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Evaluating Break-Even Levels when Interest Rates Rise
by Yung Lim of AdvisorShares,
In the current low interest rate environment across the Treasury curve and investment grade credit space, low coupon rates provide less protection against market value loss resulting from rising interest rates. When interest rates were higher, fixed income investors enjoyed the benefit of earning higher recurring income to offset any market value declines.
Wheres the Growth?
by John Mauldin of Mauldin Economics,
Call me a heretic, but I take a different view than the economists in charge. To my mind, the sluggish recovery is a sign that central banks, governments, and, quite frankly, the textbook economists (despite their best intentions) are part of the problem. As Detlev Schlichter commented in his latest blog post (Keynes was a failure in Japan No need to embrace him in Europe), To the true Keynesian, no interest rate is ever low enough, no quantitative easing program ever ambitious enough, and no fiscal deficit ever large enough. It&r
Panic in Bermuda: When Your Business Turns into an “Interesting New Asset Class”
All else equal, we prefer to invest in strong franchises in stable industries. However, even within industries undergoing turmoil, understanding the differing prospects of individual firms can present us with attractive investment opportunities, both long and short.
“You’re Going to Need a Bigger Boat”: Alpha and Interest Rates
Caution has been the dominant sentiment among investors in recent times even as equities have continued to march along. But as the prospect of rising US interest rates becomes ever more real, Brooks Ritchey, senior managing director at K2 Advisors, Franklin Templeton Solutions, takes a look at how some individuals and institutions are changing their guarded approach. He says alternative investments could find increased interest among savvy investors as interest rates start to tick higher.
What the Scottish Referendum & Fed News Could Mean for Investors
by Russ Koesterich of BlackRock,
Last weeks stock losses were partly a reflection of investors looking ahead to the Scottish independence vote this Thursday and the Federal Reserve (Fed)s statement on Wednesday. Russ weighs in on the investing implications of these two big news events.
America in the Driver’s Seat – Enjoy the Ride
Like clockwork, earnings season has drawn to a close, creating an information vacuum for the stock market, one in which the media spends more time "making" the news than perhaps reporting it. The marginal dollar at trade - or the price maker in a high frequency dominated trading world - is one more likely to be concerned about the Fed's words over the next two days than the stream of earnings produced by corporate America over the next few quarters.
Are Government Bonds Really "Safe"?
One of the striking ironies of our modern economy is that government bonds are considered safe-haven investments, while gold is a barbarous relic to be avoided at all costs. Since the 2008 financial collapse, the bond market has been on a tear, thanks to the Federal Reserves endless interest rate suppression. This has only served to reinforce the traditional notion that government bonds are safe.
Authoritarianism versus Democracy: The Key Challenge to Chinese Ascendancy
An intense debate has been underway for more than a decade about whether the East - China in particular - is in the ascendancy. Some argue this is so and that the West is in decline. Others say China's flawed political institutions will limit its monumental growth and render it precarious. This an especially opportune time to address these questions.
The Key Problem with Monte Carlo Software - The Need for Better Performance Metrics
by Joe Tomlinson,
Popular financial-planning software packages have shortcomings in the metrics they use to evaluate the outputs from Monte Carlo simulations; other metrics provide more useful information. I will address how to measure the performance of financial plans when variable investment returns and longevity are introduced and demonstrate that the most-commonly used measures have weaknesses.
Economic Update
by Team of Cambridge Advisors,
After a rocky month in July, stocks resumed their march higher in August. The S&P 500 was up 4.0% for the month and is up 9.9% year-to-date. The small cap Russell 2000 index also performed well for the month, up 5.0%. Year-to-date, small cap stocks have lagged and are up only 1.75% as of the end of August. International stocks continued to struggle in August and year-to-date with performance of -0.4% and +2.93% respectively.
What are the 'Magic Words' to Re-engage Past Clients?
My partner and I left a firm where we worked with clients for years. It's very disheartening how few of our former clients have followed us to our new firm. In some cases, they won't even return a phone call. What magic words can we use to get them re-engaged with us?
The Economy: September Viewpoint
The U.S. economy experienced a robust summer for economic expansion and job growth, however recent consumer data is casting doubt as to whether the current level of activity can be sustained. Our position is to maintain an emphasis on higher-quality bonds and be prepared for short-term rate increase(s) in the months to come. The road ahead for stocks continues to look positive, but it would be prudent to keep in mind the inevitable speed bumps that will likely present themselves down the road, as we have not had a meaningful pullback since 2011.
General Electrics Business Strategy
Despite the many products and services provided by GE, its business strategy is actually startlingly simple. In short, GE is betting on the continued flourishing of the human race. The company is divesting consumer-facing assets and acquiring or boosting commercial-facing ones in what we term the PIT Strategy. An analysis of the companys valuation drivers suggests an upside potential of the 40% range for GE.
Whats on Your Radar Screen?
by John Mauldin of Mauldin Economics,
So lets look at whats on my radar screen today. First up (but probably not the most important in the long term), I would have to say, is Scotland. What has not been widely discussed is that the voting age was changed in Scotland just a few years ago. For this election, anyone in Scotland over 16 years old is eligible. Think about that for a second. Have you ever asked 16-year-olds whether they would like to be more free and independent and gotten a no answer? They dont think with their economic brains, or at least most of them dont.
Will the Russia-Ukraine Crisis Chill Europe’s Recovery?
As the crisis in Ukraine and resulting geopolitical tensions between Russia and the West continues with no durable solution yet, many investors have responded by exiting European companies with exposure to the Russian economy. But even as evidence mounts that the Ukraine crisis is taking a toll on many European economies, it would be imprudent for long-term investors to give up on investing in Europe. Strong corporate earnings momentum, high dividend yields and the possibility of additional support from the European Central Bank (ECB) are just some of the reasons why he remains confident that,
Conditions are right for the dollar to weigh on gold
by Ade Odunsi of AdvisorShares,
In last weeks Gold Report we looked at the historical relationship between the gold price in dollars and the value of the dollar, as measured by the Intercontinental Exchange US dollar trade weighted index (USDX) and found a strong inverse relationship between the two a strong dollar has historically tended to be associated with a weak gold price.
Distressed Corporate Credit: A Tale of Two Markets?
by Sai S. Devabhaktuni of PIMCO,
Middle market distressed credit may be an attractive source of higher returns in an overall low yield environment for investors able to access these opportunities. However, the higher return potential comes with greater risks. Imbalances in middle markets are building. ?Investors looking toward distressed credit markets should focus on companies that will likely be able to withstand periods of economic inertia, to undertake careful valuation practices and to strictly adhere to the absolute priority rule (in which senior creditors are paid in full before junior creditors).
Schwab Market Perspective: Diverging Paths…Growing Risks?
by Liz Ann Sonders of Charles Schwab,
The U.S. stock market continues to reach new highs but sentiment is extended and we are entering a period that has historically seen weakness. We believe the ultimate trend is higher, but bumps could get more pronounced in the near future. The U.S. economy is improving, with data suggesting self-supporting expansion is taking hold. Whether this means accelerated Fed interest rate hikes is being closely watched, while midterm elections often inject some more uncertainty into the market. The European Central Bank (ECB) finally acted, but structural issues and lack of demand remain problems.
Understanding China's Property Market
by Andy Rothman of Matthews Asia,
One of the biggest misconceptions about Chinas property market is that most buyers are speculators. In fact, the residential market is driven by owner-occupiers, and even many poor Chinese are homeowners; China is a global leader in homeownership with urban ownership rates at 89%. The boom days may be over, but fundamental demand remains healthy. New home prices rose at an average annual pace of 9% over the last eight years, but nominal urban income rose 13% per year. Communist Party leaders do not appear too worried about property; theyve taken only modest steps to support the m
Doubling Down on Inflation
by Peter Schiff of Euro Pacific Capital,
Friday's release of disappointing August payroll numbers should have been a jarring wake-up call warning Wall Street that the economy has been treading on thin ice. Instead the alarm clock was stuffed under the pillow and Wall Street kept sleeping.
As The World Turns ...
by Scott Brown of Raymond James,
U.S. economic data were mixed last week, but there was nothing in the August Employment Report to suggest that growth is slowing down. A surprise move from the European Central Bank pushed the euro lower, but there appears to be a lot more that the ECB can do.
ECB Measures Highlight Draghis Determination
The reduction in eurozone interest rates announced on September 4 by European Central Bank (ECB) President Mario Draghi came as a bit of a surprise to some market players. But David Zahn, Head of European Fixed Income and portfolio manager, believes that this move, along with the confirmation of the commencement of the banks asset-backed securities purchase program, is very much in line with its previous action and suggests a central bank president who is in control and determined to get the eurozones economy back on track.
Labor Force Participation Lowest in 36 Years - Why?
Last Fridays unemployment report for August was significantly weaker than expected. While the headline unemployment rate dipped back to 6.1% (same as it was for June), the number of new jobs created last month was substantially below expectations and marked the lowest number of the year.
Staying Ahead of the Curve
Investors could soon face an environment of rising U.S. interest rates and heightened rate volatility. Already, the Federal Reserve has begun setting the stage by tapering its quantitative easing program. Once rates start to rise, its difficult for a fixed income portfolio to make up lost ground if its not already positioned for higher rates. We think its crucial for investors to diversify their yield curve exposure by investing abroad.
Hiring Flounders in August and Extreme Seasonal Distortions
by Chris Maxey, Ryan Davis of Fortigent,
With expectations high, the August labor report landed with a reasonably loud thud. Economists expected recent improvements in labor markets to continue aplenty, but that proved not to be the case during the oftentimes-volatile month of August. It is never wise to read too much into a singular month, and the details of this report support that notion.
Why Multifamily Housing is Booming (and Single-Family Isn't)
by David Schawel,
The rebound in single-family housing has been tepid. Investors must understand the underlying structural changes, especially why demand has shifted toward multifamily housing and why this shift will persist in the years ahead.
Xis Purge
Since taking power, Chinese President Xi Jinping has implemented a strong program to punish corruption. A large number of the Communist Party of China (CPC) have been under investigation or punished for their failings. We believe these purges are being implemented for reasons beyond the simple exercise in political power. This report will discuss the purge in detail, introduce the concepts of environmental and social capital, and discuss Chinas four stages of growth. We will conclude, as always, with market ramifications.
Is it Time to Take the Euro Out of Europe?
by Jeremy Schwartz of WisdomTree, Inc.,
On September 4, the European Central Bank (ECB) took further accommodation to support the economic growth environment in Europe. As a result, the euro collapsed about 1% immediately after the news, while European stocks rose on prospects for more monetary policy easing. This reaction mirrors what we saw in Japan in 2013, and it strengthens the case for taking the euro out of Europe.
A Choppy Path Stretches Ahead, but It Could Favor Equities
U.S. equities continued their winning ways, with the S&P 500 Index advancing 0.2% last week. Although the August employment data were somewhat disappointing, investors were cheered by strong manufacturing trends. Events outside of the U.S. also contributed to the positive tone.
The New Challenges of Price Discovery
In the past few years, price discoveryor the act of finding the right price for a securityhas become much more challenging because of falling stock volume and widening bid-ask spreads. These challenges are directly attributable to the infiltration of high-frequency traders into the market, not to mention the expansion of dark pools and non-exchange trading.
Gold in the Time of the US Dollar
by Ade Odunsi of AdvisorShares,
Continuing on the theme of the impact that strength in the US dollar might have on the price of gold in dollars, in this weeks discussion we investigate the close historical relationship between the price of gold expressed in dollars and the value of the dollar.
Will Russia Derail the Eurozone Recovery?
by Nicola Mai of PIMCO,
Geopolitical tensions from Ukraine and the evolving trade war with Russia are threatening what is already a weak recovery in Europe, and could shave approximately 0.3%0.4% off eurozone growth. Should the situation escalate, we could expect an even greater drag with potential to push the eurozone back into recession. Looking ahead, we see attractive opportunities in peripheral bonds and favour an underweight currency position in the euro.
Markets Climb as World Faces Crisis
by John Browne of Euro Pacific Capital,
On August 28th while the geographical area formerly known as Iraq descended further into chaos, President Obama announced to the world "We don't have a strategy, yet." A few days later, another brave American journalist was brutally beheaded by a slickly televised cockney-accented jihadist. Clearly things are not going well outside the bubbly confines of the S&P 500.
Voya Global Perspectives Market Update
A hawk in doves clothing, Yellen will likely be ahead of the curve when it comes to hiking rates. Driven by strength in manufacturing and a revitalized consumer, corporate America is thriving. The euro zone is an economic basket case, forcing Draghi to reach for another bazooka solution, to the likely benefit of risk assets. Broad, globally diversified portfolios can help protect investors against the volatility that policy normalization may bring.
International Equity Commentary: July, 2014
by Team of Thomas White International,
International equity prices saw a modest correction in July as geopolitical tensions worsened in Ukraine and the Middle East. The risk of these conflicts spreading to wider areas and pulling in more countries unnerved the markets.
What's Next for the Dollar and Gold?
by Axel Merk of Merk Investments,
One reason markets tend to get a little nervous in September is that its time for investors to ponder about their asset allocation for the remainder of the year and beyond. With the markets at or near record highs and the US dollar on a roll, what could possibly go wrong? Lets look at whats next for the dollar, gold, and currencies.
U.S. Oil Industry, Economy Feel Effects of Shale Revolution
The term Shale Revolution reflects the booming oil production from shale basins in the U.S. The rapid pace of oil output from these fields is spurring growth across the energy industry, providing a wide range of benefits to the U.S. economy and generating potential opportunities for investors.
Risk Revisited
In April I had good results with Dare to Be Great II, starting from the base established in an earlier memo (Dare to Be Great, September 2006) and adding new thoughts that had occurred to me in the intervening years. Also in 2006 I wrote Risk, my first memo devoted entirely to this key subject. My thinking continued to develop, causing me to dedicate three chapters to risk among the twenty in my book The Most Important Thing. This memo adds to what Ive previously written on the topic.
Voya Fixed Income Perspectives August 2014
Like the buzz of the alarm clock on the first day of school, the July/early August market selloff awoke investors to the fact that the lazy, carefree days cant last forever. Though a single catalyst for the latest shift in sentiment is tough to identify, there are a number of suspects: ample geopolitical uncertainty, the possibility that strong U.S. economic data may hasten fed funds rate normalization and Fed rhetoric about froth in certain markets.
Despite Growing Risks it's Still Janet Yellen's Market
by John Browne of Euro Pacific Capital,
The current stock market is earning a deserved reputation as being coated in Teflon. Bad or disappointing news just doesn't appear to stick, and has done nothing to slow the market's upward trajectory. Bad news is good and good news is good news. But where does this all end? A minority of investors have begun to wonder whether negative geo-political risks, embodied in the steely-eyed stare of Vladimir Putin, are exerting more influence on the market than the sunny smiles of Janet Yellen.
Can Retirees Still Use a 4% Withdrawal Rate? Practical Applications of Monte Carlo Analysis
Some advisors remain critical of Monte Carlo simulations, instead preferring to use analysis based on rolling historical periods or specific pre-defined scenarios. We believe Monte Carlo is a superior tool for measuring the uncertainties in long-term financial planning. As an example, we use it to predict the likelihood of a successful 4% withdrawal rate under today's market conditions.
Results 8,651–8,700
of 10,317 found.
