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Advisor Perspectives
Insights into the world of high- and ultra-high net worth investing
October 20, 2009- Vol 3, Issue 42
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Sign
up here for a free webinar on October 28 at 4pm
EST
where Dan Richards will review how things have changed in the past year and
what advisors need to do in response.
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.
Scott Wittman,Senior Vice President, Asset Allocation at
American Century Investments reflects on the one-year anniversary of the near-meltdown by our financial
system and provides perspective on what
kind of recovery may be coming. We thank American Century Investments for
their sponsorship.
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.
During a 13-year career that began in 1987, Chris Dudley was called on to defend
some of the greatest centers in NBA history
- among them Shaquille O'Neal, Robert Parish, and David Robinson.
While developing a reputation as an exceptional shot-blocker and rebounder,
Dudley also devoted time to preparing for his
post-basketball career - as a financial advisor - and he shares with us his
thoughts about financial planning for the professional athlete.
More articles below...
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. To
subscribe directly to this publication, go here.
Given the beating their portfolios have taken and the general mood of
skepticism, often your goal when meeting
with clients is to have them leave feeling more optimistic and
upbeat about their future prospects and in particular about your role as
their advisor. Dan Richards
offers three ways to uplift your clients'
spirits, while confronting today's crucial issues and building
your credibility.
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.
Participating in various groups is one way you can utilize LinkedIn as a marketing tool, but
for the more ambitious marketers, having your own group offers even greater
opportunities. Kristen Luke offers
step-by-step instructions to create your own group.
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.
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.
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Indices are always more pure than active funds; by definition, they contain
only those stocks whose characteristics meet the definition of the style
box. Within a style box, such as mid-cap core, an active fund, unlike
the index, will hold stocks that fall outside the definition for that
box. Those "impurities" detract from active performance in
bull markets, giving the fund a measurable headwind. When a style box
is performing poorly, impurities are a tailwind to the active fund relative
to the index.
Don't be Misled by Morningstar's Box
Score Results
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Asset
Allocation Perspective from American Century Investments
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American Century
sees signs of recovery in some sectors of the economy, but there are also
continued signs of problems and issues in other parts of the economy. The
housing market is one area where they see improvement; housing prices have
stabilized in many regional markets and the level of home sales is up.
Asset Allocation Perspective from
American Century Investments
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Letters
to the Editor: Fama-French and the Active-Passive Debate
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When taking a tour of the western US, one sees wide-open expanses and
beautiful vistas. If asked afterwards, the tourists would say they saw
little or no evidence of valuable mineral resources along the way. But in
fact, the western US is home to many deposits of valuable ores.
Searching for evidence of skillful managers using life-of-fund alphas is
like trying to identify mineral deposits along the route by looking out the
windows of the bus.
Letters to the Editor: Fama-French
and the Active-Passive Debate
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Life
in and after the NBA: Financial Planning for Professional Athletes
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The real question about equity market valuation will come down to corporate
earnings, which have managed to surprise on the upside thus far in
2009. The third quarter should again provide reasonably good news on
this account, although there will be a lot of noise in the numbers for both
the third and fourth quarters. Readers need not be reminded that
economic activity came to a grinding halt around this time last year,
causing third quarter 2008 numbers to weaken and fourth quarter 2008
numbers to fall off a cliff.
Finance After Auschwitz
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Three
Ways to Inspire Clients
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For clients to leave meetings feeling positive, you first have to be upbeat
and positive yourself - hard as that might be some days. Few things are more
important.
Three Ways to Inspire Clients
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Giving advice is
both a privilege and a responsibility, and interpersonal dynamics have a
significant effect on how a recommendation is given and received.
Good relational dynamics between an advisor and client require three things
- integrity, communication and trust.
Advice as Art
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Marketing
with LinkedIn: Create Your Own Group
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Creating and administering your own group is a time-consuming tactic, but
it increases your exposure to your target market and allows direct access
to your group members via LinkedIn email.
Marketing with LinkedIn: Create Your
Own Group
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Letter
to the Editor: Leveraged and Inverse ETFs
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FINRA and SEC's warnings about leveraged and inverse ETFs are not only
justified; to a certain extent, they are insufficient. These products
are so complex that they can confuse not only investors, but investment
professionals.
Letter to the Editor: Leveraged and
Inverse ETFs
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Highlights
from Advisor Market Commentaries
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Milton Friedman believed inflation to be a monetary phenomenon and the real
cost of government was not how the government raised its funds - taxing,
borrowing or printing - but how many funds the government raised. Inflation
and federal government deficits are "hot" topics these days. So
let's discuss these topics within a framework of what I assume Milton
Friedman would have approved of.
"Inflation and Deficits - What
Might Milton Friedman Have to Say?" by Paul Kasriel of Northern Trust
We had been estimating that banks would not recover 20% of the commercial
real estate loans outstanding. Now, we feel that the recovery will even be
less. This distress will certainly have an impact on housing, and one that
will be both good and bad at the same time.
"Commercial Real Estate
Distress Will Have A Big Impact on Housing" by John Burns Real Estate
Consulting
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Perspectives
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