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Advisor Perspectives
Insights into the world of high- and ultra-high net worth investing
August 18, 2009- Vol 3, Issue 33
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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.
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.
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.
Experienced advisors know there's no
substitute for face-to-face meetings to review portfolios, especially
in times such as these. In some cases, however, a client's location
or schedule make it impossible to meet face-to-face - in those cases, Dan Richards offers an alternative method to
conduct that review.
More articles below...
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.
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.
Our interview with economist Paul Krugman
two weeks ago continues to generate responses, and we share
several from our readers.
Lastly, we highlight submissions to Advisor
Market Commentaries.
We welcome guest submissions from our
readers. For more information, here are our guidelines.
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TIPS may be volatile, but the TIPS market is well-understood easily
modeled. Credit analysis is unnecessary and quantitative analysis should rapidly
identify any inefficiency. Active management may succeed in the equity or
corporate bond markets, where individual securities are highly
differentiated and require shrewd analysis, experience, and judgment.
Such is not the case with the TIPS market, where active management is
doomed to fail.
Actively Managed TIPS?
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A
Crash Course in Investing: Six Lessons from the Market Meltdown
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Last year was a
disaster for many investors, but at least two managers can actually claim
they predicted the crash. Both Robert Rodriguez, renowned manager of
the FPA Capital fund, and Peter Schiff of Euro Pacific Capital accurately
predicted the decline of the past 18 months. Did their prescient
forecasts pay off for investors?
A Crash Course in Investing: Six
Lessons from the Market Meltdown
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Turbulence
Can Improve Portfolio Diversification
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By incorporating
information about correlations, turbulence indicates-in a way that
volatility cannot-whether markets are decoupling or converging. This is
important because when assets act uncharacteristically, hedging and other
investment strategies that rely on consistent correlations may not work.
Turbulence Can Improve Portfolio
Diversification
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An Alternative Way to Conduct Client Reviews
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Advisors who are using telephone meetings tell me another advantage of
phone meetings is that they tend to be more focused - clients are less likely
to drift off topic, since the visual on the screen keeps them on
track. Just remember, telephone meetings lack the intimacy and
personal dimension of a face-to-face meeting - while they can be a good
supplement to face-to-face reviews, they are not a substitute. For
key clients it's still important to meet once a year.
An Alternative Way to Conduct Client
Reviews
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Beam
Me Up Scotty, Vulcans Have Taken Over Planet Finance
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In order to "Live Long and Prosper," we need to admit to
ourselves - and to our clients - that precise analytical calculations are
no substitute for good human judgment; the kind of good judgment that is
grounded in all parts of our neurochemistry.
Beam Me Up Scotty, Vulcans Have
Taken Over Planet Finance
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Microblogging
with Twitter
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Twitter's future is very bright, and mainstream usage of it is only now
taking off. Become an early adopter - as one of the first FAs to understand
and use this channel, you'll quickly gain the dividends.
Microblogging with Twitter
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Letters
to the Editor - Paul Krugman
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Our interview with economist Paul Krugman two weeks ago continues to
generate responses, and we share several from our readers.
Letters to the Editor - Paul Krugman
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Highlights
from Advisor Market Commentaries
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We may have a "statistical recovery."
The numbers may be positive for a variety of reasons only a statistician
could love, but it is not going to feel
like a recovery to the rest of us. Maybe that is why consumer
confidence took another hit today, dropping to its lowest level since
March, helping to drive the market down.
The Statistical Recovery, Part 2 by
John Mauldin
... this push to national health care is
only marginally about health care it is really and mostly a cynical and awesome power grab. If
this plan or some equally noxious national plan is emplaced, every election
afterward will be about healthcare and its benefits. As the various political parties seek to gain a
majority they will not dare cut benefits the only question will be who will
increase them to the right groups. Health care will
be another electric third rail of politics. This is the reason
the plan states that healthcare will be available to "all residents of
the United States". Eventually, illegal aliens will be
granted citizenship and will vote, whoever gives them health care coverage
will get their votes. The evidence for a power grab is the speed at which
this is being enacted and the wailing that there is opposition. The way the
leaders are dealing with those in opposition reminds me of Ayn Rand's
statement that it is easier to destroy a man than his ideas.
Rushing to Foolishness by Dennis
Gibb of Sweetwater Investments
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