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Seven Implications for the Coming Retirement Revolution
by Dan Richards,
Most advisors look to seniors as a core part of their client base. That's why it's essential to understand how boomers are going to transform retirement, just as they have redefined every other stage of their lives. Let's look at three new pieces of research and the seven implications they carry for retirement planning.
Survey Results: Advisor Use of 529 Plans
by Paul Curley, CFA,
With investor sales volume returning to the 529 industry, financial advisors have an opportunity to grow their business. However, they are missing out: Asset growth within the advisor-sold channel has not kept pace with the growth experienced by the direct-sold channel.
On Your Mind: Debt Ceiling and the US Dollar
by Team of Charles Schwab,
The uncertainty surrounding the upcoming decision on the debt ceiling has been a negative factor for the dollar. A US default and/or a downgrade of the US credit rating would almost certainly be negative also. It could weaken confidence in the dollar and cause it to fall. However, there are many global factors driving demand, including support of Japan and China, which continue to be large holders of US Treasuries. It would not be in their interest to sell dollar-denominated assets, including Treasuries, if there was simply a rating change or short-term default.
Gundlach: A Debt Ceiling Impasse Could Drive Rates Lower
by Robert Huebscher,
Failing to raise the debt ceiling would be a 'huge financial calamity,' according to Federal Reserve Chairman Ben Bernanke and the general consensus view. But that opinion is 'exactly wrong,' at least as far as the Treasury market is concerned, DoubleLine's Jeffrey Gundlach said in a conference call with investors last Tuesday.
A New Approach for Forecasting Market Returns
by C. Thomas Howard,
I propose a method for predicting future market movements, which I call the strategy market barometer (SMB). The SMB is calculated by measuring the extent to which investors are rewarding specific investment strategies being pursued by active equity managers. My research reveals that equity strategy performance ranking is a useful predictor of future market returns, and tests confirm that market returns vary in line with SMB measurements.
The Real Story behind Bond Yields
by Michael Nairne,
One of the most important questions that individuals should ask before making any investment is 'Am I being paid enough for the risk of this investment?' I analyze the returns available today from government bonds and answer this important question for this asset class.
An End-of-Quarter Letter to Clients
by Dan Richards,
Given recent unrest in Europe and uncertainty about economic growth, many clients are looking to their advisors for direction. This template for an end-of-quarter letter is a starting point for your own letter to clients, one that can be a catalyst for a conversation about how to position portfolios.
A Million Dollar Meeting Gone Wrong - A Lost Prospect Tells All
by Dan Richards,
Over lunch last week, a long-time friend who's a partner at a Toronto law described a recent meeting with a financial advisor seeking his business and how some subtle errors and obvious mistakes cost the advisor the opportunity to do business.
An Important Challenge to ?Stocks for the Long Run?
by Geoff Considine,
Jeremy Siegel's dictum - to invest in stocks for the long run - faces a new challenge. A recent paper by Robert Stambaugh, a Wharton colleague, and Lubos Pastor of the University of Chicago says that once you take into account the uncertainty of estimating future returns, stocks are not nearly as attractive to retirement-oriented investors as Siegel has claimed.
Higher Commodity Prices and the End of Economic Growth Without Inflation
by Mihir P. Worah of PIMCO,
Global inflationary patterns may shift amid higher commodity prices.
We expect commodity prices to be generally rising going forward, though with volatility and differentiation among commodities.
Emerging markets going through a particularly commodity and energy intensive phase of growth may affect what developed-world consumers pay for commodities.
Currencies are another factor. If developed-world policymakers attempt to make their economies more competitive via a cheaper currency, that could lead to higher inflation for those that are net importers.
A Proven Path to Business Breakthroughs
by Dan Richards,
In my conversations with advisors, implementing change often tops the list of business challenges and frustrations. To advance your business, one proven strategy that has demonstrated remarkable success over not just years but decades is tapping into the power of peer-performance groups.
What Fama and French?s Latest Research Doesn?t Tell Us
by Michael Edesess,
With the high name recognition and respect that the team of Eugene Fama and Kenneth French enjoys in the world of finance, anything they publish warrants attention. Their latest offering, Size, Value, and Momentum in International Stock Returns, offers some interesting data on global equity performance. But they fail to offer any insights that explain the reasons behind their findings.
Understanding Recent Market Movements
by Mohamed A. El-Erian of PIMCO,
Despite massive fiscal and monetary stimulus, the U.S. economy has frustratingly failed to gain proper traction.
The U.S. economy faces structural impairments in housing, credit, public finances, and the functioning of the labor market.
The situation in Europe is another factor undermining market sentiment.
Structural problems require structural solutions that are adopted within a clearly communicated overall vision.
ProVise Bullets
by Team of ProVise Management Group,
As the first of the Baby Boomers begin to turn 65, they are being greeted with some bad news concerning Medicare and Social Security, especially since they hope to enjoy a longer time in retirement. Social Security is now scheduled to be exhausted by 2036, a year earlier than was projected last year. In addition to longer life spans, the 2% reduction in Social Security tax this year was a major factor in this updated information. As bad as things are for Social Security, things are worse for Medicare, which is projected to be bankrupt by 2024, five years sooner than was projected last year.
Doubling the Turnout to Client Events
by Dan Richards,
Many advisors are puzzled and frustrated by just how hard it is to get clients to show up when they organize events for them. Achieving great turnout isn?t easy, but it can be done - I recently spoke to an advisor who made a couple of simple changes to his annual event and doubled attendance as a result.
The WikiLeaks of the Economics Profession
by Michael Edesess,
What Caused the Financial Crisis presents the most comprehensive account I have seen of the regulations that, when considered as a whole, have incentivized unprecedented self-delusion and risk-taking in the subprime mortgage market. To put it in a manner that financial advisors will understand, the book shows that the policies and regulations greatly increased the Sharpe ratio of the financial industry - they increased the return for taking risk.
Profit Margin Squeeze Continues to Grip the Economy
by Doug Short,
The two charts below offer clues for evaluating the risk of profit margin squeeze in the current economy. One is the ratio of crude to finished goods in the Producer Price Index (data through April). The other is an indicator constructed from two data series in the Philadelphia Feds Business Outlook Survey through todays release. It is the spread between the Philly Feds prices paid (input costs) and received (prices charged) data. A major risk factor for margin squeeze is the increase in commodity prices over the past several months with the price of oil and gasoline as the dominant factor.
Howard Marks on the Human Side of Investing
by Robert Huebscher,
Howard Marks is widely regarded for his thought-provoking essays on the discipline and process of value investing. He is the chairman and co-founder of California-based Oaktree Capital, and he delivered the keynote address at the Value Investing Congress in Pasadena last week.
P/E: Future on the Horizon
by Ed Easterling,
Most people expect P/E to measure current valuation and to show historical patterns. But more features are available from some versions of P/E. The methodology behind the Crestmont P/E enables investors to anticipate the future. It may not precisely predict the market ten years away, but it frames within a relatively tight range the likely outcome. One component from determining the Crestmont P/E is a means to assess the future trend line for EPS using estimates of future economic growth (GDP).
Why Demographics will Drive Global Growth
by Sam Parl,
When economic pundits trade heated predictions about the massive economic shifts we see internationally, it is easy to forget the subtleties that shade their forecasts. One such shadow overhanging any intelligent debate about our global economic future is global age demographics, according to Harvard Professor Richard Cooper.
Managing Exposure to Extreme Markets
by Geoff Considine,
Volatility in the equity markets has subsided, courtesy of a strong bull market and fading memories of the 2008 financial crisis. Risks remain, however, ranging from the turmoil in northern Africa to sovereign debt instability in Europe. Investors can take advantage of the complacency in the equity markets by purchasing inexpensive insurance against adverse events.
The Return of the Carry Trade?!
by Jeffrey Saut of Raymond James,
There may be an increase in the carry trade in both dollars and yen, but I dont think this is the main factor behind the rise in commodity prices and demand for risk assets. Bank policies matter a lot for currencies. However, the U.S. is not going to raise rates anytime soon, implying a somewhat softer dollar. Youre hearing inflation concerns among some of the district bank presidents, but that is a minority view. The Fed sees higher oil prices as bad for growth, not a catalyst for a higher trend in underlying inflation; but officials will be watching the trend in core inflation, and wages.
Dumb, Dumber and Dumbest
The two stupidest characters ever to grace the big screen - Lloyd Christmas and Harry Dunne - were first introduced to the world in Jim Carrey's 1994 movie, Dumb and Dumber. If that movie were made today, its leading characters could easily be our government and the supposedly independent Federal Reserve Bank. Both of these institutions have foisted their misguided policies on the American public, who, in their passive acceptance, have proven themselves to be the dumbest of all.
Why High Oil Prices Are Likely Here to Stay
A number of forces continued to push oil prices higher this week, reaching their highest levels in the U.S. since September 2008. One factor fueling the run has been the continued decline of the U.S. dollar. Oil and the dollar historically are negatively correlated. This means that a rise in oil prices generally coincides with a decline in the dollar, and vice versa. The U.S. dollar has seen a dramatic decline since the beginning of the year as oil prices have moved some 30 percent higher. This could be due to fact that roughly two-thirds of the U.S. trade deficit is related to oil imports.
The Future of Investment Manager Due Diligence (and a Look Back at Q1 Performance)
by Ron Surz,
Despite the continuing global financial crisis, the uprisings in the Middle East and the Japanese disaster, global stock markets delivered positive results in the first quarter of 2011, as described in this capital market review. In the second part of the article, you'll discover what due diligence procedures need to change and why.
Inflation versus Deflation: Two Experts Disagree
by Robert Huebscher,
An important question for all investors is whether low inflation rates will persist or whether the economy is heading toward much higher inflation. The answer to that question will dictate asset class allocations, portfolio construction and ultimately the rates of return investors should expect.
Profit Margin Squeeze and Inflation Risk
by Doug Short,
A major risk factor for margin squeeze is the increase in commodity prices over the past several months. The latest turmoil in the North Africa and the Middle East has now put oil prices in the spotlight. At present, in light of the unemployment rate and the ongoing demographic shift, the rise in commodity prices probably poses more risk of margin squeeze than run-away inflation. Some degree of cost-push inflation may be a near-term risk, but the demand-pull inflation we saw in the 1970s is difficult to evision in the US economy of this decade.
Barbie's Lesson from Shanghai
by Winnie Phua of Matthews Asia,
Mattel?s Barbie store in Shanghai closed March 7, 2011. The sudden closure of the Barbie store left many baffled. The U.S. toy maker has stated that it is reorganizing its China strategy. Others, however, argue that the store is closing because Barbie?s classic western appeal has not caught on in China where girls tend to prefer cute animated characters, such as Hello Kitty, over a womanly life-like doll. Barbie?s price point (US$15 to US$30) has also been criticized as too high, particularly for a toy with limited brand recognition or nostalgic factor for parents who hold the purse strings.
Toward an Understanding of Risk - Part 2
by Robert Huebscher,
How should clients think about risk in their portfolios? Advisor Perspectives put that question to a cross-section of prominent advisors and academics. Their answers encompassed diverse opinions and underscored how crucial that question is to the investment process. In part one of this series, which appeared last week, we heard from seven practitioners in the financial planning community. This week, we hear from seven well-known academics, including two Nobel Prize winners.
David Laibson on the Hidden Challenges of Aging Clients
by Dan Richards,
In this interview, Harvard economist David Laibson discusses his research into the challenges of helping elderly clients with their financial planning. He also discusses how to overcome the procrastination and laziness that often result in inferior investment decisions. This is a transcript of the interview.
Optimizing Your Fixed Income Allocation
Here's a little-known fact: The traditional 60/40 portfolio, when using the aggregate-bond index for its fixed-income allocation, has a 99% correlation to the returns of the S&P 500. One way to overcome the limited diversification value offered by the aggregate index is to use a risk-parity approach. In this article, I explore the concept of risk parity in asset allocation and how it provides value for portfolio management.
Go for the Long Bond: Technical Indicators are Positive
by Georg Vrba, P.E.,
My article, Seeking Beta in the Bond Market: Update December 31, 2010, showed that my Bond Value Ratio (BVR) model indicated the beginning of an up-market for high-beta bond funds on 12/17/10. I present a further indicator here which reinforces this signal.
Richard Bernstein: The Antidote to Pessimism
by Robert Huebscher,
For an antidote to the bearish sentiment coming from David Rosenberg, look at Richard Bernstein. In contrast to Rosenberg's vision of Japan's lost decade, Bernstein expects the S&P to outperform emerging markets, at least in the near term.
The 2011 Economic Outlook ? Credit Given Where Credit Is Due
by Paul Kasriel of Northern Trust,
With regard to 2011 real GDP growth, we now expect Q4/Q4 growth of 3.3% vs. 3.0%. An upward revision of 2011 Q4/Q4 real consumption growth to 2.9% from 2.5% in November is the primary factor accounting for the upward revision to the real GDP growth forecast. We are more optimistic about 2011 real GDP growth primarily because QE2 implies that the Fed will be purchasing all of the additional Treasury debt issued in conjunction with the Obama-McConnell tax and unemployment insurance compromise. We currently see more upside risk to our 2011 real GDP growth forecast than downside risk.
Demographics and Sovereign Debt
by Team of American Century Investments,
Events surrounding what the press calls the European Sovereign Debt Crisis have been in the news for much of the past year. Unfortunately, this label masks an underlying major contributing factor: demographics. The combination of long life expectancies, relatively early retirement ages, generous retirement benefits and a shrinking base of workers to support the growing proportion of retirees in the population will put tremendous burdens on the budgets of these countries.
The End of the Asian Bull Market
by Robert Huebscher,
A broadly diversified emerging market investor would have earned nearly 12% annually over the last five years, far outpacing investors in the US and other developed markets. Over the next five or even ten years, investors relying on emerging economies will not be as fortunate, however, according to Louis-Vincent Gave, CEO of the Hong Kong-based research and investment management firm GaveKal.
Year-end Letter to Clients: Investment Advice from Winston Churchill
by Dan Richards,
For the past 18 months, my draft letters have been designed to balance some of the extreme pessimism among many investors with an objective, positive outlook - the draft year-end letter for 2010 continues with that goal. In it, I borrow from Winston Churchill's insight into the difference between optimists and pessimists.
An Uncertain Future for Housing Prices
by Robert Huebscher,
A renewed decline in housing prices would surely impede economic growth. Yet that is a strong possibility, according to housing expert Laurie Goodman of Amherst Securities. Goodman was joined in Boston last week to discuss the housing market by Karl Case, who, along with Yale professor Robert Shiller, created the Case-Shiller index.
Black Gold, Texas Tea
by Robert Huebscher,
The flow of money into gold-related funds is, at least in part, driven by good intentions - hedging against dollar debasement, inflation, and systemic risk. As investors drive the price of gold to record levels, though, they are overlooking an equally compelling commodity hedge, one that the Beverly Hillbillies once dubbed 'black gold, Texas tea' - oil, that is.
Why Three Top Bond Managers Like Equities
by Robert Huebscher,
You'll rarely - perhaps never - hear a fund manager say that market conditions do not favor investing in their chosen asset class. That's why it was so remarkable when several prominent managers recently admitted that they favored equities over their own discipline - fixed income.
Ned Davis - Still Positive on Stocks
by Robert Huebscher,
Just over a year ago, Ned Davis correctly forecast a continuation of the cyclical bull market in stocks. In February of 2008, he foresaw that year's market upheaval, and a year later he predicted the rally that began in March of 2009. Today, Davis is moderately bullish on stocks, as long as the Fed maintains its policy of quantitative easing.
Reducing Portfolio Risk through Sustainable Investing
by Jon Quigley,
By incorporating a broad swath of extra-financial data as a risk factor and tilting a portfolio away from companies with poor environmental, social and governance policies, we can better reduce that portfolio's risk of extremely negative outcomes.
Finding Your Alternatives
In everyday life, you know that the first idea you think of to meet a need, or address a problem, may not always the best one. But when it comes to running a firm, far too many advisors never go through a proper brainstorming process to determine which option may be the best one for
their firm.
Waiting for Superman: The Fate of Teachers? Unions
by Charlie Curnow,
In 'Waiting for Superman,' the new documentary film about the shortcomings of American public education, director Davis Guggenheim argues that, in order to compete with rival school systems in Asia and Europe, the U.S. must rein in its teachers unions and embrace the free market principles of private schools and privately managed charter schools. Is this a fair assessment?
Identify the Human Factor
One of the most overlooked steps in goal-setting and goal-achievement is the human element in the planning process. Once you have clearly defined your desired outcome, and once you have identified and categorized the obstacles you have faced or expect to face, you must turn your attention to the people involved. This is the third of five articles in the S.H.I.F.T. series
Results 6,401–6,450
of 6,533 found.
