|
|
Advisor Perspectives
Insights into the world of high- and ultra-high net worth investing
July 7, 2009- Vol 3, Issue 27
|
|
|
|
|
|
|
|
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.
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."
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.
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.
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.
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.
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. The second set is a series of responses to Ted
Wong's article last week, Moving Average:
Holy Grail or Fairy Tale - Part 2.
Lastly, we highlight submissions to Advisor
Market Commentaries.
We welcome guest submissions from our
readers. For more information, here are our guidelines.
If you are experiencing problems
opening or navigating through our newsletters, we can send you a text-only
version. Please send an email to feedback@advisorperspectives.com requesting the "text-only" version.
If you have received this newsletter
in error, or you do not wish to receive future newsletters, please reply to this email with the word
"unsubscribe" in the subject line.
|
|
|
|
|
|
|
Marty Whitman discusses the once-in-a-lifetime opportunity at the end of last
year to buy distressed securities and how his outlook has evolved over the
last six months. In our interview, he also offers his post-bankruptcy
outlook for GM and Chrysler and the reasons why the Third Avenue Value Fund
is heavily invested in east Asian real estate.
Marty Whitman: The Outlook for
Distressed Securities
|
Gary
Shilling: Recovery is a Year Away
|
|
Gary Shilling
echoed the forecasts of PIMCO's Bill Gross and others, who foresee a
"new normal" - GDP growth of 2% - not the historical average of
3.6% and not high enough to prevent rising unemployment. The
recession's shape will be more like an L, Shilling said, with slow recovery
and muted growth. "I see nothing steep enough to suggest
anything like a V-shaped recovery," he said.
Gary Shilling: Recovery is a Year
Away
|
Burton Malkiel Talks the Random Walk
|
|
Returning to the
message that he has preached for the last four decades, Burton Malkiel
warned advisors that "anything you find that will make money will
eventually self-destruct. There are too many smart people looking for
those opportunities."
Burton Malkiel Talks the Random Walk
|
The
Q Ratio Sends a Modestly Bearish Long-Term Signal
|
|
Over the short- and near-term the Q ratio indicates the market valuations
are neutral. For broad-based equity investors, though, the key to long-term
performance is the price at which one enters the market. The Q ratio
has been exceptionally accurate - more accurate than the P/E ratio - in
forecasting investors' returns.
The Q Ratio Sends a Modestly Bearish
Long-Term Signal
|
The
True Cost of Volatility
|
|
At a recent conference, Don Phillips of Morningstar presented an analysis
of how U.S.
mutual fund investors did in the ten years to the end of 2007, comparing
this to the performance of the funds in which they invested. In calculating
the investor return, Morningstar factored in when investors bought and sold
and the returns during the periods they held funds.
The True Cost of Volatility
|
Riding
the Stock Market Wave in the First Half of 2009
|
|
Ron Surz' market commentary looks at performance across global markets by style,
sector and country, and he offers an unbiased way to analyze the
performance of managers over the last quarter.
Riding the Stock Market Wave in the
First Half of 2009
|
|
Letters:
Arnott/Bonds and Unconventional Thinking
|
|
Readers respond to our article about Rob Anrott's research on bond market
returns and to Dan Richards' article last week on the importance of
unconventional thinking.
Letters: Arnott/Bonds and
Unconventional Thinking
|
|
Letters:
Moving Average: Holy Grail or Fairy Tale Part 2
|
|
A series of readers respond to Ted Wong's article last week, Moving
Average: Holy Grail or Fairy Tale - Part 2.
Letters: Moving Average: Holy Grail
or Fairy Tale Part 2
|
|
Highlights
from Advisor Market Commentaries
|
|
Interest rates seem a bit schizophrenic, writes Ray Ferrara of the ProVise
Management Group. Since the first of the year the interest rate on
the 10 year treasury has risen from an interest rate of about 2.1% to its
current level of approximately 3.5%. It has actually been a little
higher recently. The same thing is also happening with other long-term
interest rates. In the middle of June, some treasury bills were
trading at a year-to-date low yield of 0.29%. How could interest
rates be pulling in different directions?
ProVise Bullets
Payroll employment fell more than expected in June, setting off a wave of
equity selling, as investors fear that the recession will persist. Charles
Lieberman of Advisors Capital Management asks: What happened to all the
green shoots? Should they be dismissed so quickly? Shifting from recession
to growth is not like turning on a light switch. It is a process and the
data tend to be quite mixed initially and they tend to turn largely
positive only after some months. The processes currently underway should
result in economic growth in the second half. Moreover, it is way too early
to judge whether the gains will be tepid or strong.
Disappointment, Not Tragedy
|
|
Advertise
in Advisor Perspectives
|
|
Our newsletter goes to over 75,000 RIAs, wealth managers, and financial
advisors. See how you can deliver your message to our sophisticated
audience.
Read more
|
|
Advisor
Perspectives
Box 380
Lexington, MA 02420
(781) 376-0050
|
|
|
|
|
|
