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Beta Earthquake
by Ben Hunt of Salient Partners,
One of the things I like to keep my eye on when Im puzzling out whats going on in the market are the specific company factors that loosely define concepts like Momentum and Value. I do this because any sort of big market move, like weve seen over the past week, is inherently over-determined and over-explained. That is, there are dozens of "reasons" trotted out by the financial media and various experts, ALL of which are probably right to a certain degree.
Gold - Managing the Downside
by Ade Odunsi of AdvisorShares,
We get a lot of questions regarding the impact on portfolio risk of having an allocation to gold. In particular given the status of gold as a safe haven asset, focus has centered on its performance during periods of extreme market stress ? what is the downside to gold during periods of high risk aversion? The high level answer to this question is that the financing currency used to make the gold purchase matters and as is often the case when discussing portfolio construction, ?you ask a simple question, you get a complex answer?.
Tax Management - Optimized for Investors
Academic studies of portfolio management often neglect real world considerations. Turnover is often used to gauge tax management capabilities, but used in isolation turnover can be misleading. Tax lot accounting is integral to maximizing after-tax returns. Tax management must be an integral part of a managers buy/sell discipline, and should be applied throughout the year. OSAMs after-tax results in 2013 are indicative of an effective, integrated tax management process.
The Russians Are Coming
by Jeffrey Saut of Raymond James,
The Russians Are Coming, The Russians Are Coming is a 1966 American comedy film directed by Norman Jewison and based on Nathaniel Benchley?s book The Off-Islanders. The movie tells the Cold War story of the comedic chaos that happens when a Soviet submarine runs aground closely offshore a small island town near New England and the crew is forced to come ashore. Last Friday, however, rumors that the ?Russians are coming? swirled down the canyons of Wall Street, causing a late Friday Fade that left the S&P 500 (SPX/1865.09) down an eye-popping 24 points.
"I Will Gladly Pay You Tuesday for a Hamburger Today"
In October of 2013, Robert Shiller won the Nobel Prize in economics for his research on spotting market bubbles. Shiller, an economist and professor at Yale University who accurately predicted the housing bubble, is a pioneer of behavioral finance, or the understanding of how psychology causes us to act irrationally with our money.
Dare to be Great II
In September 2006, I wrote a memo entitled Dare to Be Great, with suggestions on how institutional investors might approach the goal of achieving superior investment results. Ive had some additional thoughts on the matter since then, meaning its time to return to it. Since fewer people were reading my memos in those days, Im going to start off repeating a bit of its content and go on from there.
Take an Active Approach to Selecting Your Active Manager
For some time, we have written about the challenges active equity managers face from a market with unusually high cross-correlations. We have also stated our belief that the correlation pendulum would swing back to more normal levels (at least) as the aftershocks of the 2008 financial crisis abated, with a corresponding benefit to active managers. That swing is well under way and a growing number of commentators have begun to echo our observation.
Avoiding Losers Is as Important as Picking Winners in High Yield Markets Today
by Andrew Jessop, Hozef Arif of PIMCO,
Although high yield bonds span a broad range of sectors, industries and individual credits, their yields today tend to fall within an increasingly narrow range. Narrow dispersion means portfolio decisions that target outperformance should now be guided by avoiding deteriorating credits as much as by selecting the most attractive rising stars. Strategies for picking the rising stars can extend to CCC rated credits where agency ratings lag the improvement in the underlying credit profile.
Moving Forward With the Normalization of Yields
by Scott Mather, Michael Story of PIMCO,
One response to yield normalization is to consider retaining core bonds and diversifying the specific risk factor of concern, in this case duration. In the past, global bonds have captured most of the upside but avoided a significant amount of the downside relative to domestic-only bonds. Generating capital gains from bonds in a rising yield environment requires defining concretely what yield normalization means ? where yields are going and when they will get there ? and setting these expectations against forward market pricing, country by country.
On Cruise Control
The first quarter was a relatively calm start to the year. The Dow was down 0.7%, the S&P up 1.3%, and the NASDAQ up 0.5%. International equities were nearly flat as well with the MSCI ACWI ex US down 0.1%. European equities were up 1.5% and Pacific equities were moderately negative, with the MSCI Pacific down 3.3% for the quarter. Emerging market equity indices were down 0.8% for the quarter, with China down 6.7%.
The Doubt of Appearances
Households have made significant progress mending their balance sheet in the post-crisis period. Assets have been boosted on the back of higher home values and stock prices, while liabilities have been trimmed, mostly mortgages, thanks in large part to widespread home foreclosures.
ECRI Recession Watch: Weekly Update
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.6, unchanged last week (which was revised from 133.5). The WLI annualized growth indicator (WLIg) rose to 3.0 from last week?s 2.9.
Here are some notable developments since ECRI?s public recession call on September 30, 2011: 1) The S&P 500 is up 61.9% at yesterday?s close, fractionally off its record close on April 2nd. 2) the unemployment rate has dropped to 6.7%, and 3) Q4 GDP was revised upward to 2.6%.
Do You Think You Can Be Effective in Market Forecasting?
It is important to understand that no one can predict the future with certainty. Investors should take so-called expert forecasts with a grain of salt. Effective portfolio management is not about forecasting the future and then clinging to that forecast. It?s about continuously evaluating information and market conditions and then making adjustments when necessary to pursue the ultimate goal. To paraphrase long time market watcher Steve Leuthold, ?Predictions are for show, our decisions within the portfolio are for dough.?
VIX Exchange Traded Products...Growth and Risk Impact
by Daniel Kirsch of Macro Risk Advisors,
The growth of ETFs has been nothing short of tremendous. What started as a product designed to provide investors with broad equity or sector exposure in the US, the ETF landscape now includes a myriad of geographies (Europe, Asia) and asset classes (FX, rates, credit, commodities). Research consultancy firm EFTGI estimates that there are almost 5,000 ETFs globally with total AUM in excess of $2 trillion.
How to Avoid Hidden Costs in Your Bond Allocations
by Bob Veres,
The supposedly safe move to shorten bond maturities in anticipation of rate increases has been very costly over the last three years - and there’s no reason to expect the next three will be any different. Here’s a way to quantify those costs and position your portfolios in a way that makes money in a variety of interest-rate scenarios.
Hotchkis & Wiley: Frequently Asked Questions
by Team of Hotchkis & Wiley,
In Hotchkis & Wiley's 2014 1Q Newsletter, Ray Kennedy, Mark Hudoff, and the rest of Hotchkis & Wiley's high yield team examines the high yield market and attempt to answer the questions it they get asked most frequently, or ones they believe to be particularly relevant in the current market environment.
What Has Been Fueling the Rise of Gold in 2014?
by Kevin Mahn of Hennion & Walsh,
Gold declined approximately 28% for the year of 2013, its worst annual performance since 1981 according toUSA Today. At that time, the downturn ended Golds own bull market run of 12 consecutive years as investors jumped on the back of this current bull market by piling into stock funds in 2013 and largely exiting bond funds.
Striking a Balance: Risks and Opportunities in Emerging Market Debt?
?We believe the risk of a full crisis in emerging markets is greatly diminished as the initial conditions of such economies nowadays are quite different. Although there are vulnerable credits out there, the mark-to-market volatility in the financially strong emerging market economies can present advantages as longer-term fundamentals reassert themselves. By monitoring key triggers and employing a differentiated investment approach, investors may be able to take advantage of attractive valuations in emerging market debt. ?
Yellen Speaks, Do the Financial Markets Listen?
by Scott Brown of Raymond James,
No surprise, the Federal Open Market Committee tapered the monthly rate of asset purchases by another $10 billion and altered the language in its forward guidance on the federal funds rate. In its policy statement, the FOMC indicated that ?it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends.?
The Takeaways from the Latest Fama-French Research
by Michael Edesess,
The latest Fama-French research expands their three-factor model with the addition of two new factors: profitability and investment. My question is whether this work provides any information that can be of practical value to advisors or investors. After careful evaluation of their paper, I conclude that the answer is no.
How Reverse Mortgages Improve Sustainable Withdrawal Rates
by Joe Tomlinson,
Standby reverse mortgages (SRMs) have been viewed as a product only to be utilized late in life, after other retirement funds have been depleted. But new research shows that SRMs are a useful tool during retirement to increase sustainable withdrawal rates. I’ll describe how the SRM works and highlight key findings from the research.
Active Share. Toward a Stock Picker’s Market?
Explore five groups of mutual funds-from stock pickers to moderately active to the closet indexers. Which categories produced the best risk-adjusted return 1990-2009? The more different the portfolio from its benchmarks, the greater the range of possible outcomes. Consider a tool like active share.
Understanding The "Millennial Generation"
As the father of two adult children who were born in the early 1990s, I have a particularly keen interest in the ?Millennial Generation? ? those 80 million or so people born in the US between 1980 and 2002, the largest generation ever ? and who will be running the country before too long.
Frontier Markets: Weighing the Risks
by Nathan Rowader of Forward Investing,
Why would investors even think about investing in fledgling, so-called frontier economies half a world away? The quick answer is that some of the best-performing stock markets in the world can be found in places like Kenya, Bulgaria and Argentina. Annual equity returns topped 40% in all three countries in 2013 while a number of other frontier markets (FMs), including Romania, Serbia and Nigeria, experienced annual returns ranging from 25% to 35%. Although past performance is not a guarantee of future results, investors in search of portfolio growth and diversification are taking note.
A Matter of Odds: Not Everything That?s Supposed to Work, Works All the Time
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, explores the worth of quantitative analysis versus fundamental, and examines forecasts, consensus, and valuation as three ways of looking at the market for investment.
IPOs: Hot Again
by Roger Nusbaum of AdvisorShares,
Last week the Wall Street Journal gave a rundown of what has been a very hot IPO market. The Journal reported that there were 42 listings in the first two months of 2014 compared to 20 from the same timeframe in 2013 and keep in mind 2013 was a very good year for IPOs.
Reflections on Ukraine
Over the past five weeks there have been a number of significant events that have occurred in Ukraine. A president has fled, a revolutionary government is forming and Russia has taken de facto control over the Crimea. The events themselves are momentous but the broader effects are significant as well. In this report, we will offer three reflections?Putin?s Gambit, The U.S. Adrift and A Dangerous New World. Although any of these could be a topic in themselves, we will shorten these issues to offer a single journey through the current crisis. As always, we will conclude with market ramifications
Have Researchers Uncovered Buffett’s Secret?
by Robert Huebscher,
Researchers from AQR Capital Management, a Connecticut-based asset manager, claim they have uncovered the source of Warren Buffett’s alpha. They believe Buffett-like performance can be achieved by constructing a portfolio with exposure to certain "factors." But their theory hinges on a crucial assumption, which, as I will show, is highly tenuous.
Positive Payroll Report Offsets Geopolitical Concerns
by Bob Doll of Nuveen Asset Management,
U.S. equities increased 1.1% last week after somewhat volatile trading due to heightened tension in Ukraine. Although the crisis dominated headlines, the market relegated the major geopolitical issue to the back burner. The broader macro narrative did not change, as concerns about dampened growth momentum continued to be pacified by the distortion from adverse weather.
Market Outlook
by Scotty George of Alexander Capital,
The irascible, and sometimes irrational, actions of the major indices this year should confirm for all observers that there's something at work in the financial markets that goes way beyond "traditional" fundamental analysis and good stock picking.
Weather or Not?
by Peter Schiff of Euro Pacific Capital,
Everyone agrees that the winter just now winding down (hopefully) has been brutal for most Americans. And while it's easy to conclude that the Polar Vortex has been responsible for an excess of school shutdowns and ice related traffic snarls, it's much harder to conclude that the it's responsible for the economic vortex that appears to have swallowed the American economy over the past three months.
Emerging Markets: Distinguishing Opportunities
by Manning & Napier,
The recent sell-off in emerging market currencies and equities is part of a broader move that has seen the asset class heavily underperform developed markets since mid-2012. Part of the underperformance can be attributed to disappointing economic performance, as actual growth in the emerging markets (EMs) has come in much lower than broader consensus expectations.
The US Economy - Back To The Slow Lane Again
Late last year, President Obama predicted that 2014 would see ?breakout growth? in the US economy. His optimism was not completely unwarranted since the economy grew by a healthy 4.1% (annual rate) in the 3Q of last year, driven largely by an unexpected surge in inventory rebuilding. Then in late January, the Commerce Department reported that the economy grew by a better than expected 3.2% in the 4Q.
2014: A Transition Year - Back to Fundamentals
by Lorenzo Pagani of PIMCO,
The past several years have seen multiple regime changes in financial markets in Europe, each dominated by different factors and requiring a distinct approach to fixed income investing. As spreads tighten to pre-2008 levels, it is now time to ask whether a shift in investment style is due. Macroeconomic developments and inflation expectations are likely to be key determining factors in whether 2014 will be a good year for European bond investors.
David Rosenberg: No U.S. Recession in Sight
by Robert Huebscher,
Following a lackluster recovery that began in June 2009, many fear the U.S. is due for another recession, given that the average post-war economic expansion lasted five years. But we’re only in the "fourth or fifth inning of the business cycle," according to David Rosenberg, who predicts growth in consumer and capital spending - and positive returns for U.S. equities.
Results 5,751–5,800
of 6,534 found.
