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Red Shoots? Amid the Holiday Cheer, is a Market Peak Brewing?
I dont see imminent signs of a rough market, but it does appear that some "red shoots" are not forming. FYI, a red shoot is a term I just made up. Whereas a "green shoot" is a piece of good news in an otherwise difficult economic environment, I define a red shoot as a piece of potentially bad news among a sea of green stock market profits.
No Silver Bullets in Investing
by James Montier of GMO,
In a new white paper today, James Montier of GMOs asset allocation team reviews recent "innovation in our industry." He argues, "one of the myths perpetuated by our industry is that there are lots of ways to generate good long-run real returns, but we believe there is really only one: buying cheap assets."
Patience in Asia
Investing in a multitude of markets and companies as we do within the Templeton Emerging Markets Group means that at any given point in time it may appear to some that they are underperforming or outperforming any particular benchmark index or market. Such is the nature of global financial markets. Of course, wed like all of our investments to go straight up, but at the same time continually like to find new bargains for investors.
How to Keep Prospects from Stealing Your Ideas
by Dan Richards,
After multiple meetings with prospective clients during which you provided recommendations on their situation, at some point every advisor has walked away feeling that someone took their advice and implemented it on their own. How do you prevent this from happening?
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.
Economic Cycle Update: Evidence Suggesting Slow Growth Reigns
by Team of Manning & Napier,
Since the start of the current recovery, we have made the case that the economy would grow at a slower pace compared to most other expansions in recent memory. The consumer factored prominently in this outlook as they embarked on a long overdue period of balance sheet repair. Corporations would have little reason to invest if consumer growth was weak and large fiscal deficits would limit the ability of the federal government to contribute to growth.
The Elephant in the Room
by John Hussman of Hussman Funds,
Investors will do themselves terrible harm if they ignore the objective warnings of history based on our subjective experience in this unfinished half-cycle. That subjective experience is far more closely related to my 2009 stress-testing decision than many investors recognize.
Five Reasons Inflation Is Still Missing
by Chun Wang of The Leuthold Group,
Apart from a couple of market-oriented drivers that could reverse course on a short-term basis, we are not seeing convincing evidence of an imminent pick-up in inflation. Let us be clear. There is most definitely inflation in the financial markets, but that does not seem to benefit the average person in the U.S. The liquidity injected by various central banks went mostly into the financial markets first and foremost; only a small fraction of it trickled down to the average person. That is why all this money printing has not been reflected in various inflation measures.
Elections in Chile
On November 17, Chileans went to the polls to vote on a new president and parliament. In this report, we offer short biographies of the two Chilean presidential candidates, focusing mostly on Michelle Bachelet. From there, we will provide a short history of Chile, primarily to highlight the tensions between the forces of liberalization and reaction. An examination of the Allende-Pinochet period will detail the factors that have affected Chiles political structure over the past five decades. As always, we will conclude with market ramifications.
For Whom the Nobel Tolls: Efficient Market or Irrational Exuberance?
In his latest essay, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, looks at the work of two of the recent recipients of the Nobel Prize in Economic Science. While the work of Eugene Fama and Robert Shiller might at first seem to be in direct conflict, Sicart explores how simultaneously recognizing Famas "efficient market hypothesis" and Shillers work on investor psychology may be "less of a contradiction than meets the eye."
Why It's (a Little) Too Quiet on the Market Front
by Russ Koesterich of iShares Blog,
Stock market volatility remains unusually low. While this is partially justified by loose credit conditions and strong market momentum, the drop in volatility looks exaggerated and suggests investors are becoming too complacent.
When the Stimulus Stops, Cash Flow Matters
Several rounds of massive stimulus by the Federal Reserve has kept interest rates well below where they would otherwise be, buoying both stock and bond markets. As stock prices have reached new peaks, many professional investors consider current valuations to be stretched. When the stimulus finally stops, a new era of rising interest rates will likely take hold. And experienced investors know that rising interest rates and high valuations and can be a dangerous combination. Read more.
No Madness and No Crowds
by Pamela Rosenau of HighTower Advisors,
Charles Mackays book Extraordinary Popular Delusions and the Madness of Crowds, chronicles some of historys greatest financial manias, including the South Sea bubble and the Dutch tulip mania, among many others. As the stock market continues to make new highs, discussion of a market bubble has been capturing many of the recent headlines. For those that suggest this is the case, they may need to refresh themselves with Mackays book, which highlights the mania phase a phase that we have yet to encounter.
New Research on How Much Clients can Spend in Retirement
by Wade Pfau,
A major problem remains unsolved in the discipline of financial planning: How should clients adjust their spending patterns in response to changes in the value of their retirement portfolios? The original research on this topic was based on a fixed percentage of assets, adjusted for inflation. Numerous refinements to that model have been proposed, and I will look at how the updated models can help clients maintain their desired standard of living without depleting their assets.
Breaking News! U.S. Equity Market Overvalued!
In GMOs quarterly letter to institutional clients today, co-head of asset allocation Ben Inker outlines the reasoning behind GMO implementing a new forecast methodology for the U.S. stock market. While the new methodology has slightly increased GMOs seven-year forecast for U.S. equity returns, Ben notes, "The basic point for us remains the same -- the U.S. stock market is trading at levels that do not seem capable of supporting the type of returns that investors have gotten used to receiving from equities."
Ignoble Prizes and Appointments
by Jeremy Grantham of GMO,
Chief investment strategist Jeremy Grantham comments on this years Nobel Prize in economics and "the most laughable of all assumption-based theories, the Efficient Market Hypothesis"; candidates to succeed Chairman Bernanke at the Fed; the impact of commodity price rises and the housing bubble in the crash of 2008; and prospects for the U.S. equity market.
Will 39% Hike in Minimum Wage Tank The Economy?
President Obama called for a whopping 39% increase in the minimum wage from $7.25 to $10.10 per hour last Thursday. There is already a bill working its way through in the Senate to do the same thing. If this legislation passes, the minimum wage will be increased 95 cents each year for the next three years starting this year, to bring it to $10.10 by 2015.
Let's Party Like it's 1978
A twice yearly meeting of the Chinese government officials, formally known as the third plenary session of the 18th CPC Central Committee, started on Saturday and will end tomorrow. Chinese General Secretary Xi Jinping has indicated that this session could be as consequential as the plenary session in 1978 which introduced policies that set in motion the Chinese growth engine. We are going to take a closer look at the changes from the plenary session 35 years ago, the circumstances leading up to the session and how China changed following the meeting.
Big Ideas in the Big Easy
This is likely a contrarian view to the folks in the White House, but I think investors benefit from being contrarian and thinking differently. In preparation for my presentations in New Orleans as well as for the Metals & Minerals Investment Conference in San Francisco and the Mines and Money in London in a few weeks, I?ve been pulling together this kind of research that we can all put to use now.
Putting Macro Trends in Context: What do They Mean to a Bottom-Up Investor?
by Will Nasgovitz of Heartland Advisors,
For some time now, weve had a generally positive economic outlook. The occasional setback is assured, but on the whole we believe that the U.S. economy is still in the early stages of a multi-year recovery.
The Underperformance Culprit
Each year we are reminded of the fact that active management systemically underperforms the benchmark. The scorecards come in, and the tally is drilled back into our consciousness. But has the now long-tenured debate of active versus passive offered us much in the way of new perspective over the last several decades?
Geo Scores and Election Predictions
by Gregg Bienstock of Lumesis,
Its the economy, stupid. Im sure many of us remember that statement from a few years back. With a couple of gubernatorial and many mayoral elections at hand, I thought it might be fun to provide our call on these races by looking at how the economies of those States and cities have fared over the past year. If it is indeed the economy, stupid, the below may provide some insight into where incumbents are safe and where change may come. This report will print longer due to the inclusion of more tables than usual.
Leash the Dogma
by John Hussman of Hussman Funds,
Its fascinating to hear central bankers talk about the economy, because in the span of a few seconds they can say so many things that simply arent supported by the evidence. For anyone planning to watch the confirmation hearings for the next Fed Chair, the evidence below is provided as something of a leash to restrain the attacking dogma.
How I Explain Amazon's Stock Performance
by Chuck Carnevale of F.A.S.T. Graphs,
Amazon (AMZN) is a stock that seems to defy conventional wisdom about how a stock is, or should be, valued. Fundamental investors, like yours truly, recognize and respect the importance of the earnings and price relationship. Moreover, I will be so bold as to emphatically state that in the long run profitability (earnings) will be the primary determinant of a businesses fair value, any business. However, my bold statement is predicated on the longer run. In the short run it is often a truth that all bets are off.
And That's The Week That Was
by Ron Brounes of Brounes & Associates,
Nice to have a week free of politico rhetoric and distractions for a change (dont get used to it). With little in the way of budget battles, investors focused on earnings and generally liked what they saw. Add in some positive economic news from China and a labor picture that should prompt the Fed to stay put (for now) and you have another record for the S&P.
The Website is Fixable, Obamacare Isn't
by Peter Schiff of Euro Pacific Capital,
Since Obamacare made its debut, discussions have focused on Ted Cruz efforts to defund the law and the shockingly bad functionality of the Website itself. Fortunately for Obama, polling indicates that Senator Cruz has lost, at least for now, the battle for hearts and minds. The President has not been nearly so lucky on the technological front.
ECRI Recession Watch: Weekly Update
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.1, up from last weeks 130.3 (revised from 130.4). The WLI annualized growth indicator (WLIg) to one decimal place, dropped to 2.0, down from 2.7 (a downward revision from 2.8).
Why Growth is Deep in the Heart of Texas
TIME Magazine?s cover this week features an engaging collage of the 50 states reassembled to fit within the boundaries of Texas. With a growing number of solid-paying jobs, affordable housing, and low taxes, ?the Lone Star State is America?s Future,? declares economist and writer Tyler Cowen.
Quarterly Review and Outlook
When an economy is excessively over-indebted and disinflationary factors have forced central banks to make overnight interest rates as close to zero as possible, central bank policy has repeatedly proved powerless to further move inflation or growth metrics. Four considerations suggest the Fed will continue to be unsuccessful in engineering stronger growth and higher inflation with their continuation of the current program of Large Scale Asset Purchases.
What a Yellen Fed Could Mean for Interest Rates
by Zach Pandl of Columbia Management,
A major question among investors after Janet Yellens nomination for Fed Chair is whether she will be too soft on inflation. Part of Yellens dovish reputation stems from a debate among the FOMC in July 1996, in which she warned the committee about the risks of pushing inflation too low. With the passage of time, however, the views Yellen expressed at that meeting now come across as very sensible. Indeed, today they would be considered uncontroversial among most economists. In reality Yellen is closer to the Fed consensus on inflation than her reputation in markets would suggest.
Singaporean Consumer Consumption and Confidence is Weak - Should Investors Worry?
by Team of Manning & Napier,
Singapore is the worlds 35th largest economy by nominal GDP, yet ranks 6th in the world by GDP per capita, signifying its position as an advanced and highly-productive economy. With an efficient regulatory framework, low tax rates, and a flexible labor market, Singapore has a reputation for being one of the most business-friendly countries in the world.
Bond Legend Dan Fuss on Rising Rates
by Robert Huebscher,
Having just celebrated his 80th birthday, Dan Fuss can claim a unique achievement ? his tenure in the fixed income markets has spanned a full market cycle, from the great bear market that began in the early 1950s through the equally great bull market that commenced in 1981. Fuss said today’s environment most closely resembles what he confronted in the late 1950s, when long-term rates were 3% and beginning their march upwards.
The Fiscal Follies, the Economy, and the Fed
by Scott Brown of Raymond James,
The deal reached last week does not remove uncertainty about the budget and debt ceiling. We could go through a similar crisis in three months. The hope is that lawmakers will learn from the recent experience and work together.
Results 5,801–5,850
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