Advisor Perspectives Vol.5:iss49

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December 6, 2011 - Vol 5 Issue 49

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Why Shiller and Soros May Be Wrong about Farmland Investing
By Robert Huebscher

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.

How Outsourcing Drives Growth

Sponsored Content by Envestnet

Principals at the most successful advisory firms spend 75% of their time on new business development, according to Schwab Advisor Services. This figure may seem daunting for many RIAs, but it's a number you can reach. In order to spend more time growing your firm, you may need to consider outsourced solutions for any and all activities that aren't directly helping you serve existing clients or win new business. Read our white paper, "Outsourcing: Drive Growth and Profitability, Focus on Core Competencies," to learn more about the challenges that RIAs face today, the benefits of outsourcing and how two advisors were able to successfully grow their businesses.

The Unspoken Truth about Hedge Funds
By Michael Edesess

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.

Two Simple Questions to Motivate Your Assistant
By Dan Richards

High on the list of holiday wishes for many advisors would be a cheerful, motivated, efficient team, united in the common goal of moving your business forward. And while you have no control over many things, you have a great deal of influence over how well your team operates.

The Quality Conundrum
By J.J. Abodeely, CFA, CAIA

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.

Small-Cap ETFs: Tail or Dog?
By Mariko Gordon

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.

Our Most Read Article from Last Week:
Jeremy Siegel on Why Stocks are 'Extremely Attractive'

By Robert Huebscher

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.

Highlights from Market Commentaries

Below are the three most widely read commentaries during the last week:

Are Corporate Balance Sheets Really the Strongest in History?

At an aggregate level, corporate balance sheets look reasonable, but are certainly not "stronger than they have ever been in history." Cash levels are elevated, but this is at best a second-order factor (with excess cash representing only a few percent of total assets), while debt remains near record levels relative to total assets and net worth.

Tags: US Sovereign Debt

Are Corporate Balance Sheets Really the Strongest in History? by John P. Hussman of Hussman Funds

Family Feud

Investors should recognize that Eurolands problems are global and secular in nature; it will be years before Euroland and developed nations in total can constructively escape from their straitjacket of debt. Global growth will likely remain stunted, interest rates artificially low and investors continually disenchanted with returns that fail to match expectations. Investors should consider risk assets in emerging economies, and bonds in the strongest developed economies, where the steep yield curve may offer opportunities for capital gains and potentially higher total returns.

Tags: Europe Sovereign Debt

Family Feud by Bill Gross of PIMCO

3 Things to Watch This Week

The business sections of this weekend's newspapers understandably focus on last week's disappointing stock market performance (the worst in two months for the S&P) and another round of credit downgrades for European sovereigns (Belgium, Hungary and Portugal). Yet, these are essentially lagging indicators. The stories that may well materialize in the next few weeks will be more heavily influenced by what happens this week to Europe's latest yield curve inversion, core bond rates, and policy announcements.

Tags: US Europe Sovereign Debt

3 Things to Watch This Week by Mohamed A. El-Erian of PIMCO