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Advisor Perspectives
Insights into the world of high- and ultra-high net worth investing
November 17, 2009- Vol 3, Issue 46
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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.
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.
The biggest concern of the boomer
generation moving towards retirement (individuals born between
1946 and 1964) is the fear of outliving
their savings. With several different economic and tax
issues to take under consideration, advisors are tasked with an incredible
challenge when it comes to offering an appropriate
retirement planning vehicle that will give their clients the reassurance
that they seek. To address this challenge, Envestnet
introduces a new fully integrated
time-segmented distribution strategy. We thank them for
their sponsorship.
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.
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."
More articles below...
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. To subscribe to this excellent publication, go
here.
Having trouble with ideas for holiday
gifts for your clients? Dan
Richards offers four
strategies for selecting a gift with a meaningful impact.
The slow period in November and December
doesn't mean you should halt your marketing efforts. As Kristen Luke
writes, you need to adjust your
strategies and take advantage of the unique opportunities that
are available during this period. Here are five tips to help make the most out of your
end-of-year marketing.
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.
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
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Ned Davis is in his fifth decade as a market forecaster. Synthesizing
technical, fundamental and macroeconomic analysis, Davis
identified seven indicators that correspond to secular market lows.
Most of those are not in place, and he offered a neutral long-term
forecast.
Ned Davis: The Cyclical Bull Rally
is Not Over
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Federal
Taxes & Municipal Bonds - Historical & Current Perspectives
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As a percentage of
GDP, tax revenues are at the third lowest level in over 60 years, while
government spending is at the highest level. According to the Tax Foundation, the highest tax rate
would have to increase to 95.2% in order to erase the deficit. Municipal
bond yields as a percentage of treasury yields are currently above their
historic mean, and their implied tax rate is negative, meaning that munis
have been yielding more than treasury bonds before tax and indicating that
munis may still be undervalued.
Federal Taxes & Municipal Bonds
- Historical & Current Perspectives
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The Great Wave of Retirees Is Coming
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With a retirement horizon of approximately 80 million boomers, are advisors
ready to offer their clients the level of certainty that they seek for
their retirement needs? Envestnet introduces PlanHorizon - a fully
integrated time-segmented distribution strategy developed to bridge the gap
from wealth accumulation to retirement income distribution.
PlanHorizon - A Retirement Income
Solution Designed to Seek Consistent Income Throughout Retirement
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Bruce
Greenwald on Positioning First Eagle's Funds
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On Buffett's
purchase of Burlington Northern, Greenwald says "It looked to us like
an oil play. He has a history of making bad oil play decisions.
And that was at $75/share, we thought there were better oil plays. At
$100/share we think he has lost his mind."
Bruce Greenwald on Positioning First
Eagle's Funds
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Our Steroidally Challenged Economy
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Our economy suffered severe injuries last year, and to keep it going massive
amounts of steroids were and are being injected - they're what economists
call stimulus (or government intervention).
Our Steroidally Challenged Economy
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The question remains when the long-term will become the short-term, and of
course nobody can answer that question with any certainty. One thing
can be said with certainty, however - by the time we find the answer to
that question, it will be too late to do anything to prevent the
instability that will follow. That is why, rather than push the
problem off to the future, it remains incumbent upon our current leaders to
promulgate a meaningful program for budgetary discipline as soon as
possible.
Disheartened
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Client
Gifts that Stand Out
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We all want the
things we do to thank and acknowledge our clients to stand out and be
remembered afterwards. This is harder and harder to do as both we and many
of our clients have done it all and seen it all.
Client Gifts that Stand Out
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Five End-of-Year Marketing Tips
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Make the most of these last two months of the year by planning for 2010 and
finding fun and creative ways to market to your clients, network within the
community and nurture existing relationships. Doing so will set the
stage for a prosperous new year.
Five End-of-Year Marketing Tips
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Letters to the
Editor
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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.
Letters to the Editor
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Highlights from Advisor Market Commentaries
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Investment-grade bonds are likely to generate average returns in a 2% to 3%
range in most scenarios over the next five years. That is notably below
their long-term historical average of over 8%. With the Barclays Capital
Aggregate Bond Index yielding about 3.6%, intermediate-term
investment-grade bond yields are also below average relative to their
history.
"Investment-Grade Bonds Asset
Class Review" By the Investment Research Team at Litman Gregory
My hypothesis is that investors, rather than borrowing dollars, are selling
U.S. Treasury securities that they already owned, selling them ultimately
to capital-concerned/constrained banks, and are then investing the proceeds
in higher-yielding foreign government securities. This would result in a
weaker dollar, but does not entail any net new credit creation as banks are
reducing their holdings of non-Treasury debt by more than they are
increasing their holdings of Treasury/Agency debt. The upshot? Worries
about a new credit bubble from a dollar carry trade are much ado about
nothing.
"Accumulated Musings" by
Paul Kasriel of Northern Trust
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Perspectives
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