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Policy Uncertainty on the Rise
Congress seems to be digging in and ramping up the rhetoric in advance of a possible government shutdown, a debt ceiling increase and a probable selection of a new Fed chair. We think it is likely policymakers will agree to a short-term deal to fund the government and avert a shutdown, and also cobble together a resolution on the debt ceiling, although neither is likely until the last minute. The Fed chair debate will likely continue to sway markets over the next few months, leading to greater uncertainty and greater market volatility.
The Price Clients Pay for Worst-Case Forecasts
by Bob Veres,
Clients and the world at large give inordinate attention to downside scenarios, and nobody is calling our attention to the much larger upside of our business and investment landscape. The human brain amplifies this effect, because it is hardwired to notice threats much more than opportunities. I recently spoke with Dennis Stearns ? an advisor who happens to be an expert in scenario planning ? about the role planners need to play to counteract media-driven negativity.
5 China Charts That Look Bullish for Commodities
Over the past few months, investors have seen better economic data coming out of Europe. Consumer confidence in the continent has been rising, manufacturing data is improving and the fiscal situation is on the mend. Now, China appears to be strengthening as well, which could signal better times ahead. Below are five charts that look bullish for China and commodities. While not meant to be comprehensive, they do point to areas where investors might want to pay close attention.
Embrace Bottom Up
With all the conflicting macro news, some good, some not, and with the S&P 500 and the Dow at new highs while many sectors languish, it is preferable to focus on the little picture not the big one. The big one may currently be more unpredictable than the small one, being bottom up investment in undervalued securities. Those may currently be less popular, but we value investors are naturally driven to buy investments low, that are neglected and unpopular, with the view of selling them high when their popularity is enhanced. Buy low and sell high. Not buy high and sell higher as is now in vogue.
What Does an Improving Economy Mean for Stocks and Bonds?
by Charlie Dreifus of The Royce Funds,
With the economy improving, inflation tame, and a Federal Reserve meeting approaching in September, Portfolio Manager and Principal Charlie Dreifus believes that small-caps remain an attractive option within the equities market.
Trickle-Up Economics
Major magazines have a history of putting a topic on their cover at the end of a long-term trend. For example, The Death of Equities was a Business Week cover in late 1979, near the end of a miserable stretch in the US stock market. Times recent cover story, The Childfree Life, got us wondering about the economics of childbearing in the US? Does Times cover mark the end of a trend? Can the US economy succeed without homegrown population increases? Will economic success driven by the current demographics in the US trickle down to unemployed blue collar
August Monthly Investment Bulletins
by Team of Bedlam Asset Management,
For the first seven months of the year the portfolio rose by 25.2% vs. 19.3% for the index. During the month, the 6.4% gain was 150 basis points ahead. Three trends continued: the gradual increase in fund flows into equity markets relative to other asset classes, slightly improving economic data across most developed countries, and a mild deterioration in many developing nations.
What's the Point of Investing in Dreams?
by Vadim Zlotnikov of AllianceBernstein,
Is innovation dead or are we on the cusp of new technological revolutions? Without resolving this epic debate, we believe that market conditions today are conducive to investing in companies with disruptive potential, but it takes a sober approach to find big dreams that can deliver big returns.
Preparing for Rising Interest Rates: Bond Ladder vs. Bond Fund Ladder
The last few years have seen interest rates hold steady or drift lower, causing investors to be concerned about how their fixed income portfolios will be affected when rates eventually rise. The question is, how can investors protect themselves from rising rates while still earning income while they wait?
Purgatory Is Heaven
by Tony Crescenzi of PIMCO,
Since June, the Fed has stressed three messages: Tapering is not tightening, the federal funds rate will not move in tandem with a slowdown in asset purchases, and any change in Fed policy will rely on data, rather than a date. If Ben Bernanke leaves the Fed when his term expires, whoever is chosen to replace him will be bound by rules and the strength of the institution. The outlook for interest rates depends more on the Feds overall approach to the policy rate, and PIMCO believes the Fed will not increase that rate until 2016.
Why GDP Deserves Less Attention
by Zach Pandl of Columbia Management,
Before joining Columbia Management I worked for several years as an economist at a few of the large broker-dealers in New York. One of my primary functions was to maintain an ongoing estimate of growth in the nations gross domestic product (GDP)a so-called GDP bean count. Most investors use GDP as their primary summary measure of overall economic performance, so they are keenly interested in how incoming data are likely to impact the estimates. Our running tally of GDP growth for the current quarter was one of the most sought after pieces of research we produced.
China's Government Can't Stop the Bust
On a recent trip to Europe we participated in a forum in Milan of five stock picking organizations. Two were from Brazil, one was from Malaysia and one was picking stocks inside China via the Shanghai Stock Exchange. We believe what they said was an enticement to investors for the purpose of getting them excited about stocks in their country. To us, this reveals a great deal about where prices in emerging stock markets and commodities are headed over the next five to seven years.
Extreme Brevity of the Financial Memory
by John Hussman of Hussman Funds,
The period of generally rich valuations since the late-1990s (associated with overall market returns hardly better than Treasury bill returns since then) has created a tolerance for valuations that, in fact, have led to awful declines, and have required fresh recoveries to elevated valuations simply to provide meager peak-to-peak returns.
The Calm Before the Storm?
Record highs in US equities have resulted thus far in only modestly elevated investor sentiment and it appears retail investors are returning to the market, which could fuel further gains. However, volatility is likely to increase with political and Fed issues on the horizon. Europe remains attractive, along with Japan, but we are watching the potential consumption tax increase closely, while Chinas valuations are improved but concerns remain.
Investment Advice Technology and How to Lose Money in the Coming Years
by Kendall Anderson of Anderson Griggs,
Adventures are good for my soul. They create wonderful memories, both of where I have been and all the effort it took to get there. All of us have memories, both good and not so good. I am a bit worried about the near term future.
Two Charts Illustrate How to ?Follow the Money?
Too often investors get caught up in their political allegiance or parties, focus on the negative and lose confidence in stocks. As a result, they can miss great bull markets. I believe when it comes to finding investment opportunities, it?s not about the political party, it?s about the policies, both monetary and fiscal.
The Federal Reserve in a Time for Doves
by Kenneth Rogoff of Project Syndicate,
The battle is on to replace current US Federal Reserve Chairman Ben Bernanke, and two of the leading candidates, Lawrence Summers and Janet Yellen, display a dovish bias regarding inflation. In normal times, that would be a handicap; under current conditions, it is an advantage.
Detroit A Guest Commentary and Noise from DC
by Gregg Bienstock of Lumesis,
This week I bring you a guest commentary from a friend and colleague, Josh Laurito. His blog post, Why Detroits Bankruptcy is a Bigger Deal Than You Think may rankle a few of you and cause others to challenge Joshs points. That is what he does so well he thinks outside of the box and offers context not necessarily shared by folks who are all munis, all the time. It is precisely these reasons that I encourage you to read on. In my years of knowing Josh, I have always found his thinking and approach to be insightful and, at times, a bit different.
FPA Crescent: Steve Romick's Quarterly Commentary
by Steven Romick of FPA Funds,
FPA Crescent Fund has released its quarterly commentary examining the state of the fund and its investments as well as an outlook on the greater economy. Portfolio manager Steve Romick feels that the economic recovery has been disappointing and largely engineered by central bank policy and worries that low interest rates and novel and theoretical Fed policy could lead to unintended consequences.
Wedding Bells in Romania
I was invited to attend the wedding of one of our Romanian staff in June, and I jumped at the opportunity to celebrate with the happy couple, visit a different part of Romania, and talk to locals about life there. The celebration represented a microcosm of the juxtaposition of old and new in Romania, and this is similar for investors there as progress continues toward market reform.
Perspective
by Jim McDonald of Northern Trust,
Investors have faced a torrent of central bank actions and communications during the last month, and markets continue to differentiate among economies and companies a welcome maturation from the markets? prior regime of ?risk on/risk off.? We believe the Federal Reserve has moved from an easing bias to one of tightening but at an elongated pace that will remain data dependent. Joining in this parsimony are some key emerging-market central banks, including the People?s Bank of China, which is working to control credit risk in the Chinese economy.
Risk Communicates Signals that Something Important is at Stake
The equity markets hit new all-time highs again this past quarter. However, we believe this rally is largely due to Ben Bernanke?s policy of Quantitative Easing (QE) which presently equates to the purchase of $85 billion in U.S. government debt every month. Through the Federal Reserve?s policies our government has effectively printed trillions of dollars since the financial crisis began, arguably inflating a host of asset prices including the stock market.
The Purgatory of Low Returns
by James Montier of GMO,
This might just be the cruelest time to be an asset allocator. Normally we find ourselves in situations in which at least something is cheap; for instance when large swathes of risk assets have been expensive, safe haven assets have generally been cheap, or at least reasonable (and vice versa). This was typified by the opportunity set we witnessed in 2007.
Any Bonds Today?
Given the acknowledged limitations of the CPI, we nevertheless use it in myriad ways. It governs cost-of-living adjustments for Social Security beneficiaries, government employees, and many labor union members. CPI is baked into the general cake, even though we know it is an imperfect fit in almost every situation.
Challenging a Long-Held Assumption about Commodities
It is widely accepted that China spurred higher commodity prices in the past decade. And if the country was the force behind the boom, then the assumption is that China?s lower, but still healthy growth will be a drag on commodity prices. But recent research challenges this assumption.
Making Sense of the Bond Market
by Phelps McIlvaine of Saturna Capital,
The great challenge for investors and advisers today is to forecast where interest rates and bond prices will be once the influence of radical central bank intervention dissipates. Measures of inflation expectations are declining, and deflation remains the dominant influence on interest rates. In assessing whether to trim bond allocations, it is important to revisit the reasons for selecting a particular asset allocation before modifying or abandoning it.
Commodities 2013 Halftime Report: A Time to Mine for Opportunity?
It was a challenging first half of the year for most commodities, with only two resources we track on our Periodic Table of Commodities Returns rising in value. Natural gas and oil rose 6.5 percent and 5 percent, respectively, while silver lost a third of its value and gold lost a quarter of its price from the beginning of the year.
Beware Of The Valuations On The Best Consumer Discretionary Dividend Growth Stocks
by Chuck Carnevale of F.A.S.T. Graphs,
The Consumer Discretionary sector consists of businesses that sell nonessential, and therefore, discretionary goods and services. Companies in this sector include retailers, media companies, consumer services companies, consumer durables and apparel companies, automobiles and components companies. Since so much of what this sector offers is discretionary items, companies in the sector tend to do best when the economy is strongest. Unfortunately, as we will soon see, so do the prices of their stocks tend to perform best when the market is performing best.
What is Happening to Gold?
John Hathaway, manager of the Tocqueville Gold Fund (TGLDX), examines in his latest Tocqueville Gold Strategy Investor Letter the dramatic developments in the gold market over the last six months. The letter goes on to discuss the impact the Fed continues to have, and suggests that todays valuations represent a compelling entry point.
Retirement Portfolios: Fears over Rising Rates are Overblown
by Joe Tomlinson,
The second quarter saw increases in interest rates, losses in every category of bonds and investors abandoning fixed-income markets. The distress has been particularly acute among retirement investors who considered bond funds to be safe. But are fears of bond losses overblown? I will make the case that the rise in interest rates is actually good for retirement portfolios. To see this, one has to look beyond the quarterly statement losses and focus on overall retirement outcomes.
So the Bulls Returned...
by Blaine Rollins of 361 Capital,
So the Bulls returned to Equities on a holiday shortened week with plenty of news and data to outrun. The Egyptians threw out their President and the Portuguese gave a thumbs down to their government. But dovish comments out of Draghi/ECB, strong data out of Japan, and a 3rd strong month of Non-Farm Payroll growth pushed the Russell 2000 to all-time highs as the rest of the market jumped into its slipstream.
Taper Tantrum Grips Muni Market
The markets have been in fits since mid-May, when Federal Ben Bernanke planted the seed that the central banks prolonged asset buying program would start winding down. Many investors were gripped with irrational panic, a so-called taper tantrum that roiled equity and fixed income markets. Rafael Costas, senior vice president and co-director of our municipal bond department, believes the early summer swoon sweeping the muni markets is unfounded and should be temporary, but the core reason for investing in the sector remains solid: long-term tax-free income potential.
Stay the Course As Mixed Signals Move Markets
We maintain that gold is in extremely oversold territory and mathematically due for a reversal toward the mean. Yet when gold prices plummet, fear takes over and some investors forget the fundamental reasons to own gold: Gold is a portfolio diversifier and a store of value. It is a finite resource with increasing global demand.
The New, Old Normal
We believe the recent volatility will be relatively short lived and provides an opportunity for investors who need to adjust their portfolios to do sowith long-term goals in mind. The risks associated with fixed income have been illustrated over the past couple of weeks and rising yields have caused equity volatility and a pullback. But we remain optimistic about US equities as well as developed international markets; particularly relative to emerging markets.
Investment Bulletin: Global Equity Strategy
by Team of Bedlam Asset Management,
For the first five months of the year the global portfolio enjoyed a net gain of 21.0%, 350 basis points better than the index, edging ahead further in May. Recent smoke signals from the Federal Reserve Bank implying - subject to a wide range of get-out clauses that less money might be put into the system, have caused market hysterics. Bond investors have rightly been stampeding out, ending a 32-year old bull market. Its longevity had caused dangerous complacency and overexposure, especially to illiquid and expensive emerging market debt through open-ended vehicles.
AdvisorShares Weekly Market Review
by Team of AdvisorShares,
Once again, US stock indexes declined last week based on investors fears of rising interest rates. While markets were rising at the beginning of the week, on Wednesday, Federal Open Market Committee Chairman Ben Bernanke said that if the economy continued on its current growth path, the Fed would scale back on asset purchases by the end of the year and attempt to end the extraordinary measures by the middle of 2014.
End of Quantitative Easing Tapers Asian Returns? Part I
by Robert Horrocks of Matthews Asia,
Historically Asian markets have done well in periods of a weaker U.S. dollar and faster growth, so lowering peoples growth expectations and causing them to bid up the U.S. dollar is about the worst combination for Asian equities historically. And I do not think that Asias relation to global markets has changed significantly enough to nullify this past relationship. However, there are reasons to think that the effects on Asias equity prices may be a little more muted this time.
Why Wellness Matters: The Real Cost to Employers of Unhealthy Employee Behaviors
by Team of Manning & Napier,
It is no secret that health care costs have ranked among the top concerns of employers for much of the last decade. There is good reason for this concern, as health care costs have outpaced inflation for years, and employers often bear the brunt of these costs for their employees and dependents. Employers looking for ways to stem the tide of runaway health plan expenses should investigate wellness programs designed to impact the source of the costs unhealthy behaviors.
Floating-Rate Notes: A New Frontier in Treasury Investing
For investors, Treasury floating-rate notes (FRNs) will likely offer a hedge against rising rates and a yield pickup over a T-bill. For the Treasury, FRNs could help reduce the risk that an auction could fail to attract customer interest, and also help diversify its investor base. PIMCO will evaluate the merits of these securities based on our macroeconomic top-down view and valuation-focused bottom-up analysis.
Fed Zombification
The enthusiasm of our culture for Zombies is estimated to contribute a tidy $5 billion dollar a year to GDP, and that doesnt even include the too-big-to-die zombie banks. In my opinion, the acute interest in zombies and horror (and escapism in general) says something about our countrys mental health.
Weekly Commentary & Outlook
Stock prices came under pressure last week over the strength of the Japanese Yen versus the dollar which led to a large decline in stock prices there as well as the misplaced fears domestically that the Federal Reserve Board will pull forward its timetable for tapering its quantitative easing policy.
Results 3,001–3,050
of 3,345 found.
