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Tempting TIPS
by Anthony Valeri of LPL Financial,
Lower inflation expectations as a result of falling oil prices have weighed on TIPS prices during the second half of 2014. TIPS underperformance has led to the lowest market-implied inflation expectations of the past four years. We do, however, find TIPS an attractive high-quality option and certainly more appealing than Treasuries as a result of recent underperformance.
Financial Planning for an Uncertain Energy Future
by Richard E. Vodra,
Advisors hearing optimistic forecasts of plentiful new supplies of oil that may last for decades may be encouraged to make aggressive projections for their clients. It is critical to understand the role oil plays in the economy and the factors that will affect future supplies. Advisors should "drill down" beneath the slogans to see both risks and opportunities upon which to base their recommendations.
Busting the Myth About Size
Many market participants (including investors, product providers, and analysts alike) assume that, just as value stocks on average outperform growth, small-cap stocks on average outperform large-caps. Unlike value, however, and contrary to popular opinion, there is little solid evidence that stock size affects performance.
Black Gold Loses Glitter
by Peter Schiff of Euro Pacific Capital,
The stunning 40% drop in the price of oil over the past few months has scrambled global economic forecasts, changed the geo-political landscape, and has severely pressured many energy sector investments. Economists are scratching their heads to determine if the drop is good or bad for the economy or whether cheap oil will add to or decrease unemployment, or complicate the global effort to "defeat" deflation.
Glancing Back but Focusing Forward
The US stock market appears set for further gains into at least the first half of next year, although risks are elevated with valuations no longer discounted and looming rate hikes. There is hope that ongoing easy monetary policy by global central banks can help to bolster economic activity is areas such as the Eurozone, China, and Japan. But we are somewhat skeptical about stock market performance in developed international countries and favor emerging markets to start out the New Year.
Three Winning Arguments for Japan
by Russ Koesterich of BlackRock,
I travel to Japan every year, normally around early December. The more time I spend there, the more I come to realize what a uniquely distinct country it is. On my trip last week, one of my Japanese colleagues pointed out that Tokyo was starting to allow taller office buildings. I assumed the previous limitation was a function of Japans location in a geologically active part of the Pacific. My friend politely laughed. The injunction was due to the fact that no building was supposed to look down on the Imperial Palace.
The Hidden Value of a Reverse Mortgage Standby Line of Credit
by Wade Pfau,
Recent research has investigated how opening a standby line of credit through a reverse mortgage and strategically spending from this line of credit can help improve the sustainability of retirement income strategies. In this article, I show that the benefits of opening a home-equity conversion mortgage (HECM) line of credit extend beyond meeting spending needs.
Designing Balanced DC Menus: Considering Equity Investments
by Stacy Schaus, Ying Gao of PIMCO,
Defined contribution investment lineups typically provide numerous equity choices but still may lack adequate diversification and return potential. Participants may benefit by accessing high-growth markets such as emerging markets and tapping in to dividend-paying stocks. Retirement outcomes could improve further by including portfolios structured using fundamental measures rather than market capitalization.
Jeremy Grantham's Favorite Book
by Michael Edesess,
Jeremy Grantham has long advocated that economic growth is inexorably constrained by physical resources, especially oil and other fossil fuels. Thus, in his quarterly letter, he writes, "I think that the old growth rates in productivity will not come back, at least until we have had a transition away from fossil fuels." But Grantham also gratefully notes that "a new book appears that amazes me by doing the opposite, and by an increasingly well-known economist no less - It is entirely sensible from start to finish - I agree with almost everything he writes."
Who Should Go to the Bowls?
When I was a kid there were just four year-end college football bowl games. Today there are 39. Perhaps the title of this piece should be Do we need holiday football bowls at all? But I guess they wouldnt produce them unless there was a demand for them from the cities, hoping to get some travelers, to the sponsors, hoping to get some attention, to the teams, seeking to cap a successful season, and to the fans, who are just looking to have some fun and experience a last hurrah for this years heroes.
Sources of Investment Power: Why Expertise Matters and What it Looks Like
There is a wide dispersion of ability in the investment services industry which makes it difficult to identify expertise. This is a shame because expertise is a critical factor in making good decisions and in avoiding bad ones. As the investment landscape becomes more difficult, it will become progressively more important to identify and access expertise.
Is the Oil Price Slump an Early Holiday Gift for Some Consumers?
With 60% of global GDP driven by consumers, the impact that sustained lower oil prices will have on the global economy is an important factor for investors to take into account. The benefits of lower oil prices will not be evenly distributed and it is important to think about countries that stand to benefit more because of higher consumption and/or less economic dependence on oil exports.
Exchange Rate 101: A Primer For International Investors
by Bryce Fegley of Saturna Capital,
A solid grasp of exchange rates and how they impact various asset classes can help international investors make better-informed decisions. The asset class most likely to be impacted negatively by a strengthening dollar is non-dollar fixed-rate bonds.
Digging Deeper for Market Valuations
Nobody buys a house without looking inside. And nobody should make investment decisions without doing their due diligence on the underlying fundamentals. But that is exactly what happens in an investment world increasingly driven by high-level asset allocation and utilization of passive, index-based products or strategies. Pundits look at aggregate index data and declare one country cheap (or some other action-inducing characteristic) vs. another. Maybe they are right, but maybe they are missing something too.
Recession Probability Models - December 2014
by Ted Kavadas of StratX, LLC,
There are a variety of economic models that are supposed to predict the probabilities of recession. While I dont agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.
Can Stocks Deliver the Goods in 2015?
by Burt White of LPL Financial,
We believe stocks will deliver mid- to high-single-digit returns in 2015. We expect earnings, and not valuations, to do the heavy lifting in producing potential stock market gains for investors in 2015. Monetary policy is in transit in 2015, when stocks will face a shift from the very loose monetary policy of the Federal Reserves (Fed) quantitative easing (QE) program to an environment in which the Fed begins to hike interest rates.
Making Sense of Dollar Strength
by Bradley Krom of WisdomTree, Inc.,
Over the last several months, investors and economists alike have started to take note of the broad-based appreciation of the U.S. dollar. However, we believe the magnitude of this years move tells only a portion of the story. In our view, this summers rally does not represent a correction or near-term adjustment, but rather the continuation of a broader trend that started in the middle of 2011.
The Tooth-Fairy Economics of Jeff Madrick
Incentives don't matter, tradeoffs don't exist and there are no limits to what the government can give you. Those who believe this dogma are likely to still have faith in the tooth fairy. In Seven Bad Ideas, a critique of the neoclassical revival in economics that surrounded Milton Friedman and that affected policy and politics worldwide for more than a generation, Jeff Madrick emerges as tooth-fairy economics' chief exponent.
Response to Larry Swedroe's Article, "How AQR's New Fund Adds Value"
by Michael Edesess,
In our November 18 issue, Larry Swedroe published an article titled "How AQR's New Fund Adds Value." His article was followed by a lively debate on APViewpoint. Michael Edesess took one side of that debate, in opposition to Swedroe, and his position is stated here.
The Dow Jones: Beautiful Tree in the Desert
by Wim Grommen of Transfer Solutions,
The Dow Jones Industrial Average (DJIA) Index is the only stock market index that covers both the second and the third industrial revolution. Calculating share indexes such as the Dow Jones Industrial Average and showing this index in a historical graph is a useful way to show which phase the industrial revolution is in. Changes in the DJIA shares basket, changes in the formula and stock splits during the take-off phase and acceleration phase of industrial revolutions are perfect transition-indicators.
Five Things To Ponder: Tryptophan Induced Coma
by Lance Roberts of Streettalk Live,
As we prepare for the annual food fest, and post-Thanksgiving tryptophan-induced food coma; I thought this weekend's reading list should be a bit of a smorgasbord of interesting topics to stimulate your brain cells between naps and football.
Weighing the Week Ahead: Are Investors Too Complacent?
There is no investment edge from repeating what you read in the morning paper. Here was my list still worth watching: Geo-political that is not on the current radar a true black swan. An increase in the PCE index that was not accompanied by strong economic growth. Wage increases that were not accompanied by strong economic growth. Declining profit margins that were not accompanied by strong economic growth and increased revenues. An increase in the chances for a business cycle peak (the official definition of a recession). Remote at this point. An increase in financial stress t
2015 Is Shaping Up to Be a "Turkey" of a Year for the U.S. Economy and Stock Market
by Paul Kasriel of The Econtrarian,
As U.S. thin-air credit growth is on track to slow in 2015, thin-air credit growth in the eurozone and in Japan is likely to accelerate as the European Central Bank and the Bank of Japan step up their QE programs. These foreign QE programs could indirectly stimulate U.S. exports. But the dominant factor affecting the U.S. economy in 2015 will be below-normal growth in U.S. thin-air credit. So, as you gather your family around you on Thursday, November 27, to give thanks for our bountiful 2014 economic harvest, bear in mind that next years harvest is likely to be a turkey
ECRI Recession Watch: Weekly Update
by Doug Short,
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.2, up from the previous week's 132.0. The WLI annualized growth indicator (WLIg) is at -2.4, down from -2.9 the previous week. ECRI's latest public statements have focused on Japan. The website now features a November 17th response to the announcement of Japan's Fourth Recession Since 2008.
Will $2.50 Gasoline Catalyze U.S. Consumer Stocks?
A great deal has been written about how lower gasoline prices could stimulate discretionary purchases in the United States. RBOB gasoline futures peaked on June 20, 2014 at $3.12 per gallon and closed on November the 14th at $2.04. Those in the bearish camp like Randall Forsyth at Barrons argue that lower oil and gas prices will negate and ruin the economic benefit of the oil boom.
The U.S. Labor Market - Show Me the Money
The U.S. labor market data has improved in the last six months now that many measures have reached cyclical highs. For the Federal Reserve though, this is not enough. They want to see this data feed through to a broader rise in incomes and wages, and ultimately spending. This will be necessary to bend the economic trajectory toward sustainably higher growth.
Investment Implications for UK DC Schemes in Light of Tax and Regulatory Changes
by William Allport of PIMCO,
With greater flexibility and choices available to DC savers in the latter stages of their career, we believe DC schemes need to reconsider their traditional pre-retirement approach to providing low-risk, income-orientated and pre-retirement investment portfolios. The primary immediate challenge for UK DC schemes is navigating the need for capital stability versus a portfolio that can generate a sustainable income stream for DC savers in retirement.
How AQR's New Fund Adds Value - An Alternative Approach to Alternatives: Investing with Style
by Larry Swedroe,
The conventional justification for alternative investments has been their ability to effectively diversify against core equity and fixed-income allocations. But, in many cases, the empirical data doesn't support that view. A new fund provides a different way to obtain returns from sources that have low to negative correlation to stocks and bonds, as well as each other - an alternative to alternative investment vehicles.
Bubble Watch Update
by Jeremy Grantham of GMO,
As you may remember, the January Rule serves as a kind of barometer for the behavior of the market in the coming year. Historically, when January was down, the rest of the year had over twice the declines than one would expect randomly, far more mediocre months, and a very sub average return. But it is far from perfect and it had the unusual problem this year of bumping into the positive signal from the Presidential third year, which started for us on October 1.
The Beginning of the End of the Fossil Fuel Revolution (From Golden Goose to Cooked Goose)
by Jeremy Grantham of GMO,
The quality of modern life owes almost everything to the existence of fossil fuels, a massive store of dense energy that for 200 years had become steadily cheaper as a fraction of income. Under that stimulus, the global economy grew ever larger, more complex, more inter-related and, I believe, more fragile. Then around the year 2000 the costs of finding oil start to rise at over 10% a year, and with the global economy growing at only 4% oil starts to fall behind in affordability.
On My Radar: Stocks Remain Richly Valued
Shortly after each month end (after the most recent reported earnings numbers are posted), I like to run through a few of my favorite valuation charts to gauge level, asses risk and to get a sense for what the probable forward return may be. Fortunately, there is a great deal of historical data that can help us.
Risk Parity: Comparing the Objections With Reality Part 1
Over the last several years, risk parity has gained prominence as a general asset allocation approach as well as a specific strategy. Rising adoption rates of the approach have invited scrutiny from both practitioners and academics. We agree with some of the challenges identified by critics and have addressed them over time through our research agenda. Others, however, either do not apply to our version of risk parity or, at least to our knowledge, the approach in general.
Tired of Being Scared Yet?
Bull markets are based on climbing the proverbial wall of worry, and this cycle has been no different. We have consistently argued over the past five years that the current bull market could be one of the biggest of our careers. Both investors and corporations continue to act conservatively because of the uncertainty caused by a litany of issues. Uncertainty is typically the engine of bull markets.
The ETF Trader Interview Series: Ken Dolan, Jefferies & Company
by David Abner of WisdomTree, Inc.,
In this edition, Dave Abner, Head of Capital Markets at WisdomTree, speaks with Ken Dolan, Senior Vice President on the ETF trading desk at Jefferies & Company, Inc. Ken joined the desk in 2011 after spending nine years at LaBranche & Co. as a Managing Director and Head of ETF Trading. In addition to his ETF trading experience, Ken has nine years of trading experience across equities, fixed income and emerging markets at Deutsche Bank, Credit Suisse and Lehman Brothers. He received a BS from Providence College and is a Chartered Financial Analyst.
Municipal Market Perspectives
by Team of SMC Fixed Income Management,
The most surprising and impressive asset class performance has been generated by long-term municipal bonds. Most pundits were calling for negative market performance again this year following the sharp 2013 sell-off; no one we know of (ourselves included) foresaw the stellar returns achieved through the years first ten months.
Portfolio Effects of Holding Gold in Yen Terms
by Ade Odunsi of AdvisorShares,
Last week in Gold in Yen Calm in the Eye if the Storm we focused on the factors behind the significant outperformance of gold priced in yen versus gold priced in dollars, identifying the strength of the dollar as the primary factor pushing down the price of gold in dollars. While on the currency side, the strength of dollar resulted in significant weakness in the YEN/USD FX rate.
Results 5,351–5,400
of 6,446 found.
