
Earlier this year, Yale's Robert Shiller identified farmland as an asset class in the early stage of bubble formation. George Soros, Jim Grant and Jim Rogers have espoused similarly bullish views. But advisors - even those managing the assets of very wealthy clients - shouldn't bet the farm on these expert forecasts just yet.
2011-12-06 The Unspoken Truth about Hedge Funds by Michael Edesess (Article)
The popularity of the endowment model among advisors has been driven by the belief that hedge funds have produced positive risk-adjusted returns. But the basis for that notion has been statistics gleaned from hedge fund databases, and new research shows returns from those databases are even more upwardly biased than previously thought; the supposed alpha never really existed.
2011-12-06 The Quality Conundrum by J.J. Abodeely, CFA, CAIA (Article)
We are witnessing the end of a remarkable and confounding era for stocks, best described by the 'quality conundrum' investors faced for much of the last two years. During that time the combined outperformance of low-quality stocks alongside the underperformance of high-quality stocks was unprecedented in the last 30 years. Now, we are embarking on an era where high-quality stocks will likely significantly outperform low-quality stocks, resolving this conundrum.
2011-12-06 Small-Cap ETFs: Tail or Dog? by Mariko Gordon (Article)
Now that ETFs represent anywhere from 30% to 40% of small-cap trading volume, the creature that was created to shadow its master has become bigger than the index itself. Let's look at the impact of this rapid growth and the three important questions it raises.
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 Volatility Trap: Why Staying the Course Makes Sense by C. Thomas Howard, Ph.D. and Craig T. Callahan (Article)
Those who let emotions drive their investment decisions missed out on the October market surge, the largest monthly stock market return in 20 years. These investors have unwittingly fallen prey to the 'Volatility Trap,' failing to recognize - as our data show - that increased volatility is a precursor to higher returns.
2011-11-29 Do You Really Understand Rates of Return? Using them to look backward - and forward by Michael Edesess (Article)
The basic quantitative building block for professional judgments about investment performance is the rate of return. How well do we really understand it? And how can we use past rates to assess the prospects for future performance? You may be surprised to learn that 'expected return' may not be what you think.
2011-11-29 The Investment Case for Israel by Jamia Jasper (Article)
What country went into the 2008-2009 recession in a stronger position and exited sooner than any western nation? Whose stock market has outperformed the MSCI EAFE over the past 10 years?
2011-11-22 Morningstar?s Attempt to Predict Performance by Robert Huebscher (Article)
Few question that skillful mutual fund managers exist, but virtually all attempts to identify them ex ante have failed. Last week, Morningstar took up the challenge with its Analyst Ratings, which aim to identify funds with the 'long-term potential for superior risk-adjusted performance.' Given the futility of such efforts over the last several decades, advisors should approach this new effort with skepticism.
2011-11-22 A Bond-Based Financial Planning Framework by Stan and Hildy Richelson (Article)
Plain vanilla bonds have proven themselves to be the best investments available, and we wholeheartedly agree with Andrew Mellon's prescient late-1920s observation that 'gentlemen prefer bonds.' We believe that ladies should, too.
2011-11-15 Are TIPS Really Safe and Worry-Free? by Wade Pfau (Article)
The Fed's aggressive monetary easing has many investors considering TIPS as a cornerstone of their retirement strategy. While TIPS' unique ability to protect against CPI-based inflation is undeniable, many investors neglect to consider the risks they pose, particularly for those who have not yet reached retirement.
2011-11-15 Michael Aronstein on Today's Key Macro Trends by Robert Huebscher (Article)
Michael Aronstein is the president and chief executive officer of Marketfield Asset Management. Since its inception in 2008, his fund has returned 31% while the S&P has been down 15%. I spoke with him about the key macroeconomic and strategic issues facing investors today.
2011-11-15 Minimize Relationships at Your Peril: A Response to Dan Richards by Amy Florian (Article)
Salespeople who focus on interpersonal relationships are less successful, according to a recent article by Dan Richards, based on research published in the Harvard Business Review. This research is shortsighted and misguided, and its supposed implications for financial advisors deserve close scrutiny.
2011-11-15 A Strategy with a 25-year Record of 25% Returns by Robert Huebscher (Article)
Indiana-based SBAuer Funds launched its inaugural mutual fund in December of 2007, after having established a successful track record with a separately managed account business. I spoke with Bob Auer, who has employed the same stock selection system used by the fund for the last 25 years, over which time returns have averaged 25% annually.
2011-11-15 It's All Greek to Me by Michael Lewitt (Article)
As one who has written that there is little chance of a long-term solution to Europe's problems without a radical rethinking of global economic policy, the Europeans still have little choice once they peer over the cliff to realize other than to step back and buy some time before taking the inevitable leap. For, in the end, they have no other options than to jump.
2011-11-15 The Problem with Many Performance Charts by Christophe Gauthron (Article)
Performance information conveyed on return charts from many financial sources is misleading. Investors reading these charts will be unfairly biased against income-producing assets.
2011-11-15 Are Gold Prices Correlated to the Real Federal Funds Rate? by Georg Vrba, P.E. (Article)
The price of gold depends on many variables, among them the real federal funds rate, which is the federal funds rate adjusted for inflation. But the real federal funds rate, or RFFR, alone does not explain variation in gold prices. One must also look at the change in the RFFR for a full understanding.
2011-11-08 Bill Gross' Revised Paradigm: The New Normal Minus by Robert Huebscher (Article)
Following the financial crisis of 2008, PIMCO articulated its 'new normal' forecast of slow growth and mediocre capital market returns. Appending the even drearier modifier 'minus' to that outlook, Bill Gross said that expectations now appear worse than even he previously feared. Gross was pessimistic in both the near and long terms, and he startled the audience with his premonition that 'capitalism is at risk.'
2011-11-08 A Unique Way to Help Clients Close the Retirement Gap by Dan Richards (Article)
Clients facing a shortfall in retirement savings can bridge that gap in many ways. But one technique is often neglected: spending reductions - even small ones - in their everyday lives. A new web site gives clients the tools to quantify and manage those reductions.
2011-11-08 Is One Better than Three? by Dave Loeper, CIMA, CIMC (Article)
One way to 'juice' a portfolio is by increasing allocations to small- and mid-caps, as one recently published paper contends. But a careful analysis - properly adjusting for risk - shows how that seemingly appealing approach can destroy client wealth.
2011-11-08 Letter to the Editor by Various (Article)
A reader responds to Michael Edesess' article, The Small Cap Falsehood, which appeared last week.
2011-11-01 The Small Cap Falsehood by Michael Edesess (Article)
The supposed outperformance of small cap stocks is a foundational precept on which many respected asset managers have staked their expertise over the years ? foremost among them, Dimensional Fund Advisors. A growing body of research, however, shows no such advantage for the last 30 years and, now, a new study seems to have proven that the supposed small-cap advantage may have never existed in the first place.
2011-11-01 The Danger in European Stocks by Geoff Considine, Ph.D. (Article)
European equity prices, depressed by fears of a sovereign debt crisis, are cheap to such a degree that William Bernstein, author of The Intelligent Asset Allocator, called them a true bargain. Income-oriented investors, in particular, may be tempted by 4.2% dividend yields and a market-wide P/E ratio of approximately 11. My analysis, however, contradicts Bernstein's and shows the underlying risk those investments carry.
2011-11-01 The Questions to Ask about Non-Traded REITs by Robert P. Seawright (Article)
The attraction of high yields comes at the expense of higher risk, a time-worn lesson that should be an ongoing focus for investors in non-traded REITs.
2011-11-01 Five Tips from Accountants on How to Get Referrals by Dan Richards (Article)
Over a recent lunch, three partners in a small accounting firm told me how financial advisors should go about getting referrals.
2011-11-01 Regulatory Armageddon by Bob Veres (Article)
Suppose you were somehow able to convince 40 advisors, who are all well-known thought leaders in the profession, to gather in the same room for a six-hour brainstorming session. The goal: to identify the single most important thing that the financial planning profession should be thinking about now. What do you think they'd come up with? Fasten your seat belts, because this may be the most important report you'll read all year.
2011-11-01 What, Me Worry? by Scott A. MacKillop (Article)
As we gnash our teeth over the latest crisis du jour let's remember that difficulties do not, ultimately, prevent progress. On the contrary, over my lifetime progress has continued unimpeded despite a more or less constant stream of difficulties.
2011-11-01 Why Invest? by Adam Jared Apt (Article)
Investing has its rational justifications, but like any human activity, it's contingent upon history. American society has come to regard investing in stocks and bonds as a matter of personal responsibility and even an obligation, which in part explains why we invest.
2011-10-25 A Jeopardy Champion and our Economic Future by Robert Huebscher (Article)
Several years ago, a group of IBM scientists watched the television quiz show Jeopardy at a local bar and decided that they could develop the technology to beat a human contestant. They succeeded, and the system they built, Watson, is situated at the leading edge of a wave of breakthroughs in artificial intelligence that will lower health care costs and accelerate economic growth.
2011-10-25 On Market Timing and Whiskey by J.J. Abodeely (Article)
Noah S. 'Soggy' Sweat, Jr. a Mississippi legislator, gave a famous speech addressing the controversial subject of prohibition. The consummate politician, Soggy tried to appeal to advocates on both sides of the issue, illustrating a lesson that advisors today will surely appreciate: In order to get at the substance of a contentious issue, sometimes you have reframe the question.
2011-10-25 Miccolis, Bengen and Evensky on the New Challenges in Portfolio Construction by Michael Skocpol (Article)
Conventional wisdom about the best way to construct a portfolio has been discredited, according to three industry thought leaders ? Jerry Miccolis, Bill Bengen and Harold Evensky. Each has distinct visions of the ways in which advisors should build portfolios in the wake of the financial crisis of 2008, but all three agree that traditional methods must be scrutinized.
2011-10-25 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 How to Fix Our Dysfunctional Tax Code by Robert Huebscher (Article)
Give an economist a clean slate, unencumbered by political ideology or allegiance, and charge him or her with designing an ideal tax system. What emerges will look nothing like the dysfunctional personal and corporate tax codes now administered by the IRS. Instead, it could resemble Larry Kotlikoff's 'purple tax plan,' one of five economic reform plans he designed to appeal to both Democrats and Republicans alike.
2011-10-18 Focusing on Relationships is a Mistake: Harvard Business School by Dan Richards (Article)
Conventional wisdom says that when it comes to client loyalty and profitable businesses, deep relationships are what counts. But a September Harvard Business Review article raised some important questions about whether this is the case.
2011-10-11 Thomas Friedman's View of the Future of the US by Michael Edesess (Article)
Andy Rooney once said, 'It's just amazing how long this country has been going to hell without ever having got there.' Our country's roughly 30-year march to perdition is the subject of Thomas Friedman's and Michael Mandelbaum's new book, That Used to Be Us. Rooney may still be right, though - the authors identify, albeit not all that convincingly, a path to salvation.
2011-10-11 Improving on Morningstar Style Boxes by Stephen Dodson (Article)
No one would ever confuse a short man with dark hair and a tall one with light hair. But this is precisely what investors do when they categorize stocks as either growth or value. Those style definitions, championed by Morningstar and others, are flawed, and I have a way to fix them.
2011-10-11 Managed Futures are not a New Asset Class by Michael Kitces (Article)
The focus on finding investments that have a low correlation to equities has grown to such an obsession that we're willing to name anything that has a low correlation as 'a new asset class.' While some alternatives truly have their own investment characteristics unique from stocks and bonds, other alternatives - like managed futures - simply represent an active manager buying and selling existing asset classes.
2011-10-11 The Global ?Old Normal? by Michael Nairne (Article)
Amidst a torrent of dismal economic news and plunging stock prices, investment horizons have become increasingly short-sighted. The new normal of faltering growth and painful deleveraging appears to be only too true. However, investors capable of taking a long-term, global view will find forces at work that will likely drive resurgent world growth akin to that which occurred in the decades right after World War II.
2011-10-11 Market See-Saw Brings Us Back to April 2010 Double-Digit Third Quarter Losses Erase Previous Gains by Ron Surz (Article)
Stock markets around the world plummeted in the third quarter, with the US market losing 16% and foreign markets faring somewhat worse with 17% losses. This quarter's loss reverses the gains of the first quarter and brings year-to-date returns below water, with domestic markets losing 11% and foreign markets losing 13%.
2011-10-04 Value Investing Lessons from Moneyball by Laurence B. Siegel (Article)
Is baseball a metaphor for life, as many literati have suggested, or for value investing? Michael Lewis' 2003 bestseller Moneyball argues the latter. More recently, the book has been adapted to make a thoughtful movie that will be of special interest to investors who believe in trying to find hidden bargains.
2011-10-04 The Energy Expert You Shouldn?t Trust by Richard Vodra (Article)
Daniel Yergin, a self-described 'leading energy expert,' has written The Quest: Energy, Security, and the Remaking of the Modern World, designed to provide information that policy-makers can rely upon in shaping energy policy for the decades ahead. This could be a dangerous reliance, for Yergin is an advocate for the fossil fuel community, not an honest broker of information.
2011-10-04 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.
2011-10-04 The Adjusted Gold/XAU Ratio as an Indicator of Forward Returns for Gold Stocks by Georg Vrba, P.E. (Article)
While the recent bull market took gold prices to new highs, the prices of gold-mining companies lagged. Some claim those companies are now drastically undervalued, and we can investigate that claim by examining the relationship between gold and gold-mining prices.
2011-09-27 Reexamining Bill Gross' Decision to Sell Treasury Bonds by Geoff Considine (Article)
Bill Gross made headlines in February by asserting that Treasury bonds were not providing enough yield to make them worth the risk and reducing his allocation to zero in the PIMCO Total Return Fund. The subsequent rally forced him to admit his mistake in August, but by then his fund was trailing 90% of its peers and having its worst year since 1995. I will examine Gross' decision in retrospect, to illustrate its tactical and strategic costs and benefits for his shareholders.
2011-09-27 A Buying Opportunity in Investment-Grade Corporate Bonds by Chris Shayne, CFA (Article)
Given that yields on Treasury and high-quality corporate bonds are near 50-year lows, investors looking for relative value in fixed income should consider purchasing lower-rated investment-grade corporate bonds. As Gluskin Sheff's David Rosenberg said last Wednesday, 'if you have money to put to work, and are looking for a reward that more than compensates for the incremental risk involved at this juncture, credit is a good place to be looking.'
2011-09-27 Do Low Correlations Favor Active Managers? by FundQuest Investment Management & Research Group (Article)
There has been much debate regarding the challenges for active managers in market environments with persistently high correlations. Some argue that high correlations hinder active managers seeking to generate alpha through security selection. Indeed, in a recent study, we found that active managers were more likely to succeed in low-correlation environments.
2011-09-20 Counterparty Risk in Large Total-Return Funds by Robert Huebscher (Article)
We can add another to the list of concerns facing advisors: counterparty risk ? a potential loss from the failure of a bank or broker-dealer. Underscoring this threat, DoubleLine's founder and chief investment officer, Jeffrey Gundlach, recently warned advisors to avoid all funds with counterparty risk. Heeding his warning, however, is not easy; it is virtually impossible to gauge the extent of counterparty risk in most funds.
2011-09-20 The Power of Dividends ? And What They Say About Future Returns by Lance Paddock (Article)
The return on equities is driven by dividends, since companies must ultimately distribute their hard-earned cash to shareholders. Given that reality, recent history of dividend yields portends a disappointing future for equity investors, one of sub-par returns relative to historical averages.
2011-09-20 A Simple Email ? Today's Best Prospecting Strategy by Dan Richards (Article)
How do you use the recent market turmoil to open conversations with prospective clients? Here's how one advisor used a simple email to solidify relationships with existing clients and to attract new ones.
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.
2011-09-19 Too Focused on Symptoms, Still by Charles Lieberman (Article)
Europe took a series of steps this week to ameliorate its credit crisis, although policy remains focused on symptoms and insufficiently willing to address underlying problems. Sovereign borrowers are paying higher interest rates, as credit availability has declined. These are the symptoms. Instead, Europe needs to lock in strong deficit reductions strategies to restore confidence that the sovereigns can manage their finances responsibly and to recapitalize its banks, so they can withstand defaults. Such actions must come eventually, although they are getting there painfully slowly.
2011-09-13 The Handicap of Experienced Investors by J.J. Abodeely, CFA, CAIA (Article)
In the investment business, assets under management are concentrated with the largest and most established firms. Understandably, investors tend to allocate capital to managers after they've established a good track record. Unfortunately, for many, the analysis stops there. By failing to separate good results from identification of what makes a great investment manager, investors are primed for disappointment.
2011-09-13 An Uncritical Glorification of Hedge Funds by Michael Edesess (Article)
Sebastian Mallaby's book, More Money than God, sheds some light on interesting events in hedge fund history and is strewn with a few valuable insights. Mostly, though, it is a work of serial hagiography. It seems designed to attract worshipers like those who drive by celebrity homes in Beverly Hills.
2011-09-13 The Risks of Exchange-Traded Products by Dennis Gibb (Article)
Every major financial crisis has been foretold by timely but ultimately ignored warnings. At the end of mania, the rush to secure more fees, investment performance and status trumps common sense. In the last few months, the drumbeats of warnings from financial journals and regulators about exchange-traded funds have been sounding. Few seem to be listening.
2011-09-13 Warren Buffett's Advice on Effective Client Meetings by Dan Richards (Article)
For many clients, the regrettable reality is that meeting with their advisor is no longer an uplifting experience. Here are three steps to make meetings with clients a more positive experience, so that they?re not seen as akin to a visit to the dentist.
2011-09-13 A Response to 'A Winning Endgame' by Guy Cumbie (Article)
A Winning Endgame, Robert Huebscher's review of John Mauldin's book Endgame, made some highly problematic claims about our energy usage. Moreover, Huebscher's claim is unfounded that an energy policy, such as the cap-and-trade policy he recommended, is the right step toward solving our economic crisis.
2011-09-06 Predictably Incorrect by Bob Veres (Article)
I had to read through this commentary by behavioral economics researcher Dan Ariely twice before I was willing to draw the obvious conclusion. It's the biggest bunch of hooey I've ever read in the financial planning press.
2011-09-06 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 How Advisors can Improve Client Returns by Dan Richards (Article)
There's a growing body of behavioral finance research on what investors can do to improve the performance of their portfolios. But how about advisors - what can they do to improve investor returns? Some new research answers that question.
2011-08-30 The Case for Active Management in a Volatile Market by Brandon Thomas (Article)
It's been an eventful few weeks, to say the least. The market volatility reminds us that active investment management is more crucial than ever.
2011-08-30 Seeking Beta in the Bond Market: Sell Long Bonds by Georg Vrba, P.E. (Article)
I have updated the model described in my article, Seeking Beta in the Bond Market: A Math-driven Investment Strategy for Higher Returns. An upper switch point was generated on August 25. This indicates the beginning of a down market for bonds.
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.
2011-08-29 Warren Buffett Gets It by Charles Lieberman (Article)
Warren Buffetts decision to call the CEO of Bank of America to invest $5 billion in newly issued preferred shares reveals how a canny investor can take advantage of market psychology. The decline in bank stocks reflects latent fears. It was driven by the experience of 2008, when the credit markets froze up and banks suffered large, unknowable losses on their mortgage portfolios. The fear of today is that the same thing could happen. The credit problems in Europe are a major source of concern. Unlike US banks, European banks did not raise a lot of capital following the market meltdown in 2008.
2011-08-23 The Simplest, Safest Withdrawal Strategy by Robert Huebscher (Article)
Few financial planning topics have garnered as much attention as safe withdrawal rates, but a key question remains unanswered: Can retirees sustain a 4% withdrawal rate with minimal risk? With the recent introduction of 30-year TIPS, the answer is now yes.
2011-08-23 Why Investors are 'Mad as Hell' ? And what you can do about it by Dan Richards (Article)
Last Friday, Jason Zweig of the Wall Street Journal wrote about fear and anger as the two dominant attitudes of American investors today ? fear about their future and anger at those they see as responsible for the latest crisis. Today's investor psyche has fundamental implications that will require changes in how you interact with clients. Before getting into how to respond, let?s look at what's driving today's mindset.
2011-08-23 A Fundamental Investment Strategy for Today\'s Environment by Robert Huebscher (Article)
We spoke with Tim Hartch and Michael Keller, who are co-managers of the Morningstar 5-star BBH Core Select Fund (BBTEX) from Brown Brothers Harriman. The fund's strategy is strictly bottom-up, with investments in established, cash-generative businesses that are leading providers of essential products and services with strong management teams and loyal customers.
2011-08-23 What You Don't Know About Stock Photos Can Hurt You by Kristen Luke (Article)
While the process of purchasing a stock image is easy, make sure you are purchasing the photos with the correct specifications and licenses to meet your needs. Otherwise, you could find yourself paying much more than you ever would have imagined.
2011-08-16 Gundlach - 'The Cusp of a Global Banking Panic' by Robert Huebscher (Article)
Don't interpret last week's volatility as merely a reaction to S&P's downgrade of US Treasury debt, according to Doubleline founder and chief investment officer Jeffrey Gundlach. Investors are actually fearful of a global banking crisis, he said, because many countries face a perilous choice - defaulting on their sovereign debt or inflating their way out of trouble.
2011-08-15 Value vs. Volatility by Charles Lieberman (Article)
Stocks are cheap. Investors dont care, because they are mesmerized and fearful over the markets volatility. I am fearful that the markets volatility doesnt reflect legitimate economic issues, but reflect the influence of computer traded algorithms that seek to eke out small price gains from high frequency trading, regardless of economic values. This induced volatility scares investors right out of the market and could also turn them more cautious about spending. But it is the flight of investors from the markets that creates the depressed valuations which will attract bargain hunters.
2011-08-09 Does Government Intervention in Financial Markets Slow Economic Growth? by Michael Edesess (Article)
As we saw with the Dodd-Frank legislation and the Consumer Financial Protection Bureau, the question underlying the debate over financial regulation is whether it stifles economic growth. Leo F. Goodstadt's book, Reluctant Regulators, provides useful insights from the experiences of Hong Kong and China. It also causes us to ponder whether our measurement of economic growth is fundamentally flawed.
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.
2011-08-09 Can American Become Greece? by Keith C. Goddard, CFA (Article)
Investors face four possible implications from the recent downgrade of America's long-term credit rating by Standard & Poor's: 1) Lower prices for financial assets; 2) Higher volatility in the asset markets; 3) Greater potential for trend-following investment strategies, and 4) Attractive opportunities in 'blue chip' stocks.
2011-08-08 Budgets and Ratings by Charles Lieberman (Article)
Governments are increasingly being forced by markets to become more responsible. Thus, S&P's downgrading of U.S. debt from AAA to AA+ is more a reflection of market reality than a key event. The efforts by the U.S. and European governments to reduce budget deficits, an inherently political decision that reflects conflicting values on how much to cut spending and how much to raise taxes, not to mention which spending categories and which taxes, is a highly contentious battle, of course. Each side is fighting for what it believes.
2011-08-02 Improving on the Ultimate Income Portfolio by Geoff Considine (Article)
The Ultimate Income Portfolio, which was published in this newsletter July 6 of last year, has delivered the risk-adjusted returns that I projected. Here's a detailed look at how last year's portfolio performed and several ways it can be improved in today's environment.
2011-08-02 Seven Implications for the Coming Retirement Revolution by Dan Richards (Article)
Most advisors look to seniors as a core part of their client base. That's why it's essential to understand how boomers are going to transform retirement, just as they have redefined every other stage of their lives. Let's look at three new pieces of research and the seven implications they carry for retirement planning.
2011-08-02 Solving the REAL Debt Crisis by Michael S. Falk, CFA, CRC (Article)
Now that the debt ceiling impasse (circus) has been resolved, it's time to address this country's real debt crises. Our leaders need to conquer the far more daunting entitlement issues we face. Our choice is simple - either reduce costs and face austerity, or raise taxes. Those alternatives need not be as painful as you or they might think, as I will demonstrate.
2011-08-02 Does Citigroup's Panic/Euphoria Model Work? by Georg Vrba, P.E. (Article)
Citigroup's Panic/Euphoria model fell into panic territory at the end of June 2011. According to the model's originator, strategist Tobias Levkovitch, this indicates a roughly 90% probability that equity prices will be higher in six months and a 97% chance of gains in 12 months. How reliable is this model?
2011-08-02 Hitting a Moving Target: Matching Portfolio Risk to Client Expectations by Scott Smith (Article)
Much of the angst faced by investors and advisors over the last several years was caused by mismatched perceptions regarding investors' appetite for portfolio risk. Advisors overestimated the amount of risk investors were comfortable being exposed to within portfolios.
2011-08-02 Survey Results: Advisor Use of 529 Plans by Paul Curley, CFA (Article)
With investor sales volume returning to the 529 industry, financial advisors have an opportunity to grow their business. However, they are missing out: Asset growth within the advisor-sold channel has not kept pace with the growth experienced by the direct-sold channel.
2011-07-26 Jeremy Siegel - Why I Changed My Mind about Index Funds by Dan Richards (Article)
Jeremy Siegel, the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania, discusses what caused him to reject capitalization-weighted market indexes and what he chose instead. This is a transcript of the interview.
2011-07-26 Comfort is Rarely Rewarded; Maverick Risk and False Benchmarks by J.J. Abodeely, CFA, CAIA (Article)
Conventional investment strategies, while affording the investor at least a temporary degree of comfort, are destined to produce mediocre results. Only by distancing themselves from the ordinary approach ? as Jeremy Grantham and Seth Klarman have ? can asset managers achieve superior performance and truly fulfill their fiduciary duties by acting as proper stewards of their clients? capital.
2011-07-26 Investing with a View of Significant Inflation by Bob Kargenian (Article)
Almost all the analysis we read has concluded that, with the Fed seemingly printing money out of nowhere, the inevitable consequence must be significantly higher inflation. We're not convinced, but we have identified which strategies are likely to best protect clients if inflation accelerates.
2011-07-26 Ten Minutes to Much More Effective Client Meetings by Dan Richards (Article)
Given the importance of client reviews, advisors should always be alert for ways to make them more effective. Recently, I spoke to an advisor who made a simple change to meeting agendas and saw a significant improvement as a result.
2011-07-26 Income Opportunities in Municipal Bonds and Stocks by Robert Huebscher (Article)
In this interview, Brian McMahon and Chris Ryon of Thornburg Investment Management assess the opportunities for income-oriented investors, particularly in the municipal bond market. They answer questions such as when a separate account is better than a fund, and why a barbell is inferior to a laddered portfolio.
2011-07-26 Letters to the Editor by Various (Article)
A reader responds to our article, Gundlach: A Debt Ceiling Impasse Could Drive Rates Lower, which appeared last week. Another reader responds to Don Moir's letter to the editor, which was in response to Doug Short's commentary, A Short History of Dividend Stocks, which appeared on July 5.
2011-07-19 Gundlach: A Debt Ceiling Impasse Could Drive Rates Lower by Robert Huebscher (Article)
Failing to raise the debt ceiling would be a 'huge financial calamity,' according to Federal Reserve Chairman Ben Bernanke and the general consensus view. But that opinion is 'exactly wrong,' at least as far as the Treasury market is concerned, DoubleLine's Jeffrey Gundlach said in a conference call with investors last Tuesday.
2011-07-19 Sorting Out the Annuity Puzzle by Joseph A. Tomlinson (Article)
Why do so few people buy annuities? Economic theory would predict robust demand for this financial product, especially as the workforce ages, but the reality is quite the reverse. Most efforts to explain this have focused on buyer behavior. But to better understand the annuity puzzle, we need to study the sellers.
2011-07-19 A New Approach for Forecasting Market Returns by C. Thomas Howard (Article)
I propose a method for predicting future market movements, which I call the strategy market barometer (SMB). The SMB is calculated by measuring the extent to which investors are rewarding specific investment strategies being pursued by active equity managers. My research reveals that equity strategy performance ranking is a useful predictor of future market returns, and tests confirm that market returns vary in line with SMB measurements.
2011-07-12 Harold Evensky on the New Rules for Wealth Management by Robert Huebscher (Article)
If you don't have a copy of The New Wealth Management on your bookshelf, you should. From gauging the risk tolerance of your clients to measuring the performance of their portfolios, this book provides comprehensive guidance for virtually every aspect of a financial advisory practice. Harold Evensky, the lead author, spoke with me last week and highlighted some key themes in the newly released second edition.
2011-07-12 An End-of-Quarter Letter to Clients by Dan Richards (Article)
Given recent unrest in Europe and uncertainty about economic growth, many clients are looking to their advisors for direction. This template for an end-of-quarter letter is a starting point for your own letter to clients, one that can be a catalyst for a conversation about how to position portfolios.
2011-07-12 The Real Story behind Bond Yields by Michael Nairne (Article)
One of the most important questions that individuals should ask before making any investment is 'Am I being paid enough for the risk of this investment?' I analyze the returns available today from government bonds and answer this important question for this asset class.
2011-07-12 The Titanic Has Sailed by Michael Lewitt (Article)
It was entirely predictable that the U.S. equity market would rally on the news that Greek would not default this month, but it does little to convince me that the long-term outlook for European sovereign debt or the global economy has improved. Markets - particularly the equity markets - are trying to pretend that the global economy is experiencing a self-sustaining recovery. A hard look at the economic numbers would tell an objective observer that no such recovery is occurring.
2011-07-12 Profiting from the Steep Yield Curve by Georg Vrba, P.E. (Article)
The yield curve, as measured by the spreads between the yields of the 10-year note and the 2-year note, has now steepened to levels seen only twice before since 1965. This is only the third time in the last 45 years that investors can take advantage of a flattening of the yield curve this extreme, an opportunity that should not be missed.
2011-07-12 Second Quarter Preserves First Quarter Market Gains: We're Still Above Water and Treading by Ron Surz (Article)
In his award-winning commentary, Ron Surz looks at how the US market performed and then how foreign markets fared. He concludes on a lighter note with a couple of videos that address key topics in the investment arena.
2011-07-12 Letter to the Editor by Various (Article)
A reader responds to Doug Short?s commentary, A Short History of Dividend Stocks, which appeared on July 5.
2011-07-05 No More Stupid Forecasts! by Michael Edesess (Article)
Dan Gardner's book Future Babble takes the sport of expert prediction apart piece by piece, showing why it's phony, why people still pay close attention to it and why people (including the experts themselves) continue to believe in it. Along the way, the author fills his pages with enough interesting information and anecdotes to keep us reading with pleasure.
2011-07-05 Essential Summer Reading - Desperate Households and More by Michael Shamosh (Article)
Summer reruns don't have to be boring and predictable. If we use a little imagination, televised repeats can depict the problems facing our economy and markets, and the storylines can become tantalizingly uncertain.
2011-07-05 A Million Dollar Meeting Gone Wrong - A Lost Prospect Tells All by Dan Richards (Article)
Over lunch last week, a long-time friend who's a partner at a Toronto law described a recent meeting with a financial advisor seeking his business and how some subtle errors and obvious mistakes cost the advisor the opportunity to do business.
2011-07-05 The Chinese Black Swan by Vitaliy Katsenelson (Article)
Party rulers in China are trapped in a position that chess players deeply fear - zugzwang - where any move make puts you at disadvantage. In China, the cost of both action and inaction is potential economic collapse.
2011-07-05 Fox in the Henhouse by Joseph Calhoun and Douglas Terry (Article)
In 1971, President Nixon ended the Bretton Woods gold standard currency system. That move set us on a path of debauching our currency through inflation. Ever since, we have counted on the Federal Reserve to preserve the purchasing power of our money. We have depended on the fox to protect our hens.
2011-07-05 Momentum Investing Can Achieve Market-Beating Returns by Matthew Tuttle, CFP (Article)
In 2002 and 2008 the investment tide went out. And as Warren Buffett famously predicted, we learned who was swimming naked. Both times, it was the practitioners of Modern Portfolio Theory (MPT).
2011-06-28 An Important Challenge to ?Stocks for the Long Run? by Geoff Considine (Article)
Jeremy Siegel's dictum - to invest in stocks for the long run - faces a new challenge. A recent paper by Robert Stambaugh, a Wharton colleague, and Lubos Pastor of the University of Chicago says that once you take into account the uncertainty of estimating future returns, stocks are not nearly as attractive to retirement-oriented investors as Siegel has claimed.
2011-06-28 How to Get in Front of High-net Worth Prospects by Dan Richards (Article)
Last week, I got a call from an advisor who used a simple idea to set up meetings with three $2 million prospects. This advisor used some research from one of my recent columns to jumpstart conversations about critical issues for the wealthy.
2011-06-28 Reducing Risk through Value-Oriented Tactical Strategies by Mark E. Ricardo, JD, LLM, AAMS (Article)
Conventional wisdom was that the best way to reduce portfolio risk is to adopt a diversified long-term strategic asset allocation. That paradigm was challenged - deservedly so - following the 2008 financial crisis. Fortunately, an improved paradigm has emerged: Investors should combine long-term strategic allocations with a value-oriented tactical rebalancing strategy.
2011-06-28 The Diversified Portfolio Index by Charles Fahy, Sr. (Article)
Investment rates of return that are average but consistent are the products of exceptional performance. Over longer time horizons, these returns become increasingly difficult to outperform. One such example is the Diversified Portfolio Index - a buy-and-hold strategy deployed across all major asset classes.
2011-06-28 Where are Long Bond Yields Heading? The Bond Value Ratio as a Predictor of Future Yields by Georg Vrba, P.E. (Article)
Are long-maturity bond funds still a good investment? My analysis shows that there is currently a maximum potential appreciation of only about 10% for long-bond values. The 30-year bull market for bonds will be ending soon and the risk-reward ratio is too high to warrant buying long-bond funds now.
2011-06-21 Investing Based on Jeremy Grantham's Forecast for Diminishing Resources by Robert Huebscher (Article)
In his most recent commentary, Jeremy Grantham became one of the first mainstream investment professionals to publicly forecast a world economy threatened by diminishing natural resources. A survey of our readers showed that an overwhelming majority agree with Grantham's views. But constructing a portfolio positioned to capitalize on those themes is exceedingly difficult.
2011-06-21 The Greek Comedy by Michael Lewitt (Article)
It is no longer prudent to dismiss the possibility of a worst-case outcome for the Greek debt crisis. Greece is not only laying bare the flawed structure of the European Union, but the fragility of the global financial system. An interconnected and networked global economy cannot ignore problems on its so-called periphery because there is no longer any periphery. Derivatives and other counterparty relationships have seen to that.
2011-06-21 The Toughest Question from Clients And How to Answer It by Dan Richards (Article)
Many existing and prospective clients wonder whether they're getting their money's worth on the fees they pay. They may not say it out loud - but it's often there, casting a cloud of doubt about the advisor they work with.
2011-06-21 Women Want to Leave a Legacy by Kristan Wojnar and Susan Turnbull (Article)
Want to broaden the conversation with your wealthy female clients? Introduce them to an idea that will strike them as beautiful, sensible and meaningful - creating a personal legacy document.
2011-06-21 Understanding the Risk in Discounted Municipal Bonds by Evan Lamp (Article)
The market discount rule is one of those arcane regulations in municipal taxation that many investors and financial advisors ignore, either because they are unaware of its adverse consequences or because they don't know what to do about them. As the market discount rule grows in impact with the recent rise in interest rates, understanding this important topic is vital.
2011-06-14 Bruce Berkowitz - Ignoring the Crowd on Financials by Sam Parl (Article)
Bruce Berkowitz has said that his deep value and contrarian investing style will not guarantee short-term results, but he promises his shareholders will be rewarded for their patience over the long term. Last week, he explained why some of his positions - especially those in the financial services sector - are among the best opportunities in the market.
2011-06-14 What Fama and French?s Latest Research Doesn?t Tell Us by Michael Edesess (Article)
With the high name recognition and respect that the team of Eugene Fama and Kenneth French enjoys in the world of finance, anything they publish warrants attention. Their latest offering, Size, Value, and Momentum in International Stock Returns, offers some interesting data on global equity performance. But they fail to offer any insights that explain the reasons behind their findings.
2011-06-14 A Proven Path to Business Breakthroughs by Dan Richards (Article)
In my conversations with advisors, implementing change often tops the list of business challenges and frustrations. To advance your business, one proven strategy that has demonstrated remarkable success over not just years but decades is tapping into the power of peer-performance groups.
2011-06-14 Letter to the Editor - Equity-Indexed Annuities, et al. by Various (Article)
A reader responds to our article about equity-indexed annuities. Guy Cumbie provides the latest installment in his exchange with Michael Edesess, which concerned Edesess' article three weeks ago, On the Wikileaks of the Economics Profession.
2011-06-13 Does Slowdown Justify Sell Off? by Charles Lieberman (Article)
Bernanke described the pace of the economic expansion as unsatisfactory and suggested that stronger job growth for a sustained period is necessary. We expect policy to remain accommodative until the expansion picks up some steam. Stocks have reacted quite strongly to the ebbs and flows of the data. If they maintain this behavior, they may rebound strongly if the economic weakness proves temporary, as we think likely. It is clear the Fed is not willing at this point to consider a third quantitative easing program. Still, Fed officials understand that policy must remain highly accommodative.
2011-06-10 Why Bill Gross Doesn?t Like Stocks (or Treasury Bonds) by Sam Parl (Article)
Stocks have come to the end of a ?wonderful journey,? according to PIMCO's Bill Gross, and are now on their own, like ?a baby bird just released from the nest.? The journey Gross spoke of is the multi-decade decline in real interest rates, which have fueled bull markets across ?risk assets,? especially in equities and bonds.
2011-06-07 New Challenges for the Endowment Model by Robert Huebscher (Article)
The multi-billion dollar endowments of elite institutions like Harvard, Yale, and Princeton are supposed to never be strapped for cash, but that's not how things played out during the financial crisis, when all those schools and many others were forced to raise liquidity under adverse market conditions. The endowment model, despite those failures, is still basically sound, according to Luis Viceira, but it needs several key improvements before institutions and individuals can rely on it.
2011-06-07 Improving on Buy and Hold: When is the Best Time to Sell by Georg Vrba, P.E. (Article)
My model, Improving on Buy and Hold: Asset Allocation using Economic Indicators, has been updated. A Sell-A type signal will be generated by the model in the second week of August and I advise reducing one's stock market investments then.
2011-06-07 Bathrooms, Speed Limits and Other Investment Artifacts by Mariko Gordon (Article)
Whether speculating on details of a lost civilization or evaluating an investment opportunity, cultural artifacts shed light on the people and institutions they represent. Let's look at a recent on-site visit, and the impact that certain clues had on our perceptions of the company involved.
2011-06-07 Letters to the Editor - Equity-Indexed Annuities by Various (Article)
A number of readers responded to Robert Huebscher's article, Fantasy-world Returns for Equity Indexed Annuities, which appeared last week.
2011-06-07 How to Waste Time Effectively by Wendy Cook (Article)
Ah, the Internet. Could there be a more usefully annoying, time-sucking, time-saver? It's always there, ready to transport us to that crucial bit of information we need - or to distract us far away from what we need to be doing. How do you harness the power of the Internet without letting it gallop off with your valuable time?
2011-05-31 Letter to the Editor ? Challenging Dave Rosenberg by Georg Vrba, P.E. (Article)
Predictions are usually made with great conviction and without a specified time frame. I review some of David Rosenberg's past predictions and show that investors would have underperformed the market had they followed his advice.
2011-05-31 Hedging In an Inflationary World by Andrew Foster (Article)
These days, given the complex web of global financial transactions in which companies are enmeshed, it is unrealistic to expect management to avoid hedging. When I invest, however, I search for companies that follow simple, consistent, and short-term hedging policies ? and whose business models are strong enough to adapt to the inherent volatility and uncertainty of the marketplace.
2011-05-31 Just A Soft Patch by Charles Lieberman (Article)
Investors reacted to the production disruptions and rise in oil prices by taking less risk and reducing their exposure to equities. The stock market weakened, but only ever so slightly, falling by less than 3% off its prior highs. Bonds actually rose in value. That?s not much of a retrenchment, although it felt a bit worse than that. Fears of something worse, reflecting the trauma of 2008, are surely one major factor behind this behavior. However, these market movements may be just as temporary as the factors that slowed growth in the first half of 2011.
2011-05-24 How to Build a Low-Risk High-Income Portfolio by Geoff Considine (Article)
Prominent investors, including Bill Gross and Warren Buffett, now say that the yields on long-term government debt do not justify the risks. But is this perception correct? I offer a way to answer that question - and to construct a low-risk high-income portfolio - using the prices of put options to derive the true risk levels of various asset classes.
2011-05-24 Robert Shiller: I'm Betting the Farm by Robert Huebscher (Article)
Yale's Robert Shiller, the economist who foresaw the implosions of the tech bubble in 2000 and the housing market in 2007, is now closely watching a different asset class. This time, however, it is one that is in an early stage of bubble formation, not of collapse.
2011-05-24 The WikiLeaks of the Economics Profession by Michael Edesess (Article)
What Caused the Financial Crisis presents the most comprehensive account I have seen of the regulations that, when considered as a whole, have incentivized unprecedented self-delusion and risk-taking in the subprime mortgage market. To put it in a manner that financial advisors will understand, the book shows that the policies and regulations greatly increased the Sharpe ratio of the financial industry - they increased the return for taking risk.
2011-05-24 A Sentence that Tripled Referrals by Dan Richards (Article)
This veteran advisor added a six-word sentence to his website - and saw referrals triple as a result.
2011-05-24 Ownership in an Operating Business by David L. Blain (Article)
There was a time when the three legs of the retirement stool were Social Security, pensions, and personal savings, but those days are gone for good, and the stool needs new legs. Paper assets and real estate are classic asset classes that can help fill the void, but where else can investors turn for the stable income they need?
2011-05-17 Dylan Grice on Japan's Coming Hyperinflation by Robert Huebscher (Article)
The Japanese scenario haunts US policy makers, who recall that country's two-decade miasma of lethargic growth and escalating fiscal deficits with apprehension. What scares them most, perhaps, is the potential endgame Japan now faces: an insolvent government crippled by uncontrollable inflation. While Japan's current situation closely parallels the experience of other countries that went on to confront hyperinflation, according to Dylan Grice, we shouldn't expect a crisis in the near term.
2011-05-17 Pippa Malmgren on Inflation and its Geopolitical Impact by Robert Huebscher (Article)
The Cold War may have been over for a quarter century, but the inflation-driven challenges that characterized that historical era are heating back up. Today, global volatility is back, according to Pippa Malmgren, who says that commodity-driven inflation will lead to political instability in emerging markets.
2011-05-17 Improving on Buy and Hold: An Initial Sell Signal by Georg Vrba, P.E. (Article)
I have updated the model described in my article, Improving on Buy and Hold: Asset Allocation using Economic Indicators. The ECRI U.S. Weekly Leading Index and its annualized growth rate published on May 13, 2011, together with the most recent values of the other indicators, have been incorporated in my model. A basic sell signal was generated last week.
2011-05-10 Howard Marks on the Human Side of Investing by Robert Huebscher (Article)
Howard Marks is widely regarded for his thought-provoking essays on the discipline and process of value investing. He is the chairman and co-founder of California-based Oaktree Capital, and he delivered the keynote address at the Value Investing Congress in Pasadena last week.
2011-05-10 Red Flags for Advisors - Communication Gaps with Affluent Clients by Dan Richards (Article)
When hard facts come to light that contradict your preconceptions, it's time to sit back and reassess your thinking. That's exactly what advisors should do following a new research study of Americans with at least $3 million in investments.
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.
2011-05-10 What Return can we Expect from Stocks? by Adam Jared Apt (Article)
What return can we expect from stocks over the long term? This sentence contains four problematic terms: 'return,' 'expect,' 'stocks,' and 'long term.' Intended for the educated laymen, this article considers each in turn.
2011-05-10 Something's Fishy in the Russell Rebalancing by Mariko Gordon (Article)
We humanoids think in words; it's just the way we're wired. As a result, the labels we assign to things affect our view of the world. I look at two frequently used investment labels: 'growth' and 'value.' I'll explain why both are high on my list of jargon pet peeves.
2011-05-10 Howard Marks on the Human Side of Investing-Q & A by Robert Huebscher (Article)
Howard Marks is widely regarded for his thought-provoking essays on the discipline and process of value investing. He is the chairman and co-founder of California-based Oaktree Capital, and he delivered the keynote address at the Value Investing Congress in Pasadena last week. Here are excerpts from the Q&A.
2011-05-03 My Breakfast with Dave by Robert Huebscher (Article)
A month ago, one of the most closely followed market observers, Gluskin Sheff's David Rosenberg, moved his Breakfast with Dave commentaries behind a pay-wall, ending an era of free access to his insights. Last Friday, however, he presented his views publicly to an audience of 500 advisors and investors, your author included.
2011-05-03 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.
2011-04-26 A Unique Way to Engage Key Clients by Dan Richards (Article)
Many advisors struggle with ways to deepen relationships with top clients. My conversations with top-performing advisors have shown that many succeed at building those relationships by rejecting the approach most advisors employ, and instead adopting an unconventional and low-cost approach built around special events.
2011-04-26 Long-term Failure with Short-term Bonds by Hildy and Stan Richelson (Article)
Fear of an impending rise in interest rates has many recommending short-term bonds. Such fears are misplaced, however, and investors can better position their portfolios by constructing a ladder of high-quality individual bonds, rather than moving assets into only short maturities.
2011-04-26 How to Take Advantage of the CFP Awareness Campaign by Kristen Luke (Article)
If you are a CFP, you will be directly affected by the Let's Make a Plan campaign, even if you take a passive role. Those who take a more active role can use the toolkit provided by the CFP Board to promote themselves in local markets. Here's what's entailed and what you can personally do to take advantage of the campaign.
2011-04-26 Cerulli Survey Results: Advisor Use of Tactical Allocation by Tyler Cloherty (Article)
Advisors have increasingly turned to tactical allocation to manage client risk. While there has been abundant discussion on how this approach should be executed in theory, our survey results show what advisors are doing today in their practices.
2011-04-25 Is the Stock Market Rally Justifiable? by Charles Lieberman (Article)
We begin with the U.S. Treasury budget, which is a mess, running a deficit of about $1.5 trillion this fiscal year, with huge deficits projected into the future. Politicians seem more anxious to shift blame rather than act to reduce these projected deficits. So, entities as blind as S&P are able to foresee a possible need to downgrade the credit rating. The U.S. is emulating the spending of Greece, Ireland, Spain and Portugal. None of these countries has its budget in order. Now, they must pay interest rates that are bringing the Greeks ever closer to default and a formal restructuring.
2011-04-19 Managing Exposure to Extreme Markets by Geoff Considine (Article)
Volatility in the equity markets has subsided, courtesy of a strong bull market and fading memories of the 2008 financial crisis. Risks remain, however, ranging from the turmoil in northern Africa to sovereign debt instability in Europe. Investors can take advantage of the complacency in the equity markets by purchasing inexpensive insurance against adverse events.
2011-04-12 A Top Value Manager Looks Outside the US by Robert Huebscher (Article)
David Winters, manager of the Wintergreen Fund, began his career working for Max Heine, where Seth Klarman and Michael Price also worked. In this interview, Winter discusses the why he believes many of today's best opportunities are outside the US and how he is hedging against the threat of inflation.
2011-04-12 Seven Ways to Communicate with Confidence by Dan Richards (Article)
Whether talking to a prospect or making a recommendation to an existing client, many advisors believe that the key to effective communication is what you say. As important - and maybe more important - is your delivery. The most carefully crafted sentences won't be persuasive if they're not delivered confidently and with conviction.
2011-04-12 Dumb, Dumber and Dumbest by Barry M. Ferguson (Article)
The two stupidest characters ever to grace the big screen - Lloyd Christmas and Harry Dunne - were first introduced to the world in Jim Carrey's 1994 movie, Dumb and Dumber. If that movie were made today, its leading characters could easily be our government and the supposedly independent Federal Reserve Bank. Both of these institutions have foisted their misguided policies on the American public, who, in their passive acceptance, have proven themselves to be the dumbest of all.
2011-04-12 Letter to the Editor by Various (Article)
A reader responds to Erik McCurdy's article, A Trading System that Disproves Efficient Markets, which appeared last week.
2011-04-05 A Close Look at the PIMCO-Met Life Retirement Strategy A Marriage Made in Investment Heaven? by Michael Edesess (Article)
If you embrace their recently announced co-marketing strategy, when you're relatively young you use PIMCO's Real Income Funds for stable income in the near term. When you're older Met Life's Longevity Income Guarantee kicks in and takes it from there. You're set with secure income for life. We examine these products more closely and analyze whether they are good deals, either separately or together.
2011-04-05 Is Alpha Dead? by Andreas Steiner (Article)
While beta has been declared dead several times in the past, alpha is a survivor. My diagnosis is that alpha, however, is in very critical condition itself, even under the most optimistic interpretation. A more realistic assessment is that alpha is dead.
2011-04-05 Fiduciary Focus: The New 408(b)(2) Fee Disclosure Rule Under ERISA by RidgeWorth Investments (Article)
The U.S. Department of Labor (DOL) has now published the long-awaited rule on ERISA Section 408(b)(2). Read the article below from RidgeWorth Investments so that you can be equipped to answer questions and recommend solutions.
2011-04-05 A Trading System that Disproves Efficient Markets by Erik McCurdy (Article)
Efficient market adherents claim it is impossible to outperform the stock market over the long term. Although their principles are the foundation of modern investment theory, other compelling models, including the one I propose here, reveal that precisely the opposite is true, supporting the thesis that markets are highly inefficient.
2011-04-05 The Future of Investment Manager Due Diligence (and a Look Back at Q1 Performance) by Ron Surz (Article)
Despite the continuing global financial crisis, the uprisings in the Middle East and the Japanese disaster, global stock markets delivered positive results in the first quarter of 2011, as described in this capital market review. In the second part of the article, you'll discover what due diligence procedures need to change and why.
2011-04-05 Letters to the Editor: GMWBs and the Permanent Portfolio by Various (Article)
A reader responds to our article, Understanding Variable Annuities with GMWBs, which appeared on March 1 and another reader responds to Geoff Considine's article, What Investors Should Fear in the Permanent Portfolio, which appeared on March 22.
2011-03-29 GMO's Market Outlook: 'Disappointingly Overvalued' by Robert Huebscher (Article)
Opportunities across US and foreign assets classes are unattractive, according to Ben Inker, the head of asset allocation at the Boston-based global money manager Grantham, Mayo, van Otterloo & Co. (GMO). Neither the equity nor fixed income markets hold the potential for investors to earn acceptable inflation-adjusted returns, Inker said.
2011-03-29 Inflation versus Deflation: Two Experts Disagree by Robert Huebscher (Article)
An important question for all investors is whether low inflation rates will persist or whether the economy is heading toward much higher inflation. The answer to that question will dictate asset class allocations, portfolio construction and ultimately the rates of return investors should expect.
2011-03-29 Are Financial Stocks Value or Growth? by Ron Surz (Article)
Financial stocks have been hit hard by the current economic crisis, causing most index providers to categorize them as deep value. But this categorization is arbitrary, potentially misleading and can distort reported performance calculations.
2011-03-29 Fiduciary Focus: What You Know About the New Fee Disclosure Rule Under ERISA by RidgeWorth Investments (Article)
RidgeWorth Investments discusses what the new rule about Fee Disclosures encompasses and how it affects advisors. Their complimentary white paper is available for download through the link above.
2011-03-22 Consensus: Groundhog Decade for Stocks by Ed Easterling (Article)
Just as Bill Murray woke up to the same thing day after day in the movie 'Groundhog Day,' it's likely that your outlook foretells a groundhog decade for the stock market that will repeat its near-breakeven returns from the past decade.
2011-03-22 Gundlach Sets the Record Straight by Robert Huebscher (Article)
Jeffrey Gundlach corrects two inaccuracies in a recent interview that appeared in Barron's, and offers his assessments of valuations for the Japanese markets, municipal bonds and high-yield bonds.
2011-03-22 What Investors Should Fear in the Permanent Portfolio by Geoff Considine, Ph.D. (Article)
Over the last decade, the assets of the fund PRPFX have swelled from $50 million to more than $10 billion. The concept underlying that fund, Harry Browne's Permanent Portfolio (PP), has rewarded PRPFX investors with attractive risk-adjusted returns. Those investors, however, may want to rethink their exposure - especially if PRPFX is the core of a retirement-oriented strategy.
2011-03-22 Statistical Insights into Everyday Problems by Sam Parl (Article)
You know that the volatility of an investment matters as much as its overall return. But you may not know that research into this fundamental investment principle has been applied in many other disciplines to explain phenomena as unexpected as waiting times in lines at Disney World.
2011-03-22 No Shortcuts to Greatness by Vitaliy Katsenelson (Article)
Nothing defined Alan Greenspan's tenure as chairman of the Federal Reserve Bank more than his wholehearted embrace of capitalism. According to a current Fed governor, however, both Greenspan's Fed and the Fed today have not been the stalwarts of capitalism that the Maestro believed them to be.
2011-03-22 Dividend Dynamics: Assessing the Five Key Benefits of Dividend-Paying Stocks by RidgeWorth Investments (Article)
Increased market volatility has placed dividend-paying stocks back into the spotlight. These securities have been long valued for their defensive characteristics during down markets, but their attractive combination of steady income and capital appreciation potential has also delivered consistent, strong returns across full market cycles.
2011-03-15 Mason Hawkins and Staley Cates on Today?s Opportunities for Value Investors by Robert Huebscher (Article)
Southeastern Asset Management's Mason Hawkins and Staley Cates, two of today's most respected value investors, discuss their portfolio and the principles behind their Graham and Dodd methodology. They explain why they like certain commodity-based companies and why they disagree with Bruce Berkowitz on the opportunities in the financial sector.
2011-03-15 Running on Empty by Michael Lewitt (Article)
Despite the increasing undercurrent of negative news creeping into the financial markets, the stock market remains strong. HCM expects equities to continue to perform well for the foreseeable future (i.e. through the end of June) although most of this letter will discuss the reasons why it shouldn't. In some ways, this market is a lot like Charlie Sheen. It pretends to have tiger blood and the powers of a warlock, but deep inside it is suffering from an addiction to a substance (i.e. debt) that will ultimately kill it.
2011-03-15 Margin Shrinkage - It Can Happen to You by Vitaliy Katsenelson (Article)
Profit margins are a tick away from all-time highs and are creating the impression of cheap equity valuations. But that impression is a mirage, because today's generous margins are destined to shrink.
2011-03-15 How to Get the Best Photo for Your Web Site by Wendy J. Cook (Article)
If your photo is missing or misused on your website, social media profiles, brochures, and other introductory materials, then consider this your call to action. A few simple suggestions can help you literally put your best face forward in your corporate communications.
2011-03-08 Ed Hyman: The Key Threat to Economy Recovery by Robert Huebscher (Article)
Ed Hyman is not worried about China, quantitative easing or fiscal deficits. Equity market performance this year will be strong, he predicts, and the US economic recovery will proceed. But there is a caveat in his outlook ? and it is an immense one.
2011-03-08 Five Strategies for Older Clients by Robert Huebscher (Article)
What do a woman who volunteered with the Peace Corps in Africa, a teacher from Spanish Harlem who took up Samurai sword fighting, and a former IT manager who earned a medical degree at age 76 have in common? They are all part of a group that David Monday calls 'second-half champions.' Monday offers a five-part plan for building a practice that caters to today?s reinvigorated seniors.
2011-03-08 The Sweet Spot by Michael Nairne (Article)
Today?s low interest rates and lackluster stock valuations suggest portfolio returns going forward will be modest. Investors in search of higher return opportunities need to consider small-company value stocks. We explore how this asset class can improve portfolio performance for long-term, patient investors and deal with its risks and limitations.
2011-03-01 Understanding Variable Annuities with GMWBs by Robert Huebscher (Article)
It's very tempting: a variable annuity with minimum lifetime payout that can increase - but never decrease - based on market performance. That temptation comes in the form of an increasingly popular variable annuity rider known as a guaranteed minimum withdrawal benefit. We explain the flaws in a widely publicized study by Morningstar/Ibbotson, and provide our own analysis of the product.
2011-03-01 Subsuming the Efficient Market Hypothesis by Keith C. Goddard, CFA (Article)
A recent article highlighted important gaps in the efficient markets model (EMH) that limit its practical applications. It encouraged a search for a new theory of markets that builds upon EMH by rendering it as a special case within a broader, more general theory. Mordecai Kurz? Rational Belief Equilibrium is such a theory.
2011-03-01 Women?s Views of Wealth and the Planning Process by Kristan Wojnar and Chuck Meek (Article)
Women don?t think like men, especially when it comes to money. As women control a growing share of wealth in the years ahead, advisors will need a new paradigm in their practice, one that reflects an emphasis on values over goals.
2011-03-01 Simon Johnson on the Unconscionable Risks We Face by Dan Richards (Article)
Simon Johnson is a professor of economics at MIT and was the chief economist for the International Monetary Fund. In this interview, he explains why the underlying factors which led to the financial crisis remain unresolved. This is the transcript; a video is also available.
2011-03-01 The Real Flaws ? A response to 'Understanding Variable Annuities with GMWBs' by Peng Chen (Article)
Peng Chen challenges our analysis of variable annuities with guaranteed minimum withdrawal benefits.
2011-02-22 Bruce Berkowitz on the Exceptional Value in the Financial Sector by Robert Huebscher (Article)
Fairholme's Bruce Berkowtiz, US stock-fund manager of the decade, discusses his large position in the financial sector and why he believes the big bets he is making do not amount to Russian roulette. He also comments on his recent nomination of former Florida Governor Charlie Crist to the board of St. Joes.
2011-02-22 Toward an Understanding of Risk - Part 2 by Robert Huebscher (Article)
How should clients think about risk in their portfolios? Advisor Perspectives put that question to a cross-section of prominent advisors and academics. Their answers encompassed diverse opinions and underscored how crucial that question is to the investment process. In part one of this series, which appeared last week, we heard from seven practitioners in the financial planning community. This week, we hear from seven well-known academics, including two Nobel Prize winners.
2011-02-22 Stop Wasting Time and Money on Client Communication by Dan Richards (Article)
The world has changed in all kinds of ways. What worked in terms of client communication as recently as five years ago doesn't work nearly as well today. As a result, you need to fundamentally change how you communicate with clients.
2011-02-22 Winning New Business, Growing Your Firm by Michael Slemmer, CFA (Article)
How are advisors reaching prospects and winning new business today? What's working well for advisors as they seek to grow their businesses, and where are they finding challenges? To answer these questions, we conducted a survey in late November, 2010, aiming to learn the most common and successful business-building tactics for wealth managers, investment advisors and related professionals.
2011-02-15 Toward an Understanding of Risk by Robert Huebscher (Article)
How should clients think about risk in their portfolios? Advisor Perspectives put that question to a cross-section of prominent advisors and academics. Their answers encompassed diverse opinions and underscored how crucial that question is to the investment process.
2011-02-15 Assessing New Tools to Protect Against Tail-Risk Events by Jerry Miccolis (Article)
Protecting against sudden, severe market drops is as crucial as it is difficult. A plethora of approaches to this problem have been brought to market in last few years, and to evaluate them my firm developed a set of rigorous criteria. These criteria led us to a solution that works for us and for our clients.
2011-02-15 The Stuxnet Paradigm by Michael Lewitt (Article)
Michael Lewitt discusses the situation in Egypt, the economy, rising risk appetites in the market, sovereign debt and municipal bonds. 'It might be very easy,' he writes, 'to be impressed by the 'two years and thousands of man hours' that Ms. Whitney spent researching the fiscal condition of the 15 largest states. What in the world required so much time and effort? It shouldn't have taken nearly so long to determine that these states are in severe financial trouble and that their options for dealing with it are limited.
2011-02-15 David Laibson on the Hidden Challenges of Aging Clients by Dan Richards (Article)
In this interview, Harvard economist David Laibson discusses his research into the challenges of helping elderly clients with their financial planning. He also discusses how to overcome the procrastination and laziness that often result in inferior investment decisions. This is a transcript of the interview.
2011-02-08 Optimizing Your Fixed Income Allocation by Geoff Considine, Ph.D. (Article)
Here's a little-known fact: The traditional 60/40 portfolio, when using the aggregate-bond index for its fixed-income allocation, has a 99% correlation to the returns of the S&P 500. One way to overcome the limited diversification value offered by the aggregate index is to use a risk-parity approach. In this article, I explore the concept of risk parity in asset allocation and how it provides value for portfolio management.
2011-02-08 Undoing Meredith Whitney's Damage by Hildy Richelson, Ph.D. (Article)
Meredith Whitney did the municipal bond market an immense disservice with her misguided comments on 60 Minutes when she predicted massive defaults. Two recent articles in this publication provided accurate rebuttals to her analysis, but they failed to clarify important reasons why muni bond investors do not face the imminent peril that Whitney predicted.
2011-02-08 The Downside to Venture Investing (like Facebook?) by Dan Richards (Article)
In this interview, Harvard Business School professor Josh Lerner discusses the dangers of venture capital investing and the basis behind Facebook's valuation. This is a transcript of the interview.
2011-02-08 Be a Problem Setter, not a Problem Solver by Justin Locke (Article)
It's not a good idea to solve every problem. Sometimes, as my experience as a professional musician illustrates, it's better to just make sure everyone knows what the problem is that you want solved.
2011-02-08 Letter to the Editor - John Hussman Responds by John Hussman (Article)
John Hussman responds to a reader's comment, and reiterates his significant concerns about the present course of monetary policy.
2011-02-01 Letter to the Editor by Various (Article)
A reader disagrees with John Hussman's recent commentary, Sixteen Cents: Pushing the Unstable Limits of Monetary Policy, which appeared on January 24.
2011-01-25 The Power of Dividends by C. Thomas Howard (Article)
New evidence refutes long-held beliefs about the role of dividends. Research shows that the higher a stock portfolio's dividend yield, the greater its return. And just as surprising are new findings about the relationship of dividends to volatility.
2011-01-25 Should Advisors Care about Short-Term Volatility? by James Colon, John Gambla and Rob Guttschow (Article)
How can advisors construct portfolios that meet their clients' risk preferences across economic environments? You may be surprised to learn that tactical asset allocation has an important role to play.
2011-01-25 Beyond the Efficient Market Hypothesis by Michael Edesess (Article)
John Cassidy's 2009 book, "How Markets Fail," drives the final nail in the coffin of the Efficient Market Hypothesis. Well, perhaps the penultimate nail - as I'll explain. It is the most compelling argument I have read that we need a new and improved theory of markets, a theory that subsumes the efficient market hypothesis, much as Einstein's relativity theory subsumed Newtonian physics.
2011-01-25 Ten Resolutions for Greater Prosperity in 'The Year of the Fiduciary' by Jeffrey Briskin (Article)
If you think selling and servicing 401(k) plans isn't easy today, ERISA is about to make it even harder. The good news is that firms that adjust to these challenges can use them to their competitive advantage Here are ten steps your firm can take to prepare for The Year of the Fiduciary.
2011-01-25 Go for the Long Bond: Technical Indicators are Positive by Georg Vrba, P.E. (Article)
My article, Seeking Beta in the Bond Market: Update December 31, 2010, showed that my Bond Value Ratio (BVR) model indicated the beginning of an up-market for high-beta bond funds on 12/17/10. I present a further indicator here which reinforces this signal.
2011-01-18 Jeffrey Gundlach: The Greatest Investment Opportunity of 2011 and 2012 by Robert Huebscher (Article)
In June of 2007, against a backdrop of strong equity and corporate bond performance, Doubleline's Jeffrey Gundlach was one of the first to warn investors that sub-prime mortgages were 'a total unmitigated disaster, and they are going to get worse.' In an equally bold statement, last week he identified the asset class he considers the greatest investment opportunity for the next two years. Again, it was one for investors to avoid.
2011-01-18 Build Loyalty through Annual Client Reviews: Four Questions All Advisors Must Ask Their Clients by Ani Yessaillian (Article)
In today's highly competitive marketplace, you'll never be able to grow your business if you're losing clients. Trust fosters loyalty - but how do you build that kind of trust with your clients? The annual review is one of your best opportunities.
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 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 Structuring 2011 Meetings for Maximum Effectiveness by Dan Richards (Article)
Last summer, I wrote about new research on the factors that shape how consumers recall interactions and experiences. What was found was that in every experience, two things play the most important role in what people remember - that's true whether it is a restaurant meal, a vacation or a meeting with an advisor.
2011-01-11 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.
2011-01-11 The Two Elephants Facing the US Economy by Michael Lewitt (Article)
The consensus has reached the conclusion that financial markets will enjoy a strong start to 2011. This is reason enough to approach the markets with caution as the year begins. When everybody is leaning to one side of the boat, the vessel is far more likely to tip over, particularly if it hits an unexpected wave.
2011-01-11 2010: A Truth Odyssey by Ron Surz (Article)
I review some of the lessons learned in the last two years. I review the last year, discuss 2008's lessons, and conclude with my traditional review of the longer-term history of U.S. markets over the past 85 years.
2011-01-11 Letter to the Editor by Various (Article)
A reader responds to the article, Return Distributions and the Shiller P/E Ratio, by Keith Goddard, which originally appeared on February 2, 2010 and was contained in The Ten Best Articles You Probably Missed on December 28.
2011-01-10 Time To Come Out From Under The Covers by Charles Lieberman (Article)
I suspect 2011 will continue to produce its ups and downs (much like the past few years). The European debt crisis is still a big issue. The US Municipal debt (particularly in Illinois) issue is lingering. Congress is still Congress. When and if these issues present themselves and the markets react, we could view those situations as continued buying opportunities since the underlying fundamentals of stocks improve. However, long term investors should not wait for dips to begin investing, but rather start a systematic plan of redistributing cash back into the market.
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.
2011-01-04 The Wondrous Value of Incompetence by Justin Locke (Article)
Ignorance and incompetence are underappreciated. There may be a lot to say for training, knowledge, and expertise, but with so much emphasis being placed on acquiring more and more knowledge (especially by those in the knowledge-peddling business) a dose of ignorance these days can offer incredible value.
2011-01-04 Improving on Buy and Hold: Update December 31, 2010 by George Vrba, P.E. (Article)
I have updated the model described in my article Improving on Buy and Hold: Asset Allocation using Economic Indicators. The ECRI U.S. Weekly Leading Index and its annualized growth rate, published on December 31, 2010, together with the most recent values of the other indicators used, have been incorporated in the model.
2011-01-04 Seeking Beta in the Bond Market: Update December 31, 2010 by George Vrba, P.E. (Article)
I have updated the model described in my article, Seeking Beta in the Bond Market: A Math-driven Investment Strategy for Higher Returns, which appeared on November 23, 2010. A lower switch point was generated on 12/17/2010.
2010-12-28 The Ten Most-Read Articles in 2010 by Robert Huebscher (Article)
As is our custom, we conclude the year by reflecting on the 10 most-read articles over the past 12 months. In decreasing order, based on the number of unique readers, those are...
2010-12-28 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)
Great articles don't always get the readership they deserve. Here are 10 articles that you might have missed, but we believe merit reading.
2010-12-28 Letter to the Editor by Various (Article)
A reader responds to our article, Debunking Ken Fisher, which appeared last week.
2010-12-21 Debunking Ken Fisher by Robert Huebscher (Article)
In his latest book, Debunkery, Ken Fisher achieves his goal of dispelling many common investment myths and, in doing so, offers his philosophy on how individuals should manage their money. While most of the advice he offers is unequivocally correct, he also makes egregious errors on some serious matters.
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.
2010-12-21 Letter to the Editor by Various (Article)
A reader asks a question in reference to the article, The Kings of Cash Flow - Investing in Tomorrow's Potential Winners Today, which appeared on November 16. The authors of that article respond.
2010-12-14 The End of the Asian Bull Market by Robert Huebscher (Article)
A broadly diversified emerging market investor would have earned nearly 12% annually over the last five years, far outpacing investors in the US and other developed markets. Over the next five or even ten years, investors relying on emerging economies will not be as fortunate, however, according to Louis-Vincent Gave, CEO of the Hong Kong-based research and investment management firm GaveKal.
2010-12-14 Five 2010 Tax Tips for a Time of Uncertainty by Glenn Frank (Article)
While the posturing and political grandstanding continues in Washington over the fate of the Bush tax cuts, tax season is fast approaching. With the time for long-term planning long gone, here are five questions to ask clients that could prompt some smart tax moves in the closing weeks of 2010.
2010-12-14 What the Music Business Taught Me about Selling by Justin Locke (Article)
You provide a service to each of your clients, some of whom may have similar needs but all of whom are unique. Asking your clients what more you could be doing for them is the only way to make sure you're offering the advice they truly want.
2010-12-06 Behavioral Finance by Charles Lieberman (Article)
Why do investors always do the opposite of what they should do? Individuals tend to chase performance, following recent trends until they go over the edge of the cliff. They always fight the last war. It is a proven prescription for investment disaster. So, of course, they're at it yet again.
2010-12-06 The Dangers of Rebalancing by Michael Edesess (Article)
Every portfolio should be rebalanced to its targeted asset allocation, we are taught. Indeed, there may be no other precept as routinely and studiously practiced among financial advisors. But does rebalancing either increase expected return or reduce risk? If so, why? The answers to those questions reveal that it may be prudent to rebalance, but not for the reasons you think.
2010-12-06 An Uncertain Future for Housing Prices by Robert Huebscher (Article)
A renewed decline in housing prices would surely impede economic growth. Yet that is a strong possibility, according to housing expert Laurie Goodman of Amherst Securities. Goodman was joined in Boston last week to discuss the housing market by Karl Case, who, along with Yale professor Robert Shiller, created the Case-Shiller index.
2010-12-06 Why You Aren't Getting Referrals - And What to Do About It (Part 2) by Dan Richards (Article)
In his previous column, Dan Richards discussed seven misconceptions that prevent advisors from getting referrals. Here, he concludes with eight more referrals fallacies.
2010-12-06 Real Return Expectations by Michael Nairne (Article)
There is nothing more important to long-term investors than the real rate-of-return that they can reasonably expect to earn on their investments. We forecast the expected real annual return for US stocks over the next 10 years and then set out ways to potentially improve on what many will find to be a discouragingly low expected return.
2010-12-06 Creating a Mirage of Economic Growth by Doug Carey (Article)
Bubble formation is not random. Some may believe it is, but bubbles are in fact a predictable byproduct of the fractional reserve system upon which our economy is built. By stimulating and amplifying lending through its fractional reserve system, the Federal Reserve systematically creates the mirage of growth, from which deception systemic crises inevitably result.
2010-11-30 Black Gold, Texas Tea by Robert Huebscher (Article)
The flow of money into gold-related funds is, at least in part, driven by good intentions - hedging against dollar debasement, inflation, and systemic risk. As investors drive the price of gold to record levels, though, they are overlooking an equally compelling commodity hedge, one that the Beverly Hillbillies once dubbed 'black gold, Texas tea' - oil, that is.
2010-11-30 Why Bubbles Inflate and How to Avoid Them by Robert Huebscher (Article)
In this interview, Meir Statman discusses the psychological underpinnings behind the creation of bubbles in the financial markets, why some bubbles are good and others are not, and how investors should frame their decisions when facing a potential bubble.
2010-11-30 Why You Aren't Getting Referrals - And What to Do About It by Dan Richards (Article)
When it comes to attracting new clients, every advisor knows that nothing beats referrals from satisfied clients. However, many advisors hold fundamental misconceptions about what it takes to get quality referrals. As a result, they either don't talk about referrals at all or do so ineffectively.
2010-11-30 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.
2010-11-30 The Word that Defines Effective Communication by Dan Richards (Article)
Fairly or not, if clients initiate a call, many will believe that the conversation wouldn't have taken place otherwise ... even though it's precisely the same conversation, advisors get much more goodwill and credit if they take the first step in making that call happen.
2010-11-30 Investment in Life Settlements: Certainty in Uncertain Times by J. Mark Goode (Article)
Life settlements are not directly correlated with traditional bond and equity markets and have the potential to yield above-market returns in the intermediate and long terms. Unlike the equity and bond markets, the returns on life settlements are uniquely tied to mortality.
2010-11-23 Ned Davis - Still Positive on Stocks by Robert Huebscher (Article)
Just over a year ago, Ned Davis correctly forecast a continuation of the cyclical bull market in stocks. In February of 2008, he foresaw that year's market upheaval, and a year later he predicted the rally that began in March of 2009. Today, Davis is moderately bullish on stocks, as long as the Fed maintains its policy of quantitative easing.
2010-11-23 Will Municipal Bonds be the Next Disaster? by Dennis Gibb (Article)
It has been an article of faith that municipal bonds are safe investments, but this complacency about the safety of munis may soon be proven unwise.
2010-11-23 Stop Front-Running the Fed by Keith C. Goddard, CFA (Article)
A change of mindset is in order for bond investors, who must recognize that it is no longer wise to 'front-run' monetary policy by purchasing the same bonds the Federal Reserve is targeting with its latest round of quantitative easing.
2010-11-23 The Kings of Cash Flow: Investing in Tomorrow\'s Potential Winners Today by David Vincent and Kevin Collins (Article)
Companies generating a lot of free cash flow generally represent attractive investment opportunities over time. The 'Kings' - companies with the highest free cash flow yields - have historically outperformed companies with lower free cash flow yields and are currently experiencing what may be one of their longest and most drastic periods of underperformance in the last 50 years.
2010-11-23 Why Diversify? by Adam Jared Apt (Article)
Although diversification is commonly regarded as a good thing, there are nonetheless those who regard it as a guarantee of mediocrity. It isn't, but there are right ways and wrong ways to go about diversifying a portfolio. Let's explore how diversification works.
2010-11-23 Seeking Beta in the Bond Market: A Math-driven Investment Strategy for Higher Returns by Georg Vrba, P.E. (Article)
Investors seeking permanent exposure to the bond market should invest in high-beta funds during up markets and low-beta funds during down markets. This simple strategy provides consistent long-term returns that are considerably higher than what a static investment in bond funds would achieve.
2010-11-16 Jeremy Siegel on the Upside for Equities and the Virtues of QE2 by Robert Huebscher (Article)
In our annual interview, Jeremy Siegel, the Russell E. Palmer Professor of Finance at the Wharton School, offers his forecast for equities - a 10% to 20% gain in 2011, along with a continued rally through the end of this year. He also explains why the current round of quantitative easing is exactly what is needed to stimulate the economy.
2010-11-16 A Reading List for 2010: Part 2 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 were presented last week and the remaining four are presented here.
2010-11-16 Reducing Portfolio Risk through Sustainable Investing by Jon Quigley (Article)
By incorporating a broad swath of extra-financial data as a risk factor and tilting a portfolio away from companies with poor environmental, social and governance policies, we can better reduce that portfolio's risk of extremely negative outcomes.
2010-11-16 Using Buy-Side Analytics to Improve Stock Selections by C. Thomas Howard, PhD (Article)
Buy-side active equity managers regularly "put their money where their mouth is" by ranking and weighting their best stock ideas within their portfolios, and this information can be used to better identify which stocks will deliver superior future performance.
2010-11-15 Safety In Bonds? by Charles Lieberman (Article)
Investors routinely think bonds are safe, so the recent sharp decline in the municipal bond market should serve as an early warning. Interest rates remain exceptionally low and investors who have fled the stock market for the safety of bonds are likely to rue this decision. The risks are considerable, while the rewards are very low, hardly a good combination.
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 Navigating Post-Financial Meltdown Reviews by Dan Richards (Article)
Recently, an advisor emailed me asking for suggestions on how to deal with clients who sold some or all of their portfolio near the 2008 lows. More specifically, he wanted to know if it's worthwhile educating these clients on where they would be had they not sold out.
2010-11-09 Keynesian Confusion by Michael Lewitt (Article)
Keynesian policies are inflicting untold damage on the U.S. and global economies today. Keynes did not have to be misread. The reason that the current recovery is below par is that the economy is experiencing a massive paradox of thrift. We doubt that reducing already low rates is going to stimulate much of anything other than more frustration on the part of savers. Sooner or later, everything being earned on the upside of this liquidity-induced rally will be given back in spades - the only question is when.
2010-11-09 Bogus Numbers by Michael Nairne (Article)
The crux of the difference between the 'cheap' and 'overvalued' market valuation views lies in the selection of earnings numbers, of which there are two basic sets. The broadest traditional measure is 'as reported' earnings which includes all charges except the cumulative impact of accounting changes, discontinued operations and extraordinary items. Is the market cheap by the appropriate measure?
2010-11-09 Serenity Now by Emilio Vargas (Article)
Hope has transformed into fear - not about making money but about the prospect of another bubble. The recent statements and actions of the Federal Reserve Bank may be laying the groundwork for the third massive asset mispricing in ten years.
2010-11-08 Increased Clarity Implies Increased Optimism by Charles Lieberman (Article)
Major events of last week clarified the outlook in a way that is consistently very positive for equities. Much of the weakness in the economy since spring was merely temporary fallout from the Greek debt crisis. Policy remains very expansion oriented and the political environment should improve for the corporate sector. The latest developments imply we should be even more circumspect over the outlook for bonds (if possible) and more optimistic with the equity market's prospects.
2010-11-02 Flaws in Vanguard?s Withdrawal Strategy: Income versus Total-Return Portfolios by Geoff Considine, Ph.D. (Article)
Vanguard advertises that its mission is to simplify investors' retirement decisions. In a recently published study, however, it oversimplified the critical choices investors and their advisors face in constructing a portfolio for the withdrawal phase of retirement.
2010-11-01 Big Happenings by Charles Lieberman (Article)
Interest rates are at historically low levels because households are still pouring cash into bond funds, while stock market valuations are low because retail investors can't handle the volatility and they keep pulling cash out of equities. So despite all the uncertainty, much of which is normal anyway, stocks offer value, while bonds have very limited investment potential. While uncertainty remains, the bet seems highly asymmetric in favor of equities.
2010-10-29 Cliff Asness: Understanding Managed Futures by Robert Huebscher (Article)
In a portfolio with equities and fixed income, managed futures offer strong diversification value and high returns, according to Cliff Asness. Asness is the founder and Managing Principal of AQR Capital Management, a provider of managed futures products.
2010-10-29 Four Critical Investment Themes for the Next Decade by Robert Huebscher (Article)
Four investment themes will dominate market behavior over the next decade, according to Martin Murenbeeld, the chief economist at DundeeWealth Economics, a Canadian investment manager and financial advisor. Investors, he said, would be wise to overweight gold and other commodities.
2010-10-26 Identifying - and Overcoming - Obstacles Second in a Series of Five Articles by Beverly D. Flaxington (Article)
Obstacles that haven't been identified and aren't removed will rise again and again for most people and firms, and will prevent you from achieving your goals. Here is a framework to identify and categorize the obstacles you face.
2010-10-26 Having Skin in the Game on Kill Haole Day by Mariko Gordon (Article)
The often-cited 'skin in the game,' as an indication of a money manager's personal commitment, doesn't measure what it claims. Daruma's Mariko Gordon offers three reasons why.
2010-10-26 Improving on Buy and Hold: Buy by Georg Vrba, P.E. (Article)
Georg Vrba updated the model described in his article, Improving on Buy and Hold: Asset Allocation using Economic Indicators. The ECRI U.S. Weekly Leading Index and its annualized growth rate published on October 22, 2010, together with the most recent values of the other indicators used, have been incorporated and generated a buy signal.
2010-10-19 Advising Boomers in a World of Higher Taxes by Janus Investments (Article)
Taxes may be rising in 2011. Are you prepared to answer client questions? Advisors need to have meetings now through year-end to help guide their clients to help mitigate potential tax risk. Learn more from Janus' materials on Advising Boomers in a World of Higher Taxes.
2010-10-12 Misconceptions in the Great Bond Bubble Debate by Robert Huebscher (Article)
Interest rates, many claim, have bottomed, making bonds the latest asset class worthy of the dreaded "bubble" label. Others counter that deflationary forces will prevail and that bonds offer the best risk-adjusted returns in the market. Which side of this debate you take matters profoundly, but making that call is not simply a matter of predicting the direction of interest rates, as is the typical focus of analysts.
2010-10-12 The Perfect Storm: Threat or Opportunity by Dinesh Sharma and Michelle Goldstein (Article)
Our primary client base, baby-boomers, is quickly sliding into retirement, leaving us to question where our growth will come from. And now we have the uncertainty surrounding the Dodd-Frank Wall Street Reform and Consumer Protection Act and the anxiety that comes with it. Financial advisors can choose to see the convergence of these factors as a threat to their well-being or as an opportunity to prosper.
2010-10-12 Letter to the Editor by Various (Article)
In this letter to the Editor, a reader responds to our article, The Misguided Promise of 529 Plans, which appeared last week. We were wrong, the reader says, to compare 529 plan performance to the 'market,' and solutions superior to our recommended zero-coupon muni bond strategy are available through actively-managed equity funds.
2010-10-05 The Information Risk Premium: A New Danger to Client Portfolios by Bob Veres (Article)
Michael Aronstein, who manages the Marketfield Fund, connected two dots that most of us are aware of intuitively, but may not have consciously considered. As Bob Veres writes, Aronstein says that the primary challenge for investment advisors, financial planners and money managers today, which is different from the challenges you faced in the past, is the sheer amount of attention that investors are now able to pay to the ups and downs in their portfolios.
2010-10-05 Thinking Bond Market Bubble? Consider Short-Term Bonds by RidgeWorth Investments (Article)
The current market environment - characterized by historically low interest rates and money market reform - has created an opportune time to invest in short-term bonds. RidgeWorth believes investors with excess cash reserves earning near zero percent, as well as those invested in long-term bonds who may be most impacted by a rise in rates, will be well served to consider an allocation to short-term bonds. We thank RidgeWorth for their sponsorship.
2010-10-05 The Misguided Promise of 529 Plans by Robert Huebscher (Article)
Along with the overall market, 529 plans suffered disastrous returns in 2008, leaving many families with insufficient funds to pay their tuition costs. The real problem, though, is not with the past performance of 529s. A misguided promise underlies the vast majority of 529 plans - that their heavy allocation to equities will provide acceptable risk-adjusted returns for the time horizons over which most parents invest.
2010-10-05 Charles Brandes on Investing Lessons from Benjamin Graham by Dan Richards (Article)
In this interview, Charles Brandes, the founder and Chairman of the Brandes Investment Management, discusses the lessons he learned from legendary value investor Benjamin Graham. Brandes also offers his forecast for equity market performance, as well as why he believes value stocks have an inherent, sustainable advantage over growth stocks. This is the transcript of the interview.
2010-10-05 Charles Brandes on Investing Lessons from Benjamin Graham ? Video by Dan Richards (Article)
In this interview, Charles Brandes, the founder and Chairman of the Brandes Investment Management, discusses the lessons he learned from legendary value investor Benjamin Graham. Brandes also offers his forecast for equity market performance, as well as why he believes value stocks have an inherent, sustainable advantage over growth stocks. This is the video of the interview.
2010-10-05 The Myopic Bond Market by Michael Nairne (Article)
Many investors seem to believe that today's low bond yields are proof positive that inflation rates will stay low for many years. Michael Nairne assesses how successful the bond market has been in anticipating future inflation and how well bonds have performed historically in low yield environments. Bond strategies today need to reflect our findings.
2010-10-05 Improving on Buy and Hold: Don?t Buy Yet by Georg Vrba, P.E. (Article)
According to Georg Vrba, all conditions for a type A buy signal have not as yet been satisfied. Exactly the same conditions exist now as those of 5/6/08. The past is not an indicator of the future, but it would not have been a good decision to enter the market in May 2008.
2010-09-28 The Future of Oil by Robert Huebscher (Article)
No commodity impacts the global economy more than oil. When geopolitical threats loom, two questions often dominate discussion: Will the price of oil rise? And what will be the economic consequences? We review the key drivers of recent, current, and forecast oil prices, including a template for the necessary eventual alignment of supply and demand.
2010-09-28 Three Traps that Chew Up Your Day by Dan Richards (Article)
Time has always been the scarcest resource for successful financial advisors. Given all the demands advisors face, today it's essential to make maximum use of your workday. To make that happen, Dan Richards says you have to overcome three common traps.
2010-09-28 Unraveling the 12b-1 Debate by Robert Huebscher (Article)
The SEC has proposed sweeping changes to the way commission-based advisors will be compensated for the services they provide. Those changes will rename and modify the 12b-1 fees that many mutual funds now charge. To understand their impact, we spoke with Avi Nachmany of NY-based Strategic Insight, whose clients include the largest mutual funds.
2010-09-28 Improving on Buy and Hold: The Updated Signals by Georg Vrba, P.E. (Article)
At the request of many readers, Georg Vrba updated the model described in his article Improving on Buy and Hold: Asset Allocation using Economic Indicators. The Economic Cycle Research Institute's (ECRI) U.S. Weekly Leading Index (WLI) and the index's annualized growth rate published on September 24, 2010, together with the most recent values of the other indicators he used, have been incorporated in the model.
2010-09-28 Building your Digital Identity through Blogging by Stephanie Sammons (Article)
Blogging is a modern-day marketing platform for cultivating client, prospect, and center-of-influence relationships. A well-designed and properly structured blog, writes Stephanie Sammons in this guest contribution, can provide you with an opportunity to proactively manage your online reputation and attract new clients into your business.
2010-09-27 The Bubble in Bonds by Charles Lieberman (Article)
Bonds can play an important role in diversifying a portfolio. The current bubble in bond values, however, places excessive stress on that benefit. Today's yields don't make sense to investors. While the Fed needs to keep interest rates at low levels to strengthen the pace of recovery, investors who flee stocks for the 'safety' of bonds will get hammered. Those who are not distracted by the equity market's volatility and focus on its exceptional current value relative to its long-term prospects will be handsomely rewarded.
2010-09-21 The Housing Elevator: Going Up or Down? by Robert Huebscher (Article)
Several prominent analysts have written recently that the bear market in housing is nearing its end. Writing with varying degrees of conviction and citing a range of statistical measures, they reach the broad conclusion that now is the time to buy a house. We provide a summary of those opinions - from James Grant of Grant's Interest Rate Observer, Dave Leonhardt of The New York Times, and Anatole Kaletsky of GaveKal Research - along with our own contrasting thoughts.
2010-09-21 The One-Sided Fallacy by Richard E. Cripps, CFA (Article)
The current tenor of political debate has amplified one-sided arguments as each party attempts to sell their view to voters. The same polarization has become evident in approaches to investment, and market bears are exhibiting all the classic symptoms of confirmation bias. But we know better than to let these slanted arguments sway our market convictions. As Richard Cripps explains in this guest contribution, there are plenty of reasons to remain invested in equities.
2010-09-14 A Better Way to Invest in Gold by Geoff Considine, Ph.D. (Article)
In the year since Geoff Considine last wrote about gold, underlying prices have risen 24%, leading to several important questions - including whether his advice of a year ago still holds today. We look closely at how a direct investment in GLD performed as compared to a bond-plus-call-option strategy, and which conditions favor each strategy.
2010-09-14 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.
2010-09-14 Use Client Loyalty to Drive Profitable Growth by Ani Yessaillian (Article)
As a financial advisor, you simply can't afford to lose clients, writes Ani Yessaillian in this guest contribution. No matter how many new investors walk through your front door, you'll never be able to grow your business if you're losing dissatisfied clients out the back. Client loyalty is crucial to profitable growth.
2010-09-07 Jeffrey Gundlach on Bonds, Stocks and Gold by Robert Huebscher (Article)
DoubeLine's Jeffrey Gundlach recently reduced his position from "overweight" to "small underweight" in Treasury bonds, and cited "divergent behavior across the yield curve." In this interview, he discusses that behavior and the rationale behind his move, as well as his thoughts on other asset classes, including equities and gold.
2010-09-07 A Modest Proposal to the SEC by Michael Edesess (Article)
The SEC is now considering reforming how 12b-1 fees are currently charged, how they would be set in the future, and how they will be disclosed to fund purchasers. In this guest contribution, Michael Edesess offers an alternative, radical proposal, should the SEC's reforms not be adopted.
2010-09-07 Responding to Clients who Drive You Crazy by Dan Richards (Article)
We all have them... clients whose emotions gyrate with markets, second guess decisions, and create grief and frustration for their advisors. In the perfect world, you'd part company with all of these clients. Dan Richards offers an alternative approach.
2010-09-07 Mistake Management Symphony Style by Justin Locke (Article)
Mistakes happen - often. Eliminating them is impossible. The real question is: How do you manage the inevitability of making them? In this guest contribution, Justin Locke shares a few lessons he learned while playing the bass in a professional orchestra.
2010-09-07 The Free Lunch Illustrated by Michael Nairne (Article)
One of the most remarkable discoveries in modern finance is the ability to improve the expected return of a portfolio while simultaneously reducing its risk. In this guest contribution, which advisors can share with clients, Michael Nairne explains that the proverbial "free lunch" does exist, its exploitation requires a focus not only on the returns and volatility of the assets in the portfolio but on the degree of covariance between those assets.
2010-08-31 The Riskiest Pension Assets (and the Implications for Muni Bonds) by Robert Huebscher (Article)
State finances are in trouble, in large part due to unfunded pension liabilities. To assess the depth of those problems, one can look at what is likely the riskiest component of states' pension assets - their exposure to alternative investments and, in particular, to private equity. We assess those risks and look at the larger question of whether unfunded liabilities can trigger municipal defaults.
2010-08-31 Why Mid-Cap? by RidgeWorth Investments (Article)
RidgeWorth Investments has published research detailing six distinct reasons why investors should consider a specific allocation to mid-caps. Specifically, it explores historical performance, evaluates current conditions that favor mid-caps as well as examines how mid-caps have performed during different points in market and economic cycles. Finally, the research looks at the incremental benefit of adding an allocation of up to 40% of mid-cap stocks to a portfolio of solely large and small cap stocks. We thank RidgeWorth Investments for their sponsorship.
2010-08-31 An Unexpected Route to Ecstatic Clients by Dan Richards (Article)
Dan Richards was puzzled by some recent conversations with investors, until he read a column in the New York Times about how to maximize the pleasure from vacations. The column stemmed from research by behavioral psychologists on how to structure activity to generate the most impact - and led to some striking findings both for planning vacations and for structuring how clients experience their interactions with you.
2010-08-31 Double ?Bubble,? Toil and Trouble by Sam Bass (Article)
The latest economic prophecy, which has gripped investors' fears for the past three years and counting, is that a 'bubble' in US Treasury bonds is about to burst. Hyperinflation is just around the corner, the prediction goes, and US Treasury bonds, driven up in price to record levels by unprecedented policy measures, are about to crash. In this guest contribution, Sam Bass writes that advisors shouldn't follow the advice of these "seers."
2010-08-31 David Blitzer on How Indices Work by Dan Richards (Article)
Many investors read about the Dow Jones or S & P 500 index being up or down 200 points but don't really understand what this means. Today's interview with David Blitzer of S & P provides an explanation of how indexes work that can be shared with clients. This is a transcript of the interview.
2010-08-31 Evaluating Unconstrained Managers by Various (Article)
How can advisors evaluate an unconstrained asset manager, such as John Hussman of the Hussman Fund? In a follow-up to a recent article on research by Roger Ibbotson, we present views from several advisors on the role of returns-based style analysis and whether it can help identify whether managers such as Hussman deliver alpha.
2010-08-31 Five Steps to Choosing the Right Marketing Firm by Kristen Luke (Article)
Finding a marketing firm for your advisory practice can be a daunting task and hiring the wrong firm can be an expensive mistake. It is essential that you spend time doing due diligence to find the right partner for your growth. Kristen Luke provides five steps that will help you with this process.
2010-08-24 What Investors Really Want by Robert Huebscher (Article)
Using a mean-variance optimizer to construct a retirement portfolio that sits on the efficient frontier is tantamount to dining on a well-prepared meal that was pureed in a blender, believes Meir Statman, a professor of finance at Santa Clara University. Statman's research focuses on behavioral finance, and how advisors can help investors make smarter decisions.
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.
2010-08-24 Build America Bonds Power the US States by Hildy Richelson, Ph.D. (Article)
A skeptical attitude toward new products has long served the best interests of advisors and their clients, almost without fail. However, in this guest contribution, Hildy Richelson argues that advisors should not be afraid to embrace one of the market's most prominent recent innovations: the Build America Bond (BAB).
2010-08-17 Misconceptions about Risk and Return Uncovered by Geoff Considine, Ph.D. (Article)
Our beliefs about risk and return determine how we construct portfolios and manage risk. Research over the last decade suggests that a number of the ideas on which many investors and advisors rely lead to portfolios that are too highly exposed to market risk. In this article, we review a number of ideas that determine how we select assets and how we determine what to expect from those assets.
2010-08-17 A New Framework for Retirement Income Planning by Manish Malhotra (Article)
In this guest contribution, Manish Malhorta proposes a new framework to solve many problems associated with retirement income planning, one that answers questions investors often ask, such as: "How much retirement income can I have with only a 10% chance of failure?" and "How much do I need to have now to draw $50,000 for 30 years with full certainty?"
2010-08-17 Cerulli Survey Results: New Themes in Advisors? Portfolio Strategies by Bing Waldert (Article)
New ideas, such as tactical asset allocation and the use of alternatives, have seen some uptake even before the market crisis, particularly within large institutions, but they are receiving increased attention as solutions for risk-averse clients. This article examines some of the evolutions, using data from a Cerulli Associates survey of Advisor Perspectives readers conducted in June and July of 2010.
2010-08-17 Refining Core-Satellite Investing by Ron Surz (Article)
Thanks in large part to the current crisis, investors are showing renewed interest in portfolio construction, and core-satellite investing is regaining popularity. So why the interest in core? It could be for either of two reasons - hedging or completeness - as Ron Surz explains.
2010-08-17 Letters to the Editor: Harold Evensky, et. al. by Various (Article)
Our letters to the Editor include three responses to articles in last week's issue from Harold Evensky of Florida-based Evensky & Katz.
2010-08-16 The Fear and the Flight of the Individual Investor by Charles Lieberman (Article)
Individual investors have abandoned the equity market to the greatest extent in decades, pushed out by poor returns, unfathomable volatility, and disillusion with the political and economic environment. Instead, investors have turned to bonds as they prioritize safety and return-on-capital over investment returns. This search for safety will prove counterproductive, however, and investors will get hurt down the road once the economy recovers. Their flight from stocks has made the equity market the place to be for the foreseeable future, but only those with staying power will reap the benefits.
2010-08-10 When Active Management Matters by Kenneth R. Solow, CFP and Michael E. Kitces, MSFS, MTAX, CFP (Article)
Financial planners have eagerly awaited any research that could finally, definitively prove - or disprove - the pesky notion that active management is effective. Though no one has yet risen to that challenge, past academic studies have been improperly interpreted to show that portfolio policy, or asset allocation affects portfolio returns far more than active management. As Ken Solow and Michael Kitces write in this guest contribution, the most recent study to tackle the active management debate, by Yale professor Roger Ibbotson, shares two weaknesses with previous research.
2010-08-10 Taking Exception: 'Fiduciary' is Much Ado about Something! by Scott MacKillop (Article)
All financial advisors who provide investment advice directly to clients or exercise investment discretion over client assets should be subject to fiduciary standards. In this guest contribution, Scott MacKillop takes exception to the article by John Lohr entitled 'Fiduciary': Much Ado about Nothing! that appeared here last week.
2010-08-10 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.
2010-08-10 Performance that Plan Sponsors Value Most by Jeffrey Briskin (Article)
Advisors serving 401(k) plans may successfully improve investment performance, only to find out that the plan sponsor is totally unsatisfied. In this guest contribution, Jeffrey Briskin relates a recent conversation that made that painfully obvious, and a recent study by his company confirmed that such outcomes occur all too often.
2010-08-03 'Fiduciary': Much Ado about Nothing! by John Lohr (Article)
The most overused, misused and misunderstood word in the investment industry is 'fiduciary.' Independent advisors, trade organizations and self-styled 'expert' groups have called for stockbrokers to adopt the 'fiduciary' standard to achieve a grand leveling of the playing field for those who provide investment advice. This is nothing more than unnecessary marketing hype, says securities lawyer John Lohr in this guest contribution.
2010-08-03 Rebuilding Confidence in Stocks by Dan Richards (Article)
These days, there's a cloud of uncertainty over markets, with questions about economic growth, government deficits, the timing and impact of interest rates increases, unemployment levels and the housing market. As Dan Richards writes, this environment is when advisors can bring value, by providing perspective on both sides of the debate about the value that stocks provide at today's levels.
2010-08-03 Richard Koo: Lessons from Japan's Decline by Dan Richards (Article)
Richard Koo is the Chief Economist of Nomura Research Institute, and has served as an advisor to the Japanese government. In this interview with Dan Richards, Koo explains why Japan's recovery was thwarted by inadequate stimulus spending. This is a transcript of the interview.
2010-08-03 A Marketing Guide for RIAs: Part 8 ? Implement a Client Referral Strategy by Kristen Luke (Article)
In her series on low-budget marketing for startup RIA firms, Kristen Luke discusses how to develop a client referral strategy.
2010-08-03 Letter to the Editor by Various (Article)
In a letter to the editor, a reader responds to Dave Loeper's article, Fake Diversification Exposed: Does Asset Allocation Work?, which appeared on July 13.
2010-08-02 The Bubble In Bonds vs. Cheap Stocks by Charles Lieberman (Article)
It is disputed in a few corners, but more analysts and strategists view bonds as severely overvalued and stocks as symmetrically cheap. Advisors Capital Management shares this judgment and points to assorted different ways to reach this conclusion. Investors should be trying to inoculate their bonds holdings from losing value at some point and taking advantage of the upside potential in equities. The 'lost decade' in stocks could easily be followed by a lost decade in bonds, while stocks recover.
2010-07-27 Why Immediate Annuities Make Sense by Geoff Considine, Ph.D. (Article)
As they approach retirement, baby boomers are increasingly concerned about how best to manage their portfolios during the decumulation phase of their lives. One of the challenges for advisors and investors is understanding what role annuities should play, if any. Geoff Considine shows that immediate annuities should be an important part of a decumulation strategy.
2010-07-27 Robert Shiller: A Cautious Outlook for Stocks by Dan Richards (Article)
Dan Richards recently spoke with Robert Shiller, the Yale economist who foresaw the financial crisis and created the Case-Shiller housing index. Shiller discusses the potential for a double-dip recession, valuations in the US equity market, and the outlook for a housing recovery. This is the transcript of the interview.
2010-07-27 Important New Research Talking to Seniors About Risk and Market Volatility by Dan Richards (Article)
New research shows how to talk to seniors about their investments. Titled "Behavioral finance and the post-retirement crisis" and released in May, this report compiles findings on how older investors perceive risk and make financial decisions. Dan Richards discusses the findings.
2010-07-27 Rediscovering Your Listening Skills by Justin Locke (Article)
Listening may be the most critical part of your job, both for acquiring new clients and for maintaining current relationships. Everyone's listening abilities are unique, but many common fears and anxieties can interfere with your innate listening skills. In this guest contribution, Justin Locke identifies a few common problems and suggestions for how to work around them.
2010-07-27 Active Managers Add More Value in Bull than Bear Markets by Jane Li, CFA, CAIA (Article)
In this guest contribution, Jane Li of FundQuest argues that both active and passive investing have their strengths and weaknesses; it depends on the market segment in question and on the economic climate. Active managers tend to add value in bull markets, but their value is shakier in bear markets.
2010-07-27 A Marketing Guide for RIAs: Part 7 ? Implement a Centers of Influence Referral Strategy by Kristen Luke (Article)
In her series on low-budget marketing for startup RIA firms, Kristen Luke discusses how to implement centers-of-influence referral strategies.
2010-07-26 Back to Even and Still Bullish by Charles Lieberman (Article)
The equity market has recovered to being even for the year to date, overcoming a possible credit crisis in Greece and Europe, as well as fears of a double-dip recession at home. While the economic outlook is 'unusually uncertain,' it is the pace of the recovery that is most subject to question, more than its sustainability. Notwithstanding these concerns, corporate profits continue to increase at a solid pace, cash is accumulating, and stocks have become cheap. This offers an excellent entry point for investors, who are able to hang in despite the market's volatility.
2010-07-20 Cash Investing: Considerations for Investing in a Low Interest-Rate Environment by Northern Trust Investments (Article)
Northern Trust's chief economist, Paul Kasriel, forecasts that interest rates will remain low for the remainder of 2010. Investors are looking for guidance on how they should best position their cash and fixed income portfolios to take this environment into consideration, and should consider the tradeoff between liquidity and yield. We thank Northern Trust for their sponsorship.
2010-07-20 Martin Leibowitz? Failed Defense of the Endowment Model by Michael Edesess (Article)
The latest book from Martin Leibowitz, one of the most respected thinkers in the investment industry, attempts to justify the endowment model of investing. As Michael Edesess writes in this review, Leibowitz's defense is highly problematic, and that should concern any advisor utilizing a Yale-like strategy.
2010-07-20 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 Beyond The Stars: Improving Active Fund Selection Based On Manager Skill by Michael Ervolini (Article)
After a brief review of known shortcomings of common fund evaluation methodologies, Mike Ervolini introduces a new approach based upon analytics that his firm has developed. Rather than relying on non-predictive metrics such as past performance, his approach looks at investment processes in relation to deeper skills that managers possess regarding buying, selling, and position-sizing.
2010-07-20 A Marketing Guide for RIAs: Part 4 ? Create Marketing Collateral by Kristen Luke (Article)
In her series on low-budget marketing for startup RIA firms, Kristen Luke discusses how to create your marketing collateral.
2010-07-19 Sovereign Risks by Charles Lieberman (Article)
Fitch upgraded Argentina's bonds to B (stable) from Default last week, a rather questionable decision. Argentina and a few others belong in a special class, recidivist sovereign borrowers who default on a regular basis after they've lured new lenders to provide them with fresh money. It makes little sense to upgrade Argentina and downgrade Greece because the latter country's budget cutbacks are not politically popular. It is doubtful Argentina will act responsibly any time soon.
2010-07-13 Fake Diversification Exposed: Does Asset Allocation Work? by David B. Loeper, CIMA, CIMC (Article)
Domestic equities are down roughly 14.5% from their April 23rd high. Many advisors tout sophisticated (and very expensive) asset diversification strategies, supposedly to protect their clients against precisely these circumstances. So, with this recent decline, Dave Loeper asks whether all of those supposed diversifiers protected portfolios?
2010-07-13 Deficits Monetary and Moral by Michael Lewitt (Article)
"The word 'deficit' has come to epitomize not only our economic dilemmas but also our moral and intellectual failures to address them in an era that should be boasting of new breakthroughs in the social and physical sciences," writes Michael Lewitt in the latest installment of his HCM Market Letter, Deficits Monetary and Moral. "Instead, our ability to solve complex problems is weighed down by flawed and corrupted government processes and the lack of courage to forthrightly change them."
2010-07-13 A Marketing Guide for RIAs: Part 2 ? Craft Your Message by Kristen Luke (Article)
As part of her series on low-budget marketing for startup RIA firms, Kristen Luke discusses how to craft your message.
2010-07-13 A Marketing Guide for RIAs: Part 3 ? Build a Website by Kristen Luke (Article)
Kristen Luke discusses the steps to take to build your website.
2010-07-12 It's a Slow Grind by Charles Lieberman (Article)
Economic growth in the U.S. is only moderate, which is inadequate to bring down unemployment at a satisfactory pace, even as a double-dip recession remains highly unlikely. It's easy to recognize the problems with the economy, while overlooking the positives. But there's a critical distinction often lost between the unsatisfactory current state of economic affairs and the improving direction. Given time, economic growth should accelerate and lift the economy to a solid state of health.
2010-07-07 Lebron James and Earnings Season by Charles Lieberman (Article)
It appears that everyone is reducing their expectations for the economy. The stock market, a discounting mechanism, is responding accordingly and suggesting that analyst's 2011 earnings expectations are too high. However, the market is now trading at a price-to-earnings multiple near that of March 2009 market lows, when the structure of the global economy was in question, the credit markets were still frozen, and corporate balance sheets had not yet begun being repaired, a far cry from where we are today. This does not seem appropriate.
2010-07-06 The Ultimate Income Portfolio by Geoff Considine, Ph.D. (Article)
Conventional approaches to constructing income-oriented portfolios use either bonds or high-yield stocks. In this article, Geoff Considine explores a compelling alternative to that approach: a carefully selected model high-yield portfolio consisting primarily of low-beta, high-dividend stocks, against which the investor sells call options.
2010-07-06 How to Calculate Your Personal Safe Withdrawal Rate by Lloyd Nirenberg, Ph.D (Article)
Traditional approaches for determining safe withdrawal rates (SWRs) rely on back-testing portfolios with different asset allocations using historical data. Instead, in this guest contribution, Lloyd Nirenberg provide a new, transparent analysis that enables investors to explicitly update their SWR based on new beliefs about their future returns and inflation.
2010-07-06 Template for a Mid-Year Letter ? Navigating through this Calamitous Decade by Dan Richards (Article)
It's always important for clients to feel they're being kept informed of what's happening in markets - but never more so than in markets like we've seen in the past few months. Dan Richards provides a template for a mid-year market commentary to clients, adaptable to your own opinions and circumstances, based on a recently rediscovered speech by Benjamin Graham.
2010-07-06 And the Winner Is... by Michael Nairne (Article)
As investors rush into U.S. Treasury bonds in response to a weakening economy that may portend the onset of deflation, this begs the question whether there is a superior deflationary hedge. History can be instructive in this regard, as Michael Nairne explains in this guest contribution.
2010-07-06 Stock Markets and a Sea of Change by Ron Surz (Article)
Ron Surz provides his award-winning market commentary, analyzing performance across global markets during the first half of this year. He also addresses several other topics, including the fiduciary standard, developments in target date funds, and distortions in style assignments created as a byproduct of the financial crisis.
2010-07-02 Employment Report: Just Fair by Charles Lieberman (Article)
Job growth continued in June, but not enough to support the idea that the economy is still gathering speed, but also not weak enough to indicate a double dip recession. One month?s data is insufficient to suggest the trend of accelerating growth is truly broken, but the economy ought to be getting stronger and this payroll employment doesn't show that.
2010-06-29 Timber as an Asset Class: If a Tree Falls in the Forest, Should you Buy It? by Charlie Curnow (Article)
"If the sun shines and it rains, the trees grow about on schedule," wrote Jeremy Grantham, chairman of Boston-based investment firm GMO, in his quarterly newsletter in April 2007. Grantham's enthusiasm for timber, which remains true to this day, may be excessive, despite the fact that, on the surface, historical data seems to support his optimism. If a tree falls in the forest, should you buy it?
2010-06-29 Jeff Gundlach: The US will 'Politely Default' on its Debt by Robert Huebscher (Article)
Jeff Gundlach's keynote address at last week's Morningstar conference documented the immensity of U.S. debt obligations and the lack of choices available for alleviating that burden. As he has stated in the past, he does not view inflation to be a threat in the capital markets today. He cited six options open to policy makers, but believes a seventh - some form of default - is most likely.
2010-06-29 Inflation Protection Investment Strategies by Vern Sumnicht (Article)
The value of the dollar is sure to erode, and investors will be left to grapple with the inflationary consequences. As Vern Sumnicht shows in this guest contribution, recent policies suggest steep inflation may be just around the corner. Fortunately, investors have some options to bolster their portfolios against the threat of inflation.
2010-06-22 Inexpensive Protection Against Rising Rates by Geoff Considine, Ph.D. (Article)
As is too often the case, the biggest risks are those that we discount. The possibility of a surge in interest rates appears to be today's ignored risk, despite the warnings of many experts, including David Einhorn, Bill Gross, and Seth Klarman. We discuss an inexpensive strategy to protect your portfolios from the tail risk of rising rates.
2010-06-22 Improving on Morningstar's Ratings: Moving Beyond Past Performance by C. Thomas Howard, PhD (Article)
Past returns provide little or no help in choosing the best fund going forward, and Morningstar's stars are the best known example of this failure. In this guest contribution, Tom Howard presents new evidence of the failure of past performance to predict future returns, and shows how his strategy-based rating methodology offers measurably better predictive power.
2010-06-22 Niall Ferguson on Japan, China, and the US by Dan Richards (Article)
Harvard's Niall Ferguson is arguably today's leading economic historian. In part two of this interview, Ferguson explains why he fears the future is bleak for Japan, why China may someday be the leading global superpower, and what all this means for the US. We provide a video and a transcript.
2010-06-22 The New Roth Rules: Are Your Clients Converting? Survey Results ? April/May 2010 by Michael Slemmer, CFA (Article)
Many fund companies are reporting high levels of Roth conversion activity, but to date there have been only anecdotal reports as to what investment advisors and wealth managers are experiencing with their clients and prospects. Here are the results from a survey we recently conducted that provides insights into trends in Roth conversions.
2010-06-21 Why Own Gold? by John Petrides (Article)
Buyers of gold assume that a buyer will materialize who is willing to pay more for their shiny rock than they did. For this reason, buying gold is the epitome of a speculative investment. How does one value gold, from a fundamental standpoint? The conceptual answer is to match supply with demand and an equilibrium price is created, but how does one measure supply? Well, gold is mined, so that is one part of the equation, but what about holders such as central banks and investors, who keep the shiny rock in their vaults? How is that level of supply factored into the equation?
2010-06-15 Asset Allocation Matters, But Not as Much as You Think by Robert Huebscher (Article)
The market downturn has caused a rethinking of many core principles underpinning investment advice, chief among them the role of asset allocation. We talk with Yale's Roger Ibbotson about the impact of market returns and active management in explaining return variance and the role of asset allocation going forward.
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.
2010-06-15 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 Strategy Advice from Apple and Google by Dan Richards (Article)
Last week Dan Richards conducted a webinar focused on the key decision that will drive advisors' long term success. Richards talks about what advisors can learn from the success of Apple, Google, Coke and Walmart.
2010-06-15 Letter to the Editor by Various (Article)
In a letter to the Editor, a reader responds to our article last week, Five Strategies for a Rising Rate Environment.
2010-06-08 Why Wall Street Won't be Reformed by Robert Huebscher (Article)
Michael Lewitt, author of the highly respected HCM Market Letter, has just released a new book, The Death of Capital. In this interview, he identifies the challenges facing those who seek to regulate Wall Street, and why most of the proposed reforms are likely to fail.
2010-06-08 What?s Driving Investment Management Outsourcing? by Northern Trust Investments (Article)
Advisors who fully outsource their investment management want to free time for clients and grow their practice. But, as Northern Trust Investments' research explores, not all advisors are comfortable with full outsourcing. We thank Northern Trust for their sponsorship.
2010-06-08 Five Strategies for a Rising Rate Environment by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)
The Federal Reserve can't accommodate forever, and the global stimulus effort will likely lead to inflation. Our growing indebtedness can only result in increased borrowing costs. That much we know. What we don't know is when and how quickly interest rates will rise. In this guest contribution, Kane Cotton and Jonathan Scheid examine five strategies for a rising rate environment.
2010-06-08 Three Words to Blow Away Clients by Dan Richards (Article)
Every advisor's goal is to build deep relationships with key clients, partly to foster loyalty and increase the assets you have from them, partly to open the door to referrals. One way to do that is to have clients "wowed" by their experience in dealing with you, and Dan Richards says three key words will create that "wow" effect with important clients.
2010-06-08 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 Ten Ways to Improve Manager Selection by Nancy Opiela (Article)
Today's emphases on fiduciary responsibility, risk management and increased transparency require better due diligence when selecting managers. Especially in today's turbulent markets, advisors who spend more time and resources to do due diligence well can find themselves at a distinct competitive advantage. While these ten tips won't necessarily help you identify the next active management superstar, they can bolster your manager selection and due diligence program.
2010-06-08 The First Thing We Do, Let?s Kill All the Quants by Michael Lewitt (Article)
In the latest issue of the HCM Market Letter, Michael Lewitt draws the parallels between the Gulf of Mexico oil spill and financial reform - both, he says, demonstrate our inability to learn from our mistakes. Lewitt also comments on quantitative trading strategies, economic recovery and the capital markets.
2010-06-01 Three Ways to Improve Safe Withdrawal Rates by Geoff Considine, Ph.D. (Article)
Using Monte Carlo analysis, Geoff Considine examines three ways safe withdrawal rates can be increased beyond the baseline 4% guideline. He compares and quantifies the benefits of increasing diversification beyond equities and bonds, increasing allocations to fixed income, and employing tactical asset allocation.
2010-06-01 Equity Income Targets Utilities by Philip Sundell, CFA (Article)
Natural gas local distribution companies are appealing utility business models to conservative equity investors. They tend to have stable earnings and stronger balance sheets. Philip Sundell of American Century Investments discusses his overall outlook for utilities in this interview. We thank American Century 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 Seth Klarman is More Worried than at Any Time in his Career by Robert Huebscher (Article)
The concern that the dollars he earns for his clients will lose their purchasing power is always on hedge fund manager Seth Klarman's mind. The possibility that the government will continue to print money to solve our economic problems has left him more worried than at any time in his career. We report on Klarman's remarks at last week's CFA conference.
2010-05-25 The Prospecting Approach that Works Today by Dan Richards (Article)
The problem with viewing a prospect conversation as an event is that you have to ask for a firm commitment at the end of any interaction - whether it is a request to meet when talking on the phone or asking for a decision to invest when meeting face-to-face, according to Dan Richards. All too often, that request will be premature - and if it's too soon in the process, the prospect feels under the gun. Richards offers a solution.
2010-05-25 Sleeping with the Enemy by John W. Pfenenger II, CFA (Article)
When it comes to investing, our worst enemy may be the one we see in the mirror every morning - ourselves. In this guest contribution, John Pfenenger looks at how emotions affect investment decisions, and how understanding behavioral economics can help advisors work with their clients.
2010-05-18 Jeremy Grantham Guarantees Gold will Crash by Robert Huebscher (Article)
Jeremy Grantham, the investor celebrated for his ability to spot and exploit bubbles in asset classes, guaranteed yesterday that the current bull market in gold will end. His proof? He bought some - for his own account - at the end of last week. That comment was tongue-in-cheek, but he went on to identify two asset classes likely to go into bubble territory.
2010-05-18 Anthony Boeckh on the Great Reflation by Robert Huebscher (Article)
Tony Boeckh has been the guiding force behind Bank Credit Analyst, and in this interview he discusses his new book, The Great Reflation. Boeckh stakes out a deflationary forecast, and explains how the flow of liquidity in the financial system will determine asset class performance.
2010-05-18 Spain: After the Bubble by Charlie Curnow (Article)
Today, Barajas Terminal 4 one of the most visible artifacts of the profligacy that fueled Spain's property bubble and led to the country's current financial crisis. Spain, like several other European states, has continued to spend rapidly over the past two years, even as its economy has contracted. As a result, the Spanish government's debt has skyrocketed, raising fears of a possible sovereign default.
2010-05-18 Enhance Your LinkedIn Profile through Applications by Kristen Luke (Article)
The standard LinkedIn profile is pretty boring - it consists almost entirely of text. Fortunately, LinkedIn has partnered with a dozen application providers to help enhance user experience. Here are eight that Kristen Luke recommends to turn your profile from a resume to a marketing tool.
2010-05-18 Search Engine Marketing for Financial Advisors by Dan Sommer (Article)
How do you take advantage of search engine marketing as a financial advisor? The goal of search engine marketing is to ensure that your website appears on as many results pages as possible for queries that relate to your business, and in this guest contribution Dan Somer explains the details of Search Engine Optimization (SEO) and Pay-Per-Click (PPC) advertising.
2010-05-17 Why Be Bullish? by Charles Lieberman (Article)
Investors are nervous that Greece and Europe's need to restrain fiscal policy could spill over and cause a double dip recession in the United States. While that isn't impossible, it is highly unlikely. The U.S. economy is building momentum and derailing the expansion is quickly becoming difficult. Fundamentals also strongly suggest an improving economy. Thus, rather than weakness in Europe undermining domestic growth, it is far more likely that a healthier economy in the U.S. and in Asia will spill over to help the Europeans.
2010-05-11 Predicting Financial Crises by Charlie Curnow (Article)
MIT Sloan School senior finance lecturer Mark Kritzman thinks he has found a warning signal to predict the onset of financial crises in a new statistical model called the absorption ratio. The absorption ratio predicts systemic risk by measuring how tightly markets are coupled, and thus how vulnerable they are to the spread of negative shocks.
2010-05-11 God Is Dead: The Implications of the Goldman Sachs Case by Michael Lewitt (Article)
Michael Lewitt provides us with the most recent issue of the HCM Market Letter, where his discusses the implications of the Goldman Sachs case. Lewitt says Goldman faces a terrible dilemma, and should heed the lessons of the downfall of Drexel Burnham two decades ago. Lewitt also comments on the private equity industry, public pension funds, and bank capital requirements and the ratings agencies.
2010-05-11 Inspire Client Trust by Delivering Clear, Insightful Investment Communications by Ani Yessaillian (Article)
One of the best ways to build trust with your clients is to consistently deliver clear, insightful investment communications. In this guest contribution, consultant Ani Yessaillian tells you how to make the most of your quarterly performance report and your off-cycle investment communications.
2010-05-11 Why Some Hedge Funds Made Money in 2008 by Robert Huebscher (Article)
Steven Drobny is the co-founder of Drobny Global, an international macroeconomic research and advisory firm that counts many of the leading global hedge funds and money managers as clients. He is also author of a recently released book that identifies why some hedge funds made money in the 2008 crisis, while the majority did not. In this interview, he discusses the common themes among successful strategies.
2010-05-11 A Coming Wave of M&A? by Seth P. Hieken, CFA (Article)
In this guest contribution, Seth Hieken of The Colony Group says to expect M&A transactions to accelerate over the course of the year. If correct, there are several important guidelines investors may wish to follow.
2010-05-11 Join a Professional Association ? Just Not Your Own Profession by Kristen Luke (Article)
Don't limit your involvement in professional associations to your own profession, says Kristen Luke. To actively market your business, spend more time with professional associations that pertain to your prospective clients than for your own industry.
2010-05-11 Tagline, You?re It by Wendy J. Cook (Article)
Have you ever noticed that it can be easier to write a 6,000-word treatise than to come up with six perfect words, like, say, "You're in good hands with Allstate®"? As Wendy Cook writes, sometimes less is more - more frustrating, that is. How do you say a lot with a little in corporate taglines?
2010-05-10 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.
2010-05-07 Greece and Possible Contagion by Charles Lieberman (Article)
The equity market melted down yesterday, partly due to a trading error, but also out of fear of contagion from Greece to Spain and Portugal. Europeans will need to draw a line in the sand to prevent the possibility of contagion, or risk a broad loss of liquidity across Europe. A strong policy response, possibly including a European Union guarantee on the sovereign debt of all its members, as well as support for the European credit markets from the European Central Bank, should calm the markets. Markets will remain quite volatile until these key players take strong policy action.
2010-05-04 Lacy Hunt: Keynes was Wrong (and Ricardo was Right) by Robert Huebscher (Article)
Underpinning the Obama administration's economic policies is the work of John Maynard Keynes, the legendary British economist who called for large fiscal and monetary interventions to counter the Great Depression. On this critical issue, Keynes was wrong, says Lacy Hunt, the internationally renowned economist with Texas-based Hoisington Investment.
2010-05-04 Timely market insights: Sector reviews and quarterly perspective on the financial markets by Janus (Article)
Janus provides sector reviews and reports on quarterly market performance in a new commentary. While economic recovery is in place, the firm says, its magnitude is uncertain. Topics covered include winners and losers in the energy sector, Chinese growth from within, the evolution of internet-related media and communications, and the financial impact of health reform. We thank Janus for their sponsorship.
2010-05-04 Four Words of Advice from a Top Advisor by Dan Richards (Article)
Last summer, Dan Richards talked to a thirty-year veteran of the business who's consistently ranked as a top advisor. The week before, he'd talked to a group of rookies just entering the business. In the question and answer period, he was been asked about the single most important thing he learned over the course of his career.
2010-05-04 How Much is that Investment Worth in Real Money? by Adam Jared Apt (Article)
In the latest installment of his series of articles geared to the educated layman, Adam Apt looks at the topic of the time value of money, and how discount rates can be used to determine the value of a security. He shows the practical applications of present value calculations and its limitations.
2010-04-27 Paul McCulley?s Design for Financial Regulation by Robert Huebscher (Article)
PIMCO's Paul McCulley parents his 20-year-old son with an overarching principle: If you want access to the "Bank of Dad," then you must comply with the regulations of the "Bank of Dad." Wall Street abandoned similar tenets with in the run-up to the credit crisis, and now McCulley says that core principle - to play the game, you must accept regulation - needs to be restored before another crisis unfolds.
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 Investing Insights from Doctors by Dan Richards (Article)
Dan Richards works out in the early mornings with a psychiatrist, who recently forwarded an article in the New York Review of Books by Jerome Groopman, a physician and frequent writer on the challenges of modern day medicine. As Dan read it, he was struck by the parallels between the things that cause doctors and investors to go wrong.
2010-04-27 Writing in Plain Speak by Wendy J. Cook (Article)
Wendy Cook specializes in helping advisors write newsletters and create presentations, and in this guest contribution she shares a number of tips to improve your writing skills. Cook is passionate about writing, and her article covers topics such as the importance of brevity and how to tailor content to your audience.
2010-04-20 Investment Implications for Government Policy and Intervention by BlackRock, CFA Institute Reprint w/ Curtis Arledge (Article)
Government intervention has stabilized the economy, but policymakers must be careful to draw down their interventions before inflation occurs. Although residential real estate has seen its worst days, a wave of high-yield bonds and loans will soon mature, and the banking system must rebound enough to absorb that bubble. Despite these uncertainties, the range of yields and total annual returns among fixed-income sectors provide investors with multiple opportunities. We thank BlackRock for their sponsorship.
2010-04-20 The Random Walk Spoiled: A Flawed Assumption for Long-term Equity Portfolio Simulation by Manish Malhotra (Article)
To optimize portfolios, the investment and wealth management industry still assumes a random walk of prices when running long-term simulations of equity portfolios, despite plenty of existing research pointing to serial dependency in returns, writes Manish Malhorta in this guest contribution. The random walk assumption for equities gives results that are counterintuitive and unobservable in practice. He recommends against using it.
2010-04-20 A Simple Step to Get More from Your Day by Dan Richards (Article)
Many advisors struggle to get everything done that needs doing. If you're in that category, consider following the example of one successful advisor Dan Richards talked to recently ... and put a dollar value on every hour of your time.
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.
2010-04-20 A Short-Term Buying Opportunity for Long-Term TIPS by Michael Brennan (Article)
Fixed income investors should consider a short-term buying opportunity for Treasury Inflation Protected Securities (TIPS) with maturities of ten or more years, writes Michael Brennan in this guest contribution. The 10-year TIPS should have a total return anywhere from 30 to 40 basis points greater than the comparable nominal Treasury bond.
2010-04-13 Why We Make Bad Decisions by Robert Huebscher (Article)
"When faced with critical decisions, our minds naturally want to go down one path, when a better way to think about the problem is to go down another path," said Michael Mauboussin. Mauboussin is the Chief Investment Strategist at Legg Mason Capital Management and the author of the newly released book Think Twice, and we review some of the key findings of his research.
2010-04-13 Today?s Number One Way to Demonstrate Your Value by Dan Richards (Article)
Advisors provide the greatest value by being an emotional anchor for clients- keeping the highs from being too high during times of untrammeled optimism, such as we saw in 2000, and the lows from being too low during periods of absolute pessimism, such as we saw a year ago and in many cases still see today. Playing that role takes more than just having an opinion - you need credible evidence to back you up, which Dan Richards offers.
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.
2010-04-12 Gluttons... For Bad News by Charles Lieberman (Article)
While all the economy's travails are not behind us, Advisors Capital Management thinks the stock market's recovery is very solidly based, and expects more gains over the rest of the year. There may be a bubble out there, but it has afflicted the bond market, not the stock market. S&P 500 companies beat analyst estimates by 72 percent in the first quarter. Bears dismiss this as one-time cost cutting that cannot be sustained. However, more than 70 percent of S&P companies also reported revenues that beat estimates.
2010-04-06 Liz Ann Sonders on the US Economic Recovery by Robert Huebscher (Article)
Liz Ann Sonders is Senior Vice President and Chief Investment Strategist at Charles Schwab & Co. In this interview, she discusses her positive outlook for the US economy, which she believes has been recovering since last summer.
2010-04-06 A Q1 Letter to Send Clients by Dan Richards (Article)
Dan Richards provides the latest in his very popular series of quarterly letters for advisors to send to their clients. This Q1 2010 article combines the attributes he considers essential: a balanced outlook, candor, short enough for clients to get through yet long enough to be substantial, fact-based, and customizable to your own voice.
2010-04-06 A Review of "The Big Short" by Michael Lewis by Michael Edesess (Article)
"The Big Short" tackles the financial meltdown as seen by four relatively minor, but colorful players. (Minor means running only hundreds of millions, not billions.) All of them were voices in the wilderness, writes Michael Edesess, our reviewer. All of them bet heavily against the subprime real estate bubble that, for a while, fueled huge gains.
2010-04-06 Emerging Markets: High Growth does not mean High Returns by Dan Richards (Article)
Recent research explores the return payoff of investing in emerging markets such as Brazil, Russia, India and China, writes Dan Richards. Contrary to popular beliefs, investing in high-growth emerging markets has produced inferior returns to those obtained from slower growth economies.
2010-04-06 Follow-up to the Folly of Peer Group Analysis by Various (Article)
In response to a recent commentary by Research Affiliates, The Folly of Peer Group Analysis, a reader offers his own research on the performance of indices against peer groups, once impurities have been eliminated from those peer groups. John West and Ryan Larson of Research Affiliates provide additional analysis.
2010-04-06 Insights and Foresights into 2010 by Ron Surz (Article)
Ron Surz provides his award-winning market recap and analysis for the first quarter of 2010. The first quarter of 2010 did not start well, with US stocks experiencing losses in excess of 3% in January, but then we recovered most of those losses in February, setting the stage for 6%+ returns in March. All of the first quarter return was earned in March.
2010-04-05 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 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.
2010-03-30 Seven Tips for a Successful Family Foundation by Nancy Opiela (Article)
Managing a foundation's assetswins you the cachet of being seen as helping your clients fulfill their philanthropic goals, and it is extremely lucrative work that can create a practice-building bridge to the next generation.The administrative aspects, as Nancy Opiela writes, can be daunting and she offers seven tips for a successful family foundation.
2010-03-30 Making the Sale by Michael Ervolini (Article)
Because investors are "hard-wired to like buying more than selling," writes Cabot Research CEO Michael Ervolini in this Value Investor Insight article, the sell decision-making process is typically less rigorous and analytical than the decision to buy. Ervolini explains the problems that can cause and offers a framework for how make better, return-enhancing sell decisions.
2010-03-30 Your Clients? Lives Are NOT a Game by Dave Loeper (Article)
The dialog between Roger Schreinerand Dave Loeper continues, with Loeper responding to Lance Paddock's article last week, Game On!. Loeper refutes Paddock's charges, and offers data demonstrating his key point: superior returns and lower risk do not necessarily lead to greater wealth accumulation for clients.
2010-03-30 Not a Lost Decade for Diversified, Balanced Portfolios by Joni L. Clark, CFA, CFP (Article)
Did the last ten years really demolish the foundations of Modern Portfolio Theory and classic investing principles? How did portfolios that stuck to the principles of effective diversification and buy-and-hold investing actually perform during the so-called "Lost Decade?" The answers to both questions is an unqualified "no," writes Joni Clark of Loring Ward in this guest contribution, based on her analysis of a DFA-based strategy.
2010-03-30 Letter to the Editor by Various (Article)
In a letter to the Editor, a reader comments on Keith Goddard and Channing Smith's article, Implications of the Current Shiller P/E Ratio.
2010-03-29 I'm Entitled by Charles Lieberman (Article)
Greece's budget problems reflect the willingness of the government to pay workers wages and benefits that exceed the willingness of citizens to pay taxes. The simple lesson is that governments cannot promise benefits without considering their cost. It is therefore disappointing that the U.S. government chose to create a new healthcare entitlement program at a time when it is already running high budget deficits. Markets are not ready to stop financing U.S. budget deficits right now, but this may become a problem down the road.
2010-03-26 narrative power by tom brakke of the research puzzle
The investment world illustrates the power of narrative. People up and down the informational food chain use stories to enlighten and deceive. For stock investors, many stories originate with companies and their officers, who learn that crafting a narrative that puts everything in the best light is part of their leadership role. Sell side analysts sometimes reinforce those messages by making the telling of certain stories part of their brands. Investors must therefore read widely and read well, and realize that understanding comes from taking nothing for granted and questioning everything.
2010-03-23 Quadrophobia: Predicting the Next Enron? by Charlie Curnow (Article)
Accounting scandals such as HeathSouth, Chiquita, AIG, and most infamously, Bernard Madoff Investment Securities have sent many academics and financial professionals in search of new formulas to predict "the next Enron." A professor and a graduate student at Stanford recently revealed one such approach, which they dubbed Quadrophobia, which showed that, in earnings announcements, the digit four was underrepresented to the right of the penny's place.
2010-03-23 Quadrophobia: Predicting the Next Enron? by Charlie Curnow (Article)
Accounting scandals such as HeathSouth, Chiquita, AIG, and most infamously, Bernard Madoff Investment Securities have sent many academics and financial professionals in search of new formulas to predict "the next Enron." A professor and a graduate student at Stanford recently revealed one such approach, which they dubbed Quadrophobia, which showed that, in earnings announcements, the digit four was underrepresented to the right of the penny's place.
2010-03-23 Tobin?s Q: A Stone?s Throw from a Sell Signal by Robert Huebscher (Article)
One of the most reliable measures of broad market valuation is Nobel Prize-winning economist James Tobin's Q-ratio. Data released less than two weeks ago show that the ratio is generating a bearish signal over the next three, five and ten years. Over the next year, though, the signal is neutral.
2010-03-23 Game On! by Lance Paddock (Article)
Advisor Lance Paddock comments on the exchange between Wealthcare's Dave Loeper and SCM's Roger Schreiner. Paddock lauds Loeper's focus on managing assets based on client goals, but says Schreiner's challenge is nonetheless fair, and urges Loeper to accept Schreiner's terms.
2010-03-16 The New Investment Paradigm: Graham Meets Markowitz by Bob Veres (Article)
Broadly speaking, the financial services industry has been divided into two competing paradigms since roughly 1950. One, articulated by Harry Markowitz, suggests advisors add value through diversified portfolios optimized along the efficient frontier. The other, advocated by Benjamin Graham, says advisors add value by purchasing assets at prices less than their fair value. Bob Veres reconciles those views and describes the New Paradigm that has emerged.
2010-03-16 Implications of the Current Shiller P/E Ratio by Keith C. Goddard, CFA and Channing S. Smith, CFA (Article)
In this guest contribution, Keith Goddard and Channing Smith expand on ideas presented in a previous article, Return Distributions and the Shiller P/E Ratio. They study the historical behavior of U.S. stocks during three-year holding periods that began at with valuations comparable to recent market conditions, as measured by the Shiller P/E ratio.
2010-03-16 Greeks Bearing Gifts by Michael Lewitt (Article)
We are again privileged to publish the most recent edition of Michael Lewitt's HCM Market Letter, Greeks Bearing Gifts. Lewitt comments on Goldman Sachs' derivative transactions that helped Greece hide its debt and its larger implications for the financial system, for the European periphery and for Spain in particular. Lewitt also addresses the state of decline of the US economy and other topics.
2010-03-16 Rational Deficit: An Interview with Dan Ariely by John Heins (Article)
Through creative research and clever articulation of his ideas, behavioral economist Dan Ariely has established himself as one of the brightest thinkers today on the subject of human decision-making, particularly with respect to influences of which we are largely unaware. In this wide-ranging interview with the investment newsletter Value Investor Insight, Ariely describes the unwitting biases that can lead to bad decisions and what investors can do to guard against them.
2010-03-16 Paul Romer: What Drives Economic Growth? by Dan Richards (Article)
Paul Romer is a senior fellow at the Stanford Institute for Economic Policy Research, and the focus of his research is the drivers of economic growth. In this interview with Dan Richards, Romer identifies what sets apart fast growing countries, and which policies best stimulate economic growth. We provide a transcript and a link to a video of the interview.
2010-03-16 Letters to the Editor ? A Charity Challenge and the Cassandra Portfolio by Various (Article)
In our letters to the Editor, readers respond to recent articles on the challenge to passive investors and the "Cassandra" portfolio.
2010-03-16 No Shell Game? Then What Is It? by Dave Loeper (Article)
Wealthcare's Dave Loeper responds to Roger Schreiner's recent article, It's No Shell Game. Loeper contends that the rules of Schreiner's challenge ensure that Schreiner will win and, from a larger perspective, active management advocates sacrifice their clients' wealth by exposing them to risks those advocates cannot control.
2010-03-09 Communicating with Ease by Beverly Flaxington (Article)
Advisors, like so many people in relationship-oriented businesses, depend on strong communication to maintain and grow their businesses. In this guest contribution, author Beverly Flaxington discusses her new book about how advisors can communicate with ease and strengthen their bonds with clients.
2010-03-09 Lesson\'s from an Investing Time Machine by Dan Richards (Article)
Time travel is every investor's fantasy - imagine if you could go back forty years and make investment decisions, knowing then what you know now. That's precisely the opportunity that Dan Richards gave a group of investors one recent evening.
2010-03-09 Modeling the Active versus Passive Debate by William Rafter (Article)
If you knew the returns for every stock one month in the future, you could construct a very impressive portfolio from the top performers. What's less obvious, as William Rafter shows in this guest contribution, is that you can improve on your results by holding those securities for less than a month. Rafter examines the implications of his finding for the active versus passive debate.
2010-03-09 The New Rules of Marketing - A Roundtable by Dan Sommer (Article)
Given the ever-shifting landscape of information consumption and consumer behavior, financial advisors have been forced to change their thinking about the way they market themselves. In this guest contribution, Dan Sommer speaks with two investment professionals who answer a series of marketing-related questions for advisors.
2010-03-09 Letters to the Editor by Various (Article)
In our letters to the Editor, readers respond to a number of recent articles, including the charity challenges posed by Roger Schreiner and Dave Loeper, the active v. passive debate, Morningstar ratings, and our article on the PIMCO Total Return fund.
2010-03-02 Asset Allocation for Grantham?s Seven Lean Years by Geoff Considine, Ph.D. (Article)
Followers of Jeremy Grantham know his consistently accurate long-term forecasts well, as well as his ability to identify and avoid asset bubbles and steer clients into high-performing asset classes. Grantham's prescience is remarkable but not irreplicable. Geoff Considine shows that his Monte Carlo simulations nearly match Grantham's forecasts, and he reviews the implications for asset allocations.
2010-03-02 Massachusetts Pensions in Crisis by Charlie Curnow (Article)
We wrote in the past about the perilous situation of public pension systems nationwide, and the Massachusetts state pension system is no exception. The severe problems Massachusetts faces - created by years of generous worker benefits and declining asset values - mirror challenges faced by many other states.
2010-03-02 Robert Pozen on the Financial Crisis, Social Security, and the Mutual Fund Industry by Dan Richards (Article)
Robert Pozen is the chairman of MFS Investment Management and a senior lecturer at the Harvard Business School. In this interview with Dan Richards, he discusses the financial crisis, Social Security, and the mutual fund Industry. We provide a transcript and a video replay of the interview.
2010-03-01 M&A is Back by Charles Lieberman (Article)
Mergers and acquisitions are back, but unlike the wave of deals in 2005 and 2006, these new M&As are strategic rather than financial. They are initiated by companies within the same industry that seek complementary businesses or overlapping activity where cost-cutting can significantly increase competitiveness. Implicit in these new deals is that stocks are cheap and firms have enough confidence in their outlooks to proceed with acquisitions.
2010-02-26 Was It All Just A Bad Dream? Or, Ten Lessons Not Learnt by James Montier of GMO
Montier reflects on ten lessons the investment industry did not learn during the market declines of 2008 and 2009. He says that it is time to abandon the efficient market hypothesis and acknowledge the role the housing bubble played in the financial crisis. In addition, he notes that the principles of value investing still hold true: Buy when assets are cheap, and sell when they are expensive.
2010-02-25 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.
2010-02-23 Drilling for Dummies by Mariko Gordon (Article)
"In our experience, both investors and clients find comfort in believing that there exists a steady flow of new ideas," says Mariko Gordon. "But we shouldn't collude in that desire for comfort. The commonly asked question, 'Where do your new ideas come from?' is largely missing the bigger, more essential point."
2010-02-23 An Analysis of the Risk and Return of Small/Mid-Cap Growth by David Vincent (Article)
In this guest contribution, David Vincent of Fred Alger says investors interested in gaining exposure to the small-capitalization growth equity style should consider the small/mid ("SMid") capitalization style as a way to capture the benefits of small-cap growth.
2010-02-23 Interest Rates, Inflation and the PIMCO Total Return Fund by Robert Huebscher (Article)
The current generation of financial advisors has never experienced rising interest rates, but that will change, based on the forecasts we collected in our survey last week. We review our survey results and look at the implications for the largest bond portfolio, the PIMCO Total Return fund.
2010-02-23 Jason Zweig on Protecting your Wealth by David Raileanu (Article)
Jason Zweig is a senior writer and columnist for Money magazine and frequently writes for the Wall Street Journal. In this interview, he discusses strategies for protecting client wealth, proper asset allocation, and the role of advisors in a fiduciary relationship.
2010-02-16 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 Seven Steps to Making 2010 a Breakthrough Year for your Business by Dan Richards (Article)
Dan Richards says many advisors started the year full of enthusiasm and ambitious objectives, yet at the end of January felt bogged down and out of steam. Despite starting with good intentions, the difficulty is that we quickly get caught up in the day-to-day demands on our time, and Richards offers a seven-step plan to overcome this inertia.
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.
2010-02-16 How Professionals Select Investments by Adam Jared Apt (Article)
In this guest contribution intended for the educated layman, advisor Adam Apt discusses the process by which investment managers select individual securities, contrasting the disciplines of fundamental and technical analysis.
2010-02-09 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 Letters to the Editor by Various (Article)
Our letters to Editor include two responses to our article about Joseph Stiglitz and one in response to Keith Goddard's article about asset allocation using Shiller P/E ratios.
2010-02-05 Discounts and Relative Performance by Rob Arnott of Research Affiliates
Arnott reviews the methodology behind fundamental indexing. Over the short term, fundamental indices take on much greater exposure in volatile markets to companies which underperformed relative to their economic size. This article explores the performance implications of the difference in relative valuation multiples.
2010-02-02 Return Distributions and the Shiller P/E Ratio by Keith C. Goddard, CFA (Article)
Keith Goddard expands on ideas developed by Joe Tomlinson in a series of recent articles on the topic of the Shiller P/E Ratio as a predictor of future returns in the stock market. Specifically, this article looks at the distribution of three-year returns in the stock market following different starting points for the Shiller P/E ratio to illustrate that the historical distribution of rolling three-year returns in the stock market is not random.
2010-02-02 A Question that Motivates HNW Prospects by Dan Richards (Article)
Dan Richards was asked whether he has any insights as to some great questions or strategies to get HNW prospects' attention and ultimately recruit them as clients. He provides the answer.
2010-02-02 Change ? The Only Constant by Christina Ho (Article)
The Institute for Private Investors serves families with over $50 million in assets. Their data show wealthy investors have increased their use of tactical asset allocation and are positioning their portfolios to defend against liquidity, concentration and inflation risk.
2010-02-02 Martijn Cremers on Active Management by Dan Richards (Article)
Martjin Cremers is an associate professor of finance at the Yale School of Management. He and his Yale colleague Antti Petajisto have conducted research that focuses on "active share" in mutual fund management. In this interview, Cremers discusses the implications of his research.
2010-02-02 Chuck Akre on the Akre Focus Fund by Robert Huebscher (Article)
Chuck Akre is the Managing Member and Chief Executive Officer of Akre Capital Management, which he founded in 1989. He has a track record of above-average performance over the last 20-plus years managing mutual funds, separately managed accounts and partnerships, and he discusses the strategy he employs in his new Akre Focus Fund.
2010-02-02 Who will Pay for the Burlington Acquisition? by Vitaliy Katsenelson (Article)
According to investment manager Vitaliy Katsenelson, Warren Buffett overpaid in Berkshire's acquisition of Burlington Northern. He states, "Though I agree with Buffett's assessment of the Kraft-Cadbury deal, I fear that investors and media are completely ignoring Berkshire's own, $30-billion-plus acquisition of a very cyclical, capital-intensive, not terrifically high-return-on-capital business - Burlington Northern."
2010-02-02 More Government in the Financial Sector to Save Capitalism by Vitaliy Katsenelson (Article)
In this article, Vitaliy Katsenelson argues that, despite his free market bias, the "too big to fail" banks will benefit from tighter regulation.
2010-01-26 Diversification Really Does Pay Off by Geoff Considine, Ph.D. (Article)
The last decade severely tested investors' belief in the value of diversification and strategic asset allocation, leading some in the financial media to assert that diversification and asset allocation failed and were worthless during the crash of 2007-2008. Now is an ideal moment to look back and assess the carnage.
2010-01-26 Using Alternative Investments to Build a Stronger Portfolio by Robert M. Hussey (Article)
Traditional asset classes may no longer provide sufficient portfolio diversification, but there's a new wave of mutual funds that offer alternatives strategies previously available only to large institutions. Robert Hussey of Natixis Global Associates describes how alternative strategies can be used in a mutual fund package. We thank them for their sponsorship.
2010-01-26 Robert Merton on Regulating Derivatives by Dan Richards (Article)
Robert Merton is a professor of finance at the Harvard Business School and the 1997 winner of the Nobel Prize in economics for his work on pricing models for options and derivatives. In this interview with Dan Richards, Merton explains the role of derivatives in creating the financial crisis, and what steps regulators should take to address them.
2010-01-26 The Potemkin Market by Michael Lewitt (Article)
We are again privileged to publish the current issue of Michael Lewitt's newsletter, titled The Potemkin Market. Lewitt updates his forecast for the S&P 500, criticizes the current financial reform efforts and the ongoing GSE bailout and Fed Chairman Bernanke. Lewitt argues that risk is overpriced in many segments of the market.
2010-01-26 Punctuated Equilibrium by Dan Richards (Article)
Dan Richards says we're dealing with a more fundamental issue than the recent market turmoil. "We're going through one of those rare periods of ground-shaking change that have taken place throughout history, something that was in the works well before last fall's market excitement," he says, and explains how advisors should deal with more demanding customers, new technology and global competition.
2010-01-26 Buffett?s Gold by Emilio Vargas (Article)
Warren Buffett's valuation of Burlington Northern and his use of arguably cheap Berkshire Hathaway stock to purchase it have created a bit of a cacophony among analysts. It seems to some very un-Buffett-like to pay top dollar for an asset and to use precious equity currency to get a deal done. What does Buffett see that others do not? Oddly, the argument made by gold bugs for their asset of choice may hold the answer.
2010-01-26 Letters to the Editor by Various (Article)
In our letters to the Editor, readers comment on recent articles about Paul Krugman, health care, John Cochrane and the need for trust in advisory relationships.
2010-01-19 Steve Leuthold: The Market will Rally This Year by Robert Huebscher (Article)
Steve Leuthold is chairman of the $4.5 billion Leuthold Group and one of the most widely-followed market analysts. In his keynote presentation at last week's Fortigent conference, he offered an upbeat forecast for the first half of 2010.
2010-01-19 John Cochrane on the Dangers of Current Economic Policies by Dan Richards (Article)
John Cochrane is a professor of finance at the University of Chicago and the incoming president of the American Finance Association. Cochrane is also author of the widely-circulated article, How did Paul Krugman get it so Wrong?. In this interview, Cochrane identifies the shortcomings and dangers of current economic policies.
2010-01-19 Ten Tips to be More Likeable by Dan Richards (Article)
When Dan Richards ask advisors about what it takes to attract and retain clients, they give him answers like above average returns, preserving capital in tough markets and strong communication. Those are all true - to these can be added delivering strong value and having clients trust your competence and integrity. One other factor is often overlooked, however - and that's likeability.
2010-01-19 A Market for Contrarians by Robert Huebscher (Article)
Along with Steve Leuthold, Rob Arnott, Doug Kass and DoubleLine co-founder Joe Galligan were among the speakers at Fortigent's conference. These three speakers' bearish sentiment extended across a wide range of asset classes, opening lots of possibilities for those who prefer contrarian bets.
2010-01-12 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.
2010-01-11 Low Expectations Are Made to be Exceeded by Charles Lieberman (Article)
Is the equity market overpriced and vulnerable after its sharp rally off the March 2009 lows, as suggested by the bears? While the economy has many problems to overcome, equity valuations are actually
2010-01-05 Risk Management through Costless Collars by Geoff Considine (Article)
Nassim Taleb and Zvi Bodie are among those who advocate a wealth management strategy that includes options. Despite their evangelism, though, options are rarely a part of retirement portfolios. The costless collar, a straightforward options strategy, gives investors the upside of an asset class (such as equities) while absolutely limiting the downside risk.
2010-01-05 The Falling Dollar: Should We Worry? by Elisabeth L. Talbot, CFA (Article)
Over the past several months, it has become increasingly fashionable to refer to the decline of the U.S. dollar as another financial "crisis." Yet, given the current state of the global markets, declaring that the dollar's recent losses amount to a "crisis" is an overstatement, says Elisabeth Talbot in this guest contribution. To the contrary, current conditions surrounding the dollar are arguably supportive of - if not integral to - economic recovery.
2010-01-05 Perspectives on 2009 and Beyond by Ron Surz (Article)
We are again privileged to provide Ron Surz' award-winning market commentary. Surz examines global performance in Q4, 2009 and the prior decade.
2010-01-05 Capture Ratio as a Tool to Measure Investment Performance by David Vincent and Ray Pinelli (Article)
In this guest contribution, David Vincent and Ray Pinelli of Fred Alger examine the correlation of traditional up- and down-capture ratios to investment performance. They show that combining these two measures results in a metric with much higher correlation.
2010-01-04 2010: The Year of Economic Recovery by Charles Lieberman (Article)
2009-12-29 Jeremy Siegel on the Undervaluation in US Equities by Robert Huebscher (Article)
"I think that earnings growth next year will be stronger than anticipated and will break the all-time high for the S&P, which was in the second quarter of 2007, when earnings for the trailing 12 months were in the low 90s," says Siegel. "In 2011 or 2012 we will break that amount. With $90 in earnings and a 15 P/E ratio, you get 1,350 for the S&P."
2009-12-29 End-of-Year Letter Templates by Bob Veres (Article)
Bob Veres is the editor and publisher of Inside Information, a publication focused on practice management and related issues for the financial planning profession. He just introduced a new monthly service, Client Articles, which will contain articles (and cartoons) that can be sent to clients, for example as part of your quarterly newsletters. He provides two sample letters.
2009-12-29 The Top 10 Articles You Didn?t Read (But Should Have) by Robert Huebscher (Article)
We closely monitor which articles draw the most readership. This allows us to fine-tune our content to the preferences of our audience. Reflecting on those articles that were most popular over the last year, however, we believe other articles also deserved your attention. We provide the "Top 10" articles you didn't read - but should have.
2009-12-29 Diversification is Not Enough by Roger J. Schreiner (Article)
The mainstream financial services industry, the media and academia - virtually everyone - has overestimated the value of diversification in risk management. The recent crisis has shown that investors need more than simple diversification to protect them from both the known and the unknown risk that they will eventually encounter. In this guest contribution, Roger Schreiner, says that when it comes to risk management, diversification simply is not enough.
2009-12-29 Letter to the Editor ? Morningstar Ratings by Various (Article)
In this second letter to the Editor, another reader comments on our recent articles on the predictive power of Morningstar's ratings.
2009-12-28 I'll Get Back in When the Market Corrects by John Petrides (Article)
2009-12-22 The Holiday Spirit and Better Networking by Nancy Opiela (Article)
If you aim to integrate the spirit of the holiday season into your practice, consider a networking strategy that emphasizes providing support without the direct expectation of receiving referrals. Nancy Opiela describes a new networking group that brings together people who serve the advisory profession and how the group's goals are unfolding.
2009-12-22 How to Succeed Without Knowing Anything by David Raileanu (Article)
The most commercially successful musical conductor of all time was not Leonard Bernstein. That honor goes to the Boston Pops' Arthur Fiedler, who gained fame - and commercial success - by being different. Justin Locke's book, The Principles of Applied Stupidity, shows how being different often is more important for success than being smart.
2009-12-22 Morningstar Ratings ? Our Response by Robert Huebscher (Article)
Last week, we published the response from John Rekenthaler, Morningstar's VP of Research, to our recent study of Morningstar's ratings. We disagree with the Rekenthaler's analysis and provide our rebuttal.
2009-12-22 Letter to the Editor ? Morningstar Ratings by Various (Article)
In a letter to the Editor, a reader responds to our study of Morningstar's ratings.
2009-12-21 Looking Backwards to Move Forward by Charles Lieberman (Article)
2009-12-15 Barton Biggs on Undervaluation in the S&P 100 by Robert Huebscher (Article)
Barton Biggs, the former Chief Global Strategist for Morgan Stanley who now runs the hedge fund Traxis Partners, says the high-quality, large-capitalization stocks in the S&P 100 are now undervalued by one standard deviation. In our interview, Biggs also discusses his fears and how investors should protect themselves from the worst-case scenarios.
2009-12-15 The Next Black Swan? Underfunded Public Pensions by Robert Huebscher (Article)
The plights of California and other states reveal an ominous threat our economy faces: underfunded public pension liabilities. We examine the size and scope of this problem, focusing on whether the underlying assumptions used to calculate liabilities are realistic.
2009-12-15 Letters to the Editor ? Morningstar Responds by Various (Article)
Our article last week, Morningstar's Ratings Fail over a Full Market Cycle, drew two responses from readers and a response from Morningstar. John Rekenthaler, Morningstar's VP of Research, says the three-year time period we chose was arbitrary and does not necessarily reflect a full market cycle. We also have a letter regarding our article last week, The Investment Value of Art.
2009-12-15 A Template for a Year-end Letter by Dan Richards (Article)
Many advisors have told Dan Richards they receive a positive response from the quarterly review letters they've sent over the past year based on the templates he has provided. Here's a template that can be a starting point for a year-end review letter.
2009-12-15 TCW Post-Gundlach by Robert Huebscher (Article)
The reasons for Jeff Gundlach's termination from TCW and his future plans have become subjects of great speculation. We will leave it to others to answer those questions and instead focus on one important issue that was raised in a conference call TCW held with investors last Friday.
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.
2009-12-14 Gathering Momentum by Charles Lieberman (Article)
2009-12-08 Morningstar Ratings Fail over a Full Market Cycle by Robert Huebscher (Article)
When active managers are tested, as they were during the 2008 bear market and 2009 bull market, so are the systems used to predict their performance. Perhaps no system is as widely used as Morningstar's "star" rating system. In an update to a study we originally did two years ago, we show that Morningstar's ratings fail to offer any predictive ability when measured over a full market cycle.
2009-12-08 The 529 Dilemma by Mary Ann Lambert (Article)
The recent market decline coupled with, tax, custodial, management fees and estate planning issues make the decision to use a 529 plan less than straightforward. In this guest contribution, advisor Mary Ann Lambert briefly reviews the history of college savings plans and shows how the current landscape favors 529s for some clients but not for others.
2009-12-08 The Investment Value of Art by Robert Huebscher (Article)
In a newly released study, Yale Professor Will Goetzmann shows that changes in art prices over long periods of time are mostly explained by changes in income inequality. As income inequality - the percentage of income earned by the top 0.1% of the population - grows, so does the value of art. Art has little diversification value with respect to equities.
2009-12-08 Dubai?s Moon Shot by Vitaliy Katsenelson (Article)
Dubai is like NASA; both have proven that anything is possible when you ignore economic costs. As Vitaliy Katsenelson writes, many technological discoveries were made in the process of putting a man on the moon; but the project did have, and was expected to have, a negative return on capital.
2009-12-07 Recovery on Track: Buy Equities, Sell Bonds by Charles Lieberman (Article)
2009-12-01 Ten Ways to Connect with Your Clients? Children by Nancy Opiela (Article)
When you work with a top client throughout his or her life, you have an opportunity to ensure that the client's family stays with your firm beyond the current generation. Financial legacies are often lost when wealth passes from generation to generation, so building intergenerational connections can ensure both a successful transfer of assets - and an advisory relationship that endures after your original client passes on.
2009-12-01 Allen Sinai: Jobless Recovery and the Failure of Current Economic Policies by Robert Huebscher (Article)
As the Democratic leadership in Congress has looked for ways to simultaneously create jobs and reduce the deficit, a key person they have turned to and continue to rely on is Allen Sinai. Sinai now fears the US is in the "mother of all jobless recoveries" and that the economic policies of the Obama administration are not working.
2009-12-01 Hidden Cost of Active Management by Mark Kritzman (Article)
There is a hidden cost associated with most active funds, writes Mark Kritzman of Windham Capital Management in this guest contribution. The typical active fund is more than 90% correlated with the market. Yet their relatively high active management fee is applied not just to the fund's active component but to its market component as well.
2009-12-01 To Roth or not to Roth, That is the Question by David B. Loeper, CIMA, CIMC (Article)
With the new Roth conversion rules about to be lifted next year and a "one-time special offer" available to allow investors to spread the tax bite of conversion over two years, more and more Roth conversion calculators are showing up every day. Be wary, says Dave Loeper of Wealthcare Capital. If you use one of these calculators, don't say he didn't warn you about how misleading the results can be.
2009-12-01 Think Like a Marine by David Raileanu (Article)
Retired Marine Patrick Gould has just published a book, Prudent Decision Making in an Imprudent World, and his theories prove useful for understanding decision-making in all arenas, not just those that involve life-and-death decisions. He applies many of his theories of risk, reward, preparation, security, and asset management to the financial world, working from modern portfolio theory and ultimately offering a practical decision method.
2009-12-01 Letters to the Editor by Various (Article)
In our letters to the Editor, one reader comments on Dan Richards' article last week, Tapping into Today's Number One Client Concern, and another comments on our article two weeks ago, Bruce Greenwald on Positioning First Eagle's Funds.
2009-11-30 It's a Weak Recovery, Or Is It? by Charles Lieberman (Article)
2009-11-24 Gary Shilling's Version of the New Normal by Robert Huebscher (Article)
A dramatic reduction in consumer spending has doomed the US economy to slow growth and deflation, according to Gary Shilling. America's 25-year spree of profligate spending is over, and it will be supplanted by a decade-long retrenchment that will ultimately bring the consumer savings rate from 4% to double-digits, where it has not been since the mid-1980s, he said.
2009-11-24 Dan Fuss and the Long-Term Outlook for Interest Rates by Robert Huebscher (Article)
Dan Fuss, the highly respected bond manager at Loomis Sayles in Boston, says we are in the early stages on a long-term rise in interest rates. His view was shared by two other panelists, Carl Kaufman of Osterwies and Margie Patel of Evergreen. If you accept this consensus, you must ask whether your fixed income allocation is appropriate.
2009-11-24 Buy Bonds and Not Bond Funds by Hildy and Stan Richelson (Article)
Record inflows into longer-term bond funds in the last six months have provided investors purported relief from the near-zero returns in money market funds. Do not mistake those inflows or rising prices for an endorsement of bond funds, write Stan and Hildy Richelson in this guest contribution. Bond funds are inferior to individual bonds, as those who are now buying bond funds may soon discover.
2009-11-24 The Jedi Knight's Guide to Real-Life Investing by Mariko Gordon (Article)
The term "textbook investing" suggests a perfect approach. But as a recent visit with a class of college students reminded Mariko Gordon of Daruma Asset Management, there's still much to be learned beyond textbooks and lecture halls. She takes a look at five insights from the "real world" of investing.
2009-11-24 Letter to the Editor ? Buffett and Burlington Northern by Various (Article)
In a letter to the Editor, a reader responds to Bruce Greenwald's comments and defends Warren Buffett's purchase of Burlington Northern.
2009-11-23 Too Big to Fail vs. Too Political to Regulate by Charles Lieberman (Article)
2009-11-17 Ned Davis: The Cyclical Bull Rally is Not Over by Robert Huebscher (Article)
In February of last year, Ned Davis, president and senior investment strategist of an eponymous Florida-based institutional research firm, correctly forecast last year's market decline. In February of this year, he called the market rally that began in March. Now, he says, that cyclical bull rally is not over.
2009-11-17 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.
2009-11-17 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."
2009-11-17 Disheartened by Michael Lewitt (Article)
We are again privileged to publish an excerpt from Michael Lewitt's HCM Market Letter. In this issue, titled "Disheartened," Lewitt argues that the powers-that-be are making limited progress addressing the structural problems in the economy, and that the greatest challenge is to achieve budgetary discipline.
2009-11-17 Client Gifts that Stand Out by Dan Richards (Article)
Having trouble with ideas for holiday gifts for your clients? Dan Richards offers four strategies for selecting a gift with a meaningful impact.
2009-11-17 Letters to the Editor by Various (Article)
We have two letters to the Editor - one responds to last week's interview with Bruce Greenwald and the other responds to two recent articles which argued that advisors should avoid active management.
2009-11-16 Debunking Policy and Economic Myths by Charles Lieberman (Article)
2009-11-10 Bruce Greenwald on Structural Problems in the Economy and Unemployment by Robert Huebscher (Article)
Bruce Greenwald is a professor of finance at Columbia University, the Director of Research at First Eagle Funds, and perhaps the foremost expert on value investing. In part one of our two-part interview, he discusses the structural problems facing the economy, the parallels to the Great Depression, and the implications for the unemployment rate.
2009-11-10 Roubini: Fed Policies are Destabilizing the Financial System by Robert Huebscher (Article)
Nouriel Roubini, the once-obscure economist who gained celebrity and the title "Dr. Doom" after correctly forecasting the financial crisis, believes that current Fed policies are destabilizing the markets and pushing the economy toward another collapse.
2009-11-10 Not by Return Alone: Judging Investment Performance by Adam Jared Apt (Article)
In the latest installment of his articles intended for an educated layman, Adam Apt addresses the relationship between risk and return, and shows that the connection between them is neither rigid nor obvious, and that we can be cheated of our money by disregarding risk and fixating only on return.
2009-11-09 Buffett's Message by Charles Lieberman (Article)
2009-11-03 Absolutely ? Maybe by Robert Huebscher (Article)
Since Putnam introduced its absolute return funds earlier this year, over 4,200 advisors and $650 million in assets have flocked to the new financial products. Putnam's four funds seek to beat inflation by 100, 300, 500 and 700 basis points, and their performance over their first nine months (3.1%, 6.4%, 8.4% and 12.2%, respectively) was encouraging for their investors. Impressive as those results may be, the question is whether they are sustainable.
2009-11-03 The Best Books on Investing by Vitaliy Katsenelson (Article)
Author and fund manager Vitaliy Katsenelson provides us with his list of the best books on investing. It contains six sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, and Books for the Soul.
2009-11-03 Alpha or Wealth? by Sam Bass (Article)
It is widely accepted that ETFs offer significant advantages over mutual funds, especially lower costs and taxes. But, as advisor Sam Bass argues in this guest contribution, the mutual fund industry may be all the more concerned that increasing numbers of investors are accepting the view that ETFs, and passive strategies in general, are better for wealth accumulation than active management - even if one assumes active strategies can generate positive alpha over extended periods of time.
2009-11-03 The Expense Paradox by John F. Doyle (Article)
A convenient reason to eliminate a fund from consideration is high expenses. While that criterion alone is often a good guideline, blindly relying on it can cause you to overlook otherwise attractive funds, says consultant Jack Doyle in this guest contribution.
2009-11-02 I'll Get Back In When The Market Corrects by John Petrides (Article)
2009-10-27 Policy Needs and Timing Concerns by Charles Lieberman (Article)
2009-10-27 Managing Downside Risk in Retirement Planning by Geoff Considine, Ph.D. (Article)
Boston University professor Zvi Bodie advocates a retirement investment strategy that offers investors some of the upside potential in equities tempered with downside protection against bear markets and a low-risk inflation hedge via heavy allocation to TIPS. Geoff Considine examines Bodie's strategy and shows that it will work very effectively, including in a bear market like the one just experienced.
2009-10-27 Leveraged Index Mutual Funds Evolve to Meet Market Needs by Direxion Funds (Article)
Until recently, leveraged index funds had daily objectives, rebalancing their leverage at the end of each trading day in order to match their stated exposure rate. This characteristic made it necessary for investors to monitor them daily in order to both track and manage the exposure rates applied to their investments in the funds. Direxion Funds has released the first monthly-rebalanced leveraged funds, and they explain how they operate. We thank them for their sponsorship.
2009-10-27 Stay the Course or Plot Another? by Ted A. Ponko, CFA (Article)
Is it reasonable for investors' objectives to change along with major fluctuations in their wealth? In these instances, sticking with the current portfolio may not be the best option - even for long-term investors. In this guest contribution, Ted Ponko of Klein Decisions argues advisors need a reliable way to determine when to stay the course and when to plot another.
2009-10-27 Guns N' Leeches by Mariko Gordon (Article)
No investor likes to see poor performance. But not all "bad returns" - even those of equal magnitude - are treated equally. In this guest contribution, Mariko Gordon takes a look at two common forms of underperformance and explains why one is often viewed much less favorably than the other.
2009-10-27 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 Don?t be Misled by Morningstar?s Box Score Results by Robert Huebscher (Article)
Morningstar has published its latest Box Score Results, showing the performance of active managers across each of the nine style boxes. We report these results, along with those of another study by William Thatcher of the Hammond Group, which explains why Morningstar's results can be highly misleading.
2009-10-20 Letters to the Editor - Fama-French and the Active-Passive Debate by Various (Article)
Last week's article, Luck vs. Skill in Mutual Fund Alpha Estimates, on the latest research from Ken French and Gene Fama drew plenty of responses. We publish two of them, both in support of active management.
2009-10-20 Finance After Auschwitz by Michael Lewitt (Article)
We are again privileged to provide an excerpt from Michael Lewitt's HCM Market Letter. In this installment, Finance After Auschwitz, Lewitt examines the dangers posed by Iran, whether the market is overvalued, the future of securitization, and what should be done about the private equity industry.
2009-10-20 Advice as Art by Jason K. Branning, CFP (Article)
Giving advice to clients is a delicate art, like creating a beautiful symphony from a group of musical instruments. In this guest contribution, advisor Jason Branning explains how you can offer advice to clients that transcends mere projections or proposals, and becomes something more.
2009-10-20 Letter to the Editor - Leveraged and Inverse ETFs by Various (Article)
Responding to Tom Lydon's article last week, In Defense of Leveraged and Inverse ETFs, a reader says leveraged and inverse ETFs are not aspirins to be sold over the counter; instead, they are prescription drugs that may cause serious adverse effects and thus warrant a black-box warning.
2009-10-19 Yet another Quarter of Better-Than-Expected Earnings Growth by Charles Lieberman (Article)
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 Michael Moore ? Take This! by Vitaliy Katsenelson (Article)
Vitaliy Katsenelson doesn't do movie reviews, and he hasn't watched Michael Moore's previous movies. But when a Denver Post reporter invited him to a private showing of Moore's latest flick, "Capitalism: a Love Story," its subject matter enticed the Russian-born author to check it out, and he has a few choice words for Moore and his anti-capitalistic views.
2009-10-13 Luck vs. Skill in Mutual Fund Alpha Estimates by Michael Edesess (Article)
A long-standing research thread has shown that professionally-managed portfolio returns strongly resemble a random walk about the market average. This is interpreted to mean that professional money managers cannot predictably beat the market. A new study by Eugene Fama and Kenneth French uses a novel statistical approach to add evidence to that record- but with an important caveat.
2009-10-13 Five Secrets to Effective Communication by Beverly D. Flaxington (Article)
Advisors may think they are excellent communicators, but in Beverly Flaxington's experience many have a lot to learn. Whether they are developing new business, engaging with centers of influence, introducing themselves to new prospects, or simply building existing relationships, five key techniques can improve their communication skills.
2009-10-12 Is There A by Charles Lieberman (Article)
2009-10-06 Green Shoots and Head Fakes in Housing by Robert Huebscher (Article)
The greenest of all green shoots - the recent rise in housing prices - is little more than a mirage, according to Whitney Tilson, founder and CEO of T2 Partners, a New York-based hedge fund and mutual fund manager. "It's likely the news of home price stabilization will turn out to be the mother of all head fakes," Tilson said. He spoke to a group of financial analysts in Boston last week.
2009-10-06 Analyst Viewpoints: Market Perspectives from Janus' Seven Global Sector Teams by Janus (Article)
The retail, financial and healthcare sectors are critical drivers of economic recovery. The analysts at Janus examine the latest trends in these industries, and assess which companies are best positioned to capitalize on opportunities in both the short and long term. We thank Janus for their sponsorship.
2009-10-06 A Quarter-End Letter to Send Clients by Dan Richards (Article)
Last fall, Dan Richards began posting quarter-end letters that advisors could adapt for their own use. Many advisors have told him that they have received an outstanding response to the letters they sent as a result, and Dan provides a template for a third-quarter letter.
2009-10-06 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.
2009-10-06 Tobin?s Q Now Bearish Long-Term by Robert Huebscher (Article)
The latest data for Tobin's Q-Ratio, a valuation metric shown by academic studies to be highly predictive of market performance, show that investors should brace themselves for sub-par returns over the next 10 years.
2009-10-06 So Far so Good: The Decrepit Decade Winds Down by Ron Surz (Article)
Ron Surz provides his award-winning market commentary, covering performance in the US and global markets, broken down by style, sector, and other dimensions.
2009-10-06 Ten Tips from Advisors Down Under by Terry Bell (Article)
The question for advisors is what's going to happen to their role and how they can best adapt to a changing world. Irrespective of the details, change will continue. Perhaps the Australian experience can provide a few pointers for US advisors.
2009-10-06 SpeedReading® People for More Productive Client Relationships by Paul D. Tieger (Article)
In our relationship-driven industry, it is critical to understand how to best communicate with each client and prospect. Most people assume that people want to be communicated with in the ways that they prefer. However, as Paul Tieger explains in this guest contribution, different personality types require information to be communicated differently.
2009-10-05 The Recovery Process by Charles Lieberman (Article)
2009-09-29 Strategic and Tactical Perspectives on Gold by Geoff Considine, Ph.D. (Article)
There are good reasons for investors to maintain a long-term strategic allocation to gold, which has clear, positive portfolio benefits (due to low correlation to other asset classes). That said, gold is in an historic run-up in value and has been generating unsustainably high returns. Because of its high price and rising volatility, Geoff Considine argues there is significant tactical risk in gold.
2009-09-29 Taste Testing Investment Style Sausages by Ron Surz (Article)
Equity indexes, like those offered by Russell and S&P are the investment-world equivalent of sausages - chopped up pieces of meat in tightly wrapped packages. Most shoppers buy sausages based on brand name, as do investors when they choose their benchmarks. In this guest contribution, Ron Surz dissects these index sausages and explains the real differences in their ingredients.
2009-09-29 Social Networking is Still Networking by Kristen Luke (Article)
Why do some expect that social networking should produce results in a matter of a couple of months? It is still networking and should be handled in the same manner. As Kristen Luke explains, merely advertising your business may work if you are a restaurant or hotel, but it doesn't work in a relationship-oriented business like financial advising.
2009-09-29 A Tale of Two Investors by Brian Murphy (Article)
Just as Dickens contrasted the fortunes and misfortunes in England and France in his classic novel, A Tale of Two Cities, today the divergence is painfully apparent in those who plan to accumulate wealth for their retirement and those who seek excess returns in their portfolios. In this guest contribution, advisor Brian Murphy tells the tale of two clients - one who aggressively sought alpha and the other who passively built retirement wealth.
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.
2009-09-29 Letters to the Editor by Various (Article)
In our letters to the Editor, a reader responds to our article last week, The Financial Market Solution to Carbon Emissions, and another to our article two weeks ago, Mohammed El-Erian: We Have Not Reached Escape Velocity.
2009-09-28 Unappreciated Risk by Charles Lieberman (Article)
2009-09-22 Predictably Irrational - How Investors Frame Decisions by Robert Huebscher (Article)
One of the most provocative sessions at last week's Schwab Impact conference was given by Dan Ariely, who deftly summarized his current research in the important field of behavioral finance. Ariely's message was that, no matter how good their intentions or how deep their experience, people - investors specifically - consistently make the wrong decisions. They behave irrationally, and predictably so.
2009-09-22 Will Momentum Move Your Portfolio? by Robert Huebscher (Article)
Instead of mixing value and growth stocks, investors would be far better served by combining value and momentum stocks, according to Cliff Asness, co-founder and Managing Principal of AQR Management. In fact, momentum has "kicked butt" when compared to growth over the last 80 years, Asness said.
2009-09-22 Disaster Management, The Green Beret and Lamaze Way by Mariko Gordon (Article)
Few of us respond as easily or effectively as we might like in the face of disaster. In this guest contribution, Mariko Gordon takes a look at why, and offers three things to keep in mind the next time you're in the midst of a crisis, financial or otherwise.
2009-09-22 Three Ways to Market Your Business Using Facebook by Kristen Luke (Article)
Kristen Luke explains three ways advisors can promote their practice through Facebook: utilizing a basic personal profile, creating a business page and creating a group page.
2009-09-21 Stocks Have Moved From Being by John Petrides (Article)
2009-09-15 Investing Lessons from Golf and Blackjack Players by Robert Huebscher (Article)
At key moments investors refuse to take those chances that will make them money. Behavioral finance has a term for this - risk intolerance. Research supporting these claims comes from two divergent pastimes - the games of golf and blackjack.
2009-09-15 The 'Cash For Clunkers' Economy by Michael Lewitt (Article)
We are once again privileged to offer the latest edition of the HCM Market Letter, edited by Michael Lewitt, titled The 'Cash for Clunkers' Economy. Lewitt examines the drivers behind the current market rally, the health of the banking system and the housing industry, the the future for derivatives regulation. If you enjoy this newsletter, we encourage you to subscribe directly though the link provided with our article.
2009-09-15 Five Reasons to Avoid the Gold Rush (Updated) by Vitaliy Katsenelson (Article)
The reasons why one should sell the cat, pawn the mother-in-law, and use the proceeds to buy gold are well known. However, in this guest contribution, Vitaliy Katsenelson offers arguments why one should think twice before jumping in bed with the gold bugs, or at least remain sober while determining gold's weight in the portfolio.
2009-09-15 Theoretical Support for the Moving Average Crossover by Keith C. Goddard, CFA (Article)
In this guest contribution, Keith Goddard matches an appropriate descriptive theory about how asset markets work with recently published normative theory using Ted Wong's moving average crossover as an indicator for timing portfolio changes in active portfolio management strategies. He proposes that the theory of "Rational Belief Equilibrium" in asset markets, developed by Stanford professor, Mordecai Kurz, helps to explain why moving average crossovers have demonstrated predictive value in the stock market, and why they might continue to offer predictive value in the future.
2009-09-15 Practical Advice for Students Entering University by Dan Richards (Article)
If you have clients with children heading off to college or university this fall, consider emailing these tips which Dan Richards provides, both for them to read and perhaps to pass on to their children. Chances are those tips will be particularly appreciated where kids are leaving home and living on their own.
2009-09-15 The Key to Trading and Investing in ETFs by Paul Weisbruch (Article)
In this guest contribution, Paul Weisbruch argues that an ETF does not require a certain amount of trading volume in order to be liquid. The underlying securities of the ETF determine its liquidity. Many within the industry do not grasp this reality and are missing out on a lot of quality ETFs.
2009-09-14 One Year After Lehman by Charles Lieberman (Article)
2009-09-08 Slow Turn by Charles Lieberman (Article)
2009-09-08 Are REITs Now Undervalued? by Geoff Considine, Ph.D. (Article)
The last couple of years have been rough for real estate, but there was a time not too long ago when it seemed that this was a 'special' asset class, with REITs providing valuable diversification benefits and consistently high returns. Do today's low valuations represent an opportunity to buy? Can investors expect a return to low correlations for REITs with the major equity market indexes?
2009-09-08 Why Credit Matters: Fixed Income Investing in a Changed Landscape by Janus (Article)
The recent dislocation in the fixed income market is likely to transform how investors and asset managers approach fixed income investing for years to come. The corporate credit sector may now be the single most important sector in generating risk-adjusted outperformance. In Janus' recent brief, Why Credit Matters, they discuss the structural market changes that have occurred and the importance of fundamental, bottom-up credit analysis and robust investment risk management in navigating this changed landscape. We thank them for their sponsorship.
2009-09-08 Advisor Survey Shows Best Ways to Business Growth by Michael Slemmer, CFA (Article)
Many investment advisory and wealth management firms have struggled to increase assets in the recent difficult markets. In order to understand how advisors feel they are faring - and the keys, and obstacles, to success - we partnered with Advisors Trusted Advisor to survey advisors on the state of their business-building efforts.
2009-09-08 Shiller P/Es and Predicting Returns Some Additional Thoughts by Joseph A. Tomlinson, FSA, CFP (Article)
In a follow-up to his article last week, Shiller P/Es and Predicting Returns, Joe Tomlinson explores the issue of how best to use the Shiller P/Es in setting asset allocation strategies. He extends his earlier work to show results for a selection of alternative strategies.
2009-09-08 Make the Most of your Networking after the Event by Kristen Luke (Article)
After a networking event, the standard practice for most advisors is to send an email, make a phone call or mail a handwritten note. But what happens after the initial contact? Is there a system in place to continue following-up in the coming weeks, months and years, even if there is not an immediate fit? This is where most advisors fail in their networking strategy, according to Kristen Luke.
2009-09-08 Sell in September? Time for a Reality Check! by Jeffrey Miller (Article)
Anyone paying attention to market news must know that September is the weakest month for stock market performance. In this guest contribution, Jeff Miller explains why the so-called September-effect is really nothing more than a statistical aberration.
2009-09-08 Infrastructure Investing by Michael D. Underhill (Article)
With global markets improving, liquidity returning to the credit markets, and valuations improving, the infrastructure market looks promising. In this guest contribution, Michael Underhill argues that infrastructure assets,when chosen correctly, can diversify an investor's portfolio because of their low correlation with other asset groups, their consistent returns coupled with lowered levels of risk, and their potential for inflation-linked returns.
2009-09-01 Politics and Fund Managers by Robert Huebscher (Article)
Those readers who would like to know whether to invest with Democrat or Republican fund managers finally have some guidance, thanks to a new academic study. We report the results, along with a host of reasons why you shouldn't read too much into this data. We also provide the names of the top fund manager donors to each party over the period from 1992 to 2006.
2009-09-01 Shiller P/E's and Predicting Returns by Joseph A. Tomlinson, FSA, CFP (Article)
It becomes clearer every day that the stock market does not follow a random walk and that there may be some predictability in long-term returns. But there's little agreement on how best to make such predictions. In this guest contribution, advisor Joe Tomlinson takes a look at using price/earnings ratios to predict future stock market performance.
2009-09-01 Additional Thoughts on the ?New Normal? by Geoff Considine, Ph.D. (Article)
A number of readers responded to Geoff Considine's article three weeks ago, What the New Normal Means for Asset Allocation, including Larry Katz, Director of Research at Merriman, whose response we published last week. Katz criticized Considine along a number of dimensions, and in this guest contribution Considine defends his New Normal asset allocation.
2009-09-01 The Levers to Financial Freedom by Russ Thornton (Article)
Virtually the entire financial services industry is built upon spending vast amounts of time, money and other resources on things over which we have absolutely no control - like attempting to manage investment returns. In this guest contribution, advisor Russ Thornton shows that, by focusing on those things you can control, you as a financial planner can build better, more resilient plans for your clients.
2009-09-01 Actively Managed TIPS ? A Correction by Robert Huebscher (Article)
Our August 18 article, Actively Managed TIPS?, contained a glaring factual error that we need to correct. In addition, a reader has challenged some of the assertions in that article, and we respond to those challenges.
2009-08-31 Cash is a Clunker by Charles Lieberman (Article)
2009-08-25 Jim Cramer Exposed: Does He Generate Alpha? by Adam Jared Apt (Article)
Paul Bolster and Emery Trahan, professors of finance at Northeastern University, were curious about the Mad Money phenomenon, and applied the full force of their analytical powers to a study of Jim Cramer's advice. They published their analysis earlier this year, and it reveals answers to key questions - such as whether Cramer's picks move the market or whether Cramer can legitimately call himself a skillful stock picker.
2009-08-25 Building a Practice in America?s Fastest Dying City by Robert Huebscher (Article)
While many - perhaps most - advisors use client appreciation programs as part of their marketing efforts, Mo Young has embraced this idea and made it his sole marketing focus. Young's practice is based in Youngstown, Ohio - which has the distinction of losing population more rapidly than any other city in the US - yet Young has added several hundred new clients over the last four years with his strategy.
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 Beating a Dead Dragon by Vitaliy Katsenelson (Article)
The last thing you may want to read is another article about China - how many ink cartridges have been exhausted writing about its phenomenal growth numbers in the past decade? - but what Vitaliy Katsenelson has to say may surprise you: China's economy is hardly as vibrant as everyone thinks it is.
2009-08-24 There's A Strong Recovery Ahead in Housing by Charles Lieberman (Article)
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.
2009-08-18 Turbulence Can Improve Portfolio Diversification by Susan B. Weiner, CFA (Article)
Classic diversification has failed, Mark Kritzman says, because traditional, independent measures of volatility and correlation don't provide enough information to indicate which portfolios will deliver the lower risk or higher returns that, at least theoretically, should come with investing in imperfectly correlated asset classes. Kritzman offers the concept of turbulence as an alternative way to approach diversification, and provides his latest research on the subject.
2009-08-18 Beam Me Up Scotty, Vulcans Have Taken Over Planet Finance by Mariko Gordon (Article)
You don't need to be a dyed-in-the-wool Trekkie "to boldly go where no man has gone before." In this guest contribution, Mariko Gordon explains how one of these characters - Mr. Spock - helps shine a light on the value of emotion in the never-ending quest for sound investment decision-making.
2009-08-18 New Rules of Growing Your Book of Business: Microblogging with Twitter by Dan Sommer (Article)
Twitter has quickly become one of the fastest-growing and most talked-about marketing channels on the web. In this guest contribution, Dan Sommer explains how this rapid growth and wide adoption across many demographics makes it ideal for financial professionals looking for new ways to reach potential clients and build thought leadership.
2009-08-17 Will Commercial Real Estate Defer Recovery? by Charles Lieberman (Article)
2009-08-11 It Is Looking More Like A V-Shaped Recovery by Charles Lieberman (Article)
2009-08-11 What the New Normal Means for Asset Allocation by Geoff Considine, Ph.D. (Article)
Bill Gross of PIMCO forecasts a New Normal - slow economic growth, higher inflation, and increasing correlations among asset classes. If this view is correct, what should investors do? Geoff Considine examines the implications for asset allocation and financial planning by stress-testing some well-known asset allocations to see how well they will serve investors in the forecast environment.
2009-08-11 The Business You Don?t Want: 401(k) Plans by Robert Huebscher (Article)
Wealth managers who are considering managing 401(k) plans need to re-think those plans, according to Brian Murphy. Murphy, who runs Pathways Financial Partners, a Tucson, AZ-based investment advisory firm, says the 401(k) business has become a highly commoditized industry that makes it easy for clients to switch to an alternative, lower-cost provider.
2009-08-11 At the Risk of Repeating Ourselves by Michael Lewitt (Article)
We have said before that Michael Lewitt's newsletter is a must-read, and this edition is no exception. Lewitt questions whether we are witnessing a summer calm before the storm, comments on the secured and unsecured debt asset classes, and opines on the abuses of unregulated dark pools of capital. We encourage you to subscribe to this valuable publication through the link we provide.
2009-08-11 How to Construct a Marketing Plan and Budget by Kristen Luke (Article)
One way to significantly increase the chances of marketing success is to develop a marketing plan and stick to it. Kristen Luke says forget the formal marketing plan and just outline your marketing activities and budget, and she provides a step-by-step guide for you to follow.
2009-08-04 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 A Wakeup Call for Advisors: Turmoil at the Top of the Market by Dan Richards (Article)
Recent articles in Business Week, the New York Times and the Wall Street Journal describe turmoil among high-net worth investors and have profound implications for financial advisors. Dan Richards offers a five-point response for advisors to counteract investor disillusionment with their current relationship.
2009-08-04 Uncovering the Mayhem in 2008 in the TIPS Market by Robert Huebscher (Article)
In an interview two weeks ago, Yale Endowment manager David Swensen singled out TIPS as the best way to protect against inflationary and deflationary scenarios. We review a comprehensive study of the history of the inflation-indexed bond market, including an explanation for the extreme volatility in TIPS last year.
2009-08-04 How to Think about Return and Risk at the Same Time by Adam Jared Apt (Article)
In this guest contribution targeted to the educated layman, Adam Apt discusses the relationship between return and risk. Only when you can keep in mind at one and the same time these two concepts can you properly understand how to invest. And you will also understand why you should invest. Without the marriage of the concepts, you will be playing the market-or shunning it-as if it were a casino.
2009-08-04 Convert Prospects to Clients through Drip Marketing by Kristen Luke (Article)
Kristen Luke covers drip campaigns, where an advisor sends marketing collateral to a prospect on a regularly scheduled basis. Luke discusses how you can add prospects to your existing client communications or create an independent program just for prospects.
2009-08-04 Letters to the Editor by Various (Article)
In our letters to the Editor, readers respond to last week's article, How Long is the Long Run?, Geoff Considine's article, The Retirement Portfolio Showdown: Jeremy Siegel v. Zvi Bodie , and Ted Wong's article, Moving Average: Holy Grail or Fairy Tale - Part 3.
2009-08-03 Still Missing the Last Piece: Jobs by Charles Lieberman (Article)
2009-07-28 How Long is the Long Run? by Robert Huebscher (Article)
How long must one be invested in the equity markets to have full confidence that they will earn superior returns (as compared to bonds) and overcome the risks of bear markets? We look at the historical record to see how stocks have fared against bonds for various holding periods, and we look at research by Zvi Bodie and Mark Kritzman on this topic.
2009-07-28 Flaws in the Case Shiller Methodology by Robert Huebscher (Article)
To forecast economic growth, it's essential to understand the trajectory of the housing market. Most observers rely on widely publicized data like the Case Shiller index, but those metrics can be very misleading if you don't understand how they are calculated. If you don't understand that there are factors beyond Case and Shiller's control that impact the data, according to John Burns, the founder and CEO of John Burns Real Estate Consulting, a 20-person firm based in Irvine, California.
2009-07-27 Revenues Down, Profits Up, Is This a Problem? by Charles Lieberman (Article)
2009-07-21 The Retirement Portfolio Showdown: Jeremy Siegel v. Zvi Bodie by Geoff Considine, Ph.D. (Article)
When investing for retirement over long time horizons, advisors can choose from two apparently conflicting approaches. They can follow the advice of Wharton professor Jeremy Siegel, who has steadfastly advocated equity-centric portfolios, most notably in his highly popular book, Stocks for the Long Run. Or they can listen to Boston University professor Zvi Bodie, who says equities are simply too risky over the long term, and the core of a retirement portfolio should be Treasury Inflation Protected Securities (TIPS). Geoff Considine's article shows how to resolve this conflict.
2009-07-21 Change or be Changed by Bob Padgette, CFA, CIMA and Ted Ponko, CFA (Article)
New financial services regulation will touch on many areas, and mutual fund evaluation and monitoring is one likely candidate. Over the past two decades, screening has been at the core of most mutual fund evaluation processes. The advisor picks the criteria, sets a minimum or maximum level for each, and comes up with a list of funds that survive all screens. Bob Padgette and Ted Ponko of Klein Systems demonstrate several inherent flaws in this process.
2009-07-21 Q2 2009 Performance among the Most Popular Mutual Funds in the Advisor Perspectives Universe by Robert Huebscher and Mary Pitek (Article)
Each quarter we analyze changes in the Advisor Perspectives database - a $50+ billion universe of high- and ultra-high net worth assets managed by Registered Investment Advisors. Our analysis has three parts. We look at changes in asset allocation, the performance of the most popular mutual funds, and the mutual funds that showed significant gains or losses in popularity during the quarter.
2009-07-21 Letter to the Editor Compelling Evidence that Active Management Really Works by Various (Article)
In a letter to the Editor, a reader challenges some of the findings reported several weeks ago in an article, Compelling Evidence that Active Management Really Works.
2009-07-20 From Green Shoots to Flowering Buds by Charles Lieberman (Article)
2009-07-14 Behavioral Finance ? A Three-Part Model for Client Relationships by Susan B. Weiner, CFA (Article)
Behavioral finance can improve your client relationships during market turmoil, if you recognize your clients' emotional right-brained reactions before you offer insights based on your analytical left-brained analysis. By applying a three-pronged process of Recognize-Reflect-Respond, you can adapt to new information in a thoughtful and effective framework.
2009-07-14 Billie Jean, YOU are the One by Mariko Gordon (Article)
Michael Jackson's Billie Jean wasn't the first to make headlines. Back in 1973, Billie Jean King moved the sports world a big step forward ... a step that the financial services industry is still waiting to take. Guest contributor Mariko Gordon of Daruma Asset Management explains why our overwhelming male-oriented industry necessarily leaves investment returns on the table.
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.
2009-07-14 Letter to the Editor: Tobin?s Q Ratio by Various (Article)
We have a letter to the Editor regarding our article last week, The Q Ratio Sends a Modestly Bearish Long-Term Signal, and we publish John Mihaljevic's response.
2009-07-13 The Shin Bone Is Connected to the Knee Bone... by Charles Lieberman (Article)
2009-07-07 Marty Whitman: The Outlook for Distressed Securities by Robert Huebscher (Article)
Marty Whitman is the founder, Co-Chief Investment Officer, and Portfolio Manager of the Third Avenue Value Fund and a veteran value investor with a long, distinguished history as a control investor. In our interview, he discusses the opportunities in distressed securities created by the financial crisis.
2009-07-07 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.
2009-07-07 The Q Ratio Sends a Modestly Bearish Long-Term Signal by Robert Huebscher (Article)
Strong market performance during the second quarter has claimed a victim. Tobin's Q ratio, one of the most reliable barometers of market valuation, is now 0.72 - up from its March low of 0.33 - indicating the market is modestly overvalued for long-term investors.
2009-07-07 The True Cost of Volatility by Dan Richards (Article)
Most advisors and investors hate volatility - the up and down hits to clients' long term goals. (To be more accurate, we hate the downs - the ups we don't mind so much.) Dan Richards discusses the big price clients pay for that volatility - not just stress and lost sleep at night, but volatility in portfolios that induces behavior that costs many investors serious money.
2009-07-07 Riding the Stock Market Wave in the First Half of 2009 by Ron Surz (Article)
Ron Surz provides his award-winning market commentary, reviewing the first half stock market performance around the world. He looks at the past decade, to set expectations accordingly. Have markets become cheap enough yet? He concludes with a realistic and sobering look at our current debt problems - a cause for concern for both young and old.
2009-07-07 Letters to the Editor by Various (Article)
We have two sets of letters to the Editor. The first has a response to a recent article about research by Rob Arnott on bond market returns, and a response to last week's article about unconventional thinking - and whether media such as CNBC provides these kinds of insights.
2009-07-06 Disappointment, Not Tragedy by Charles Lieberman (Article)
2009-06-30 Moving Average: Holy Grail or Fairy Tale - Part 2 by Theodore Wong (Article)
Many renowned financial experts declare that passive investing in a diversified index like the S&P500 is the only sensible way to manage money. In a follow-up to his article two weeks ago, Moving Average: Holy Grail or Fairy Tale - Part 1, Ted Wong says that he respects their opinions but is unable to verify their claims. By examining the evidence, he shows that the Moving Average Crossover (MAC) system offers a superior risk-return profile to a buy-and-hold strategy.
2009-06-30 Letters to the Editor: Moving Average: Holy Grail or Fairy Tale, Part I by Various (Article)
We have two sections of letters to the Editor. The first set features responses to Ted Wong's article, Moving Average: Holy Grail or Fairy Tale - Part 1.
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.
2009-06-29 The Message of the Bond Market by Charles Lieberman (Article)
2009-06-23 Compelling Evidence That Active Management Really Works by Ken Solow (Article)
The majority of academic studies conclude that active management does not add value for investors. However, a closer look at how many studies were conducted reveals several flaws in their methodology that are not as well-known as the accepted conclusion about active versus passive management. Guest contributor Ken Solow revisits work by two Yale researchers showing the value added through active management.
2009-06-23 Letters to the Editor ? Moving Average: Holy Grail or Fairy Tale? by Various (Article)
Ted Wong's article last week, Moving Average: Holy Grail or Fairy Tale?, drew a large number of questions and comments from readers.
2009-06-22 (The Economy) and Housing are Bottoming by Charles Lieberman (Article)
2009-06-16 Seth Klarman: Why Most Investment Managers Have It Backwards by Robert Huebscher (Article)
In his keynote speech last week to the Boston Security Analysts Society, Seth Klarman discussed how he repositioned his portfolio last fall to capture opportunities created in the wake of the financial crisis. Klarman is the lead editor of the sixth edition of Graham and Dodd's Securities Analysis, and his fund, The Baupost Group, is among the top performing hedge funds over its 27 year history.
2009-06-16 New Target-Date Fund Research from Janus by Janus (Article)
New research shows widespread target-date fund misuse and misperceptions by defined contribution plan participants. Janus Investments' white paper shows that investors misunderstand the role of target date funds in their overall portfolio and rely heavily on their employer for investment advice. We thank them for their sponsorship.
2009-06-16 High-Yield Bonds A Potential Opportunity for the Risk Tolerant by Northern Trust Investments (Article)
High-yield bonds have recently offered investors historically high spreads relative to Treasury and investment-grade corporate bonds, presenting attractive current income potential in today's low-rate environment. The current recessionary environment also poses a heightened risk of default, underscoring the importance of security selection and intensive analysis of underlying fundamentals. We thank Northern Trust Investments for this contribution and their sponsorship.
2009-06-16 Peter L. Bernstein Remembered by Robert Huebscher (Article)
The investment industry lost one of its leaders last week, when Peter L. Bernstein passed away at the age of 90. As an author, Bernstein provided clarity and insight to our understanding of risk and the way markets operate, through his books and his newsletter, Economics and Portfolio Strategy. We are republishing our interview with him last January, when he foresaw many of the elements of the current crisis.
2009-06-16 Moving Average: Holy Grail or Fairy Tale - Part 1 by Theodore Wang (Article)
Buying and holding a diversified portfolio works well during good times, but falls short when supposedly uncorrelated asset classes drop in unison in bear markets. Are there alternative investment strategies that work for all seasons? Ted Wong evaluates strategies using moving averages to determine their effectiveness.
2009-06-16 Tackling Today?s Number One Client Challenge by Dan Richards (Article)
Talk to advisors about the challenges they face today and you'll get a lengthy list - often headed by unhappy clients, reduced income and a struggle to stay positive and productive. While these are all serious issues, says Dan Richards, for most advisors they are dwarfed by the number one obstacle to getting business back on track - rebuilding investor confidence in our trust and integrity.
2009-06-16 Annual Style Index Reconstitution: Good or Bad? by Ron Surz (Article)
In just two weeks, at the end of June, the Russell style indexes will undergo their annual reconstitution. A lot has happened in the last year, especially to the finance sector. Ron Surz identifies the pressing questions for financial advisors.
2009-06-15 What if the Chinese Sell Treasuries? by Charles Lieberman (Article)
2009-06-09 Simon Johnson on Obama?s Achilles Heel by Eric Uhlfelder (Article)
While he agrees with much of what the US administration is doing to confront the economic crisis, Simon Johnson, the former chief economist of the International Monetary Fund, fears that present policy is not addressing a key issue: the overwhelming influence of the finance industry in US economic affairs. He likens this imbalance to what we see at the core of many emerging markets crises.
2009-06-09 Nassim Nicholas Taleb?s Prescription for a Black Swan-Proof Economy by Bruce W. Fraser (Article)
According to Black Swan author Nassim Nicholas Taleb, the U.S. economy is broken - but not beyond repair - and that repair will not be a snap. It does not necessarily need more regulation, but more intelligent regulation - plus the will to let entities like Citibank and General Motors fail once they become too big and cumbersome and act irresponsibly.
2009-06-09 Let?s Talk Stocks: Berkowitz, Marsico and Weitz by Robert Huebscher (Article)
Three of the industry's most accomplished value investors - Bruce Berkowitz of the Fairholme Fund, Tom Marsico of Marsico Capital Management and Wally Weitz of Weitz Funds - spoke at a panel discussion at the Morningstar Investor Conference on May 28. We present some excerpts of their thoughts on key questions raised during the panel.
2009-06-09 Jeff Gundlach: The Party is Over by Robert Huebscher (Article)
The easy money has been made in the credit markets, as investors have reaped strong year-to-date returns, topped by 17% in emerging market debt and 30% in high yield bonds. Now the markets are in a much riskier position, said Jeff Gundlach, Chief Investment Officer of the TCW Group, in his quarterly update to investors that he titled "It was Great While it Lasted."
2009-06-09 Changes in Asset Allocation by Robert Huebscher and Mary Pitek (Article)
Each quarter we review changes in the Advisor Perspectives (AP) Universe, which represents $50 billion in high-net worth assets managed by RIAs. Our analysis looks at changes in asset allocation, the mutual funds and ETFs that gained or lost market share, and the performance of the most popular actively managed mutual funds. This analysis focuses on changes in asset allocation.
2009-06-09 Letter to the Editor ? Jeremy Grantham by Various (Article)
In our letters to the Editor, a reader responds to last week's article on Jeremy Grantham.
2009-06-09 Changes in the Most Popular Mutual Funds by Robert Huebscher (Article)
Each quarter we review changes in the Advisor Perspectives (AP) Universe, which represents $50 billion in high-net worth assets managed by RIAs. Our analysis looks at changes in asset allocation, the mutual funds and ETFs that gained or lost market share, and the performance of the most popular actively managed mutual funds. This analysis focuses on the most popular mutual funds.
2009-06-09 Q1 2009 Performance among the Most Popular Mutual Funds in the Advisor Perspectives Universe by Robert Huebscher and Mary Pitek (Article)
Each quarter we review changes in the Advisor Perspectives (AP) Universe, which represents $50 billion in high-net worth assets managed by RIAs. Our analysis looks at changes in asset allocation, the mutual funds and ETFs that gained or lost market share, and the performance of the most popular actively managed mutual funds. This analysis focuses on performance across the most popular mutual funds.
2009-06-08 Why are Interest Rates Rising on Treasuries? by Charles Lieberman (Article)
2009-06-02 Jeremy Grantham's Warnings to Investors by Robert Huebscher (Article)
Of the thousands of investment letters penned in the industry, only one draws as much readership as Warren Buffet's annual letter to his shareholders: The quarterly commentary written by Jeremy Grantham. Grantham, the Chairman of the Boston-based investment firm Grantham Mayo Van Otterloo, was a featured speaker at Morningstar's Investor Conference last week, and he spoke at two breakout sessions. Those who, like me, attended both were richly rewarded, as he gave two distinctly different talks, addressing many subjects not covered in his commentaries.
2009-06-02 Helping Advisors Grow by Susan Weiner (Article)
George Tamer, Director of Institutional Sales at TD AMERITRADE Institutional, discusses the innovative strategies advisors are using to add clients and improve profitability. Tamer is also seeing an upturn in merger activities, and describes how advisors looking to buy or sell a firm can best position themselves. We thank them for their sponsorship.
2009-06-02 Market Perspectives from Janus' Seven Global Sector Teams by Janus (Article)
The last 18 months have challenged advisors, as they now wait for the market and economy to stabilize. Despite the generally bearish sentiment, Janus believes many individual investment opportunities in the market today offer compelling valuations and risk/reward profiles. We thank them for their sponsorship.
2009-06-02 John Bogle and the Lantern on the Stern by Robert Huebscher (Article)
In his remarks at the Morningstar conference last week, Vanguard founder and index fund pioneer John Bogle criticized many aspects of the mutual fund industry. Bogle, who turned 80 this year, is primed to fight his next battle - reducing investor reliance on past returns - which he likens to a lantern on the stern of a ship.
2009-06-01 Where Are the Land Mines Hidden? by Charles Lieberman (Article)
2009-05-26 Is the Stock Market Rally for Real? by Charles Lieberman (Article)
2009-05-26 Dan Fuss and the Eisenhower Recession Redux by Robert Huebscher (Article)
Those of us old enough to remember Studebakers and the military-industrial complex will recall the Eisenhower Recession, which began in 1957, lasted eight months and was followed by the 10 month "Rolling Adjustment" recession beginning in 1961. The W-shaped path of the US economy during this period is the correct analogy to today's crisis, according to Loomis Sayles and Company's Dan Fuss.
2009-05-26 The Importance of Being Active by C. Thomas Howard, PhD (Article)
New research from Tom Howard of Athenainvest shows buying and holding the typical active US equity fund is a recipe for underperformance. On the other hand, Howard shows that funds actively placing stock selection bets and enjoying recent return success earn increasingly superior returns and experience an improved likelihood of beating the market as the fund ages. Howard argues for the importance of being truly active as a fund manager.
2009-05-26 TIPS ? When a Discount is Really a Premium by Robert Huebscher (Article)
We answer a question posed by a number of readers in response to our article last week, Opportunities and Risks in TIPS, and show that TIPS purchased at a discount offer superior performance relative to those purchased at a premium, given deflationary assumptions.
2009-05-26 What the ?Missing Out? Argument Misses by Theodore Wang (Article)
Market timing is discredited by passive investment advisors as a voodoo ritual. Buy-and-hold proponents argue most compellingly by citing the "missing out" scenario - they show a dramatic drop in return, to Treasury Bill levels, if investors are out of the markets for only a few good days. In this guest contribution, Ted Wong debunks the missing out argument, using 137 years of market data.
2009-05-26 Risk Control along the Glide Path by Craig L. Israelsen and Ron Surz (Article)
Timing matters, and it matters before and after retirement. In this guest contribution, Ron Surz and Craig Israelsen show that when money is being invested annually the sequence of returns matters,and it matters even more for portfolios in the distribution phase. The authors discuss the significance for target date fund and other retirement-focused investors.
2009-05-26 The Big Issues Facing the Hedge Fund Industry by Robert Huebscher (Article)
Last week, the Argyle Executive Forum hosted its 2009 Hedge Fund Leadership Forum in New York. This event attracted more than 200 leaders from the hedge fund industry, with a series of panel discussions centered on the key issues managers now face. Although the sessions were "off the record," we have summarized the key themes from the discussions.
2009-05-19 Opportunities in TIPS by Robert Huebscher (Article)
TIPS offer a perfect hedge against inflation for US investors, but advisors need to understand their risks. We look at the history of TIPS prices and explain why this asset class is more volatile than you might think.
2009-05-19 Waiting for the Fifth Wave by Robert Huebscher (Article)
In response to skepticism we've expressed in the past about technical analysis, one of our readers invited us to attend the Market Technicians Association symposium in New York last week. Our skepticism remains, but it was an enjoyable event and we report on the forecasts of Elliot Wave theorist Robert Prechter.
2009-05-19 Turning Corporate Downsizing into Prospecting Success by Dan Richards (Article)
Optimists in the investment business claim "Crisis breeds opportunity." Dan Richards looks at the worst consequence of the current crisis - corporate downsizing - and shows how advisors used five different approaches to create opportunities while helping those faced with job losses.
2009-05-19 Five Ways to Cultivate Professional Referral Relationships by Kristen Luke (Article)
If you are looking to make professional referrals a key strategy for your business, you will want to develop dozens of relationships. Kristen Luke shows how to efficiently nurture these relationships with an action plan to touch your centers of influence throughout the year, just as you would your clients.
2009-05-18 Seeds of Recovery by Charles Lieberman (Article)
2009-05-11 Inflation Fears are Overblown by Charles Lieberman (Article)
2009-05-04 The Upside Case for the Stock Market by Charles Lieberman (Article)
2009-04-27 The Ship is Turning by Charles Lieberman (Article)
2009-04-20 Step by Step by Charles Lieberman (Article)
2009-04-13 A Little Healthier, Psychologically by Charles Lieberman (Article)
2009-04-06 Not Out of the Woods Quite Yet by Charles Lieberman (Article)
2009-03-30 International Economic Games at the G20 by Charles Lieberman (Article)
2009-03-23 Policy Engaged by Charles Lieberman (Article)
2009-03-18 Unraveling the Housing Market by Charles Lieberman (Article)
2009-03-18 Don't Fight the Fed by Charles Lieberman (Article)
2009-03-16 Early Green Shots by Charles Lieberman (Article)
2009-03-09 Accounting Gone Wild by Charles Lieberman (Article)
2009-03-02 A Good Strategic Move by Charles Lieberman (Article)
2009-02-27 The Value of Trust Preferred Shares by Charles Lieberman (Article)
2009-02-23 Nationalization Fears by Charles Lieberman (Article)
2009-02-17 Stop Talking, Just Do It by Charles Lieberman (Article)
2009-02-10 How to Think about Investment Returns by Adam Jared Apt (Article)
Adam Apt provides the third article in his series intended for the educated layman, addressing the question of how to think about investment returns. What matters for the investor is the total package, the entire portfolio. A change in one component of the package, considered in isolation, often matters very little, unless it is indicative of something systematic.
2009-02-09 Even Bonds Offer Good Value Now by Charles Lieberman (Article)
2009-02-02 Dismal News Is Not Quite So Dismal by Charles Lieberman (Article)
2009-01-26 Two Steps Forward, One Step Back by Charles Lieberman (Article)
2009-01-12 Dismal Economy by Charles Lieberman (Article)
2009-01-05 The Outlook for 2009 by Charles Lieberman (Article)
2008-12-22 Winter Thaw? by Charles Lieberman (Article)
2008-12-15 It's All about the Credit Markets by Charles Lieberman (Article)
2008-12-08 Mr. Market's Manic Moods by John Petrides (Article)
2008-12-01 Still Working to Restore Confidence by Charles Lieberman (Article)
2008-11-24 Restoring Confidence by Charles Lieberman (Article)
2008-11-17 The Power of Lower Oil Prices by Charles Lieberman (Article)
2008-11-17 The Power of Lower Oil Prices by Charles Lieberman (Article)
2008-11-11 Expectations for a Long Recession by Charles Lieberman (Article)
2008-11-03 Looking for Value; It's Everywhere by Charles Lieberman (Article)
2008-10-27 A Letter to Treasury Secretary Paulson by Charles Lieberman (Article)
2008-10-20 Coordinated Rescue Strategies by Charles Lieberman (Article)
2008-10-13 Seriously, Frankly by Charles Lieberman (Article)
2008-10-08 Exceptional Action for Extraordinary Times by Charles Lieberman (Article)
2008-10-06 A Stitch in Time Would Have Saved Nine by Charles Lieberman (Article)
2008-09-29 Behind the Scenes at the Credit Crisis by Charles Lieberman (Article)
2008-09-29 The Melodrama Continues by Charles Lieberman (Article)
2008-09-22 Sifting Through the Carnage by Charles Lieberman (Article)
2008-09-15 Where's the Safety Net? by Charles Lieberman (Article)
2008-09-15 Thoughts at the End of the Day by Charles Lieberman (Article)
2008-09-08 Help for the GSEs and Housing by Charles Lieberman (Article)
2008-09-02 Hopeful Signs of Improvement by Charles Lieberman (Article)
2008-08-26 Academic Debate by Charles Lieberman (Article)
2008-08-18 Problematic Credit Risks by Charles Lieberman (Article)
2008-08-11 Black Gold by Charles Lieberman (Article)
2008-08-04 Is Inflation a Problem? by Charles Lieberman (Article)
2008-07-29 The Complicated World of Fannie and Freddie by Charles Lieberman (Article)
2008-07-21 GMO versus GMI by Charles Lieberman (Article)
2008-07-14 Hysteria, Stoked by Hedge Funds and Media by Charles Lieberman (Article)
2008-07-07 What is Needed for the Economy to Improve? by Charles Lieberman (Article)
2008-07-01 Worries Over Incompetent Policies by Charles Lieberman (Article)
2008-06-23 When Will It End? by Charles Lieberman (Article)
2008-06-16 Talk Softly and Carry a Big Stick by Charles Lieberman (Article)
2008-06-09 Moral Confusion by Charles Lieberman (Article)
2008-06-02 And Miles to go Before I Sleep by Charles Lieberman (Article)
2008-05-19 Turning the Long, Slow, Painful Corner by Charles Lieberman (Article)
2008-05-12 The Conspiracy Raising Oil Prices by Charles Lieberman (Article)
2008-05-05 Looking Ahead to a Gradual Recovery by Charles Lieberman (Article)
2008-04-28 More Policy Action is Still Needed by Charles Lieberman (Article)
2008-04-22 The Turn is Underway by Charles Lieberman (Article)
0000-00-00 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.