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Absolute Return Letter: Much Ado about Nothing
A 300 bps rise in bond yields across the term structure would, according to their calculations, do substantial damage to financial institutions balance sheets. Holders of U.S. Treasuries alone would lose in excess of $1 trillion on such a move in rates, equal to 8% of U.S. GDP. Other countries would fare even worse. Losses on JGBs would equal 35% of the Japanese GDP, effectively wiping out its banking industry in the process. Holders of U.K. bonds wouldnt do much better, losing the equivalent of 25% of U.K. GDP.
Accessing Myanmar's Growth
Did you know that in the first half of the last century, Myanmar had twice the GDP per capita of China? What a difference a few decades and government policies make, as China is ten-fold the size of Myanmar today, according to UBS Research. The change in wealth between the two nations is a prime example of how government policies can have a tremendous effect on a countrys growth.
Why a Normalized Yield Environment Marks the Return of Capitalism
by Francis Gannon of The Royce Funds,
While market sentiment over the past few years has shifted between confidence and fear, the quality companies that we covetand never abandonedhave been relatively ignored. Portfolio Manager Francis Gannon suspects that, although a shift back to a more normalized environment will mean continued volatility, the landscape will be more favorable for active managers.
For Abenomics, the Hard Part Is Still to Come
by Guy Bruten of AllianceBernstein,
Prime Minister Shinzo Abes Abenomics program, designed to revive Japans economy, was a big success in its first five months, easily surpassing low expectations. But its drifted off course since it began, and the going is sure to get tougher from here. Still, its too early to write off this policy experiment.
Becoming the Safe Choice for Your Target Clients
by Dan Richards,
When it comes to gaining clients, many advisors harbor this fantasy: Your phone rings and on the line is a qualified prospect with a million dollars, asking if youre available to meet and talk about the possibility of working together. For most advisors, theres only one way to make that happen, and thats to become the recognized, go-to expert for people in a defined target community.
The 2013 Mid-Year Geopolitical Update
At mid-year, we customarily publish our geopolitical outlook for the second half of the year. This list is not designed to be exhaustive. As is often the case, a myriad of potential problems in the world could become issues in the second half of the year. The lineup listed below details, in our opinion, the issues most likely to have the greatest impact on the world. However, we do recognize the potential for surprises which we will discuss throughout the year in upcoming weekly reports.
Recent Volatility ? Noise, not Signal
This spasm of volatility is a normal side effect when market participants adjust their positions to a new expectation for the future of monetary policy. Even though the policy adjustment being discussed at the Fed is minor ? i.e., a gradual tapering of quantitative easing (QE) ? the timing of the change was sooner than many investors expected, so trading volume jumped.
Second Quarter Market Commentary
by Mark Oelschlager of Oak Associates,
The market posted another positive quarter, with the S&P 500 returning almost 3%. In recent years, Q2 has witnessed a growth problem, in which softening economic data prompted investors to sell stocks. But this year that did not happen, as the data actually improved. While new job creation is less than some would like to see, there has been a clear acceleration over the past six months.
The Golden Cycle
by Peter Schiff of Euro Pacific Capital,
The New York Times had the definitive take on the vicious sell off in gold. To summarize one of their articles:
Two years ago gold bugs ran wild as the price of gold rose nearly six times. But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight. The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.
Inflation Lags Monetary Expansion: Prepare to be Swindled
In May 1977, the consumer price index (CPI), which measures a basket of consumer goods in the U.S. economy, had risen 6.7% from the year before. The indexes had doubled over the previous 15 years, and by 1977 investors were fully aware that the rate of change was increasingi.e. the inflation rate was spiraling higher. By then, this inflationary awareness had worked its way into every corner of the financial markets, as commodities, gold and interest rates rose, and the stock market remained in a deep funk.
Investment Bulletin: Global Equity Strategy
by Team of Bedlam Asset Management,
For the first five months of the year the global portfolio enjoyed a net gain of 21.0%, 350 basis points better than the index, edging ahead further in May. Recent smoke signals from the Federal Reserve Bank implying - subject to a wide range of get-out clauses that less money might be put into the system, have caused market hysterics. Bond investors have rightly been stampeding out, ending a 32-year old bull market. Its longevity had caused dangerous complacency and overexposure, especially to illiquid and expensive emerging market debt through open-ended vehicles.
ING Fixed Income Perspectives June 2013
Fears of Fed tapering are overblown; we expect global funding conditions to remain easy. We continue to favor the U.S. dollar and are bearish on the euro and the yen; we are cautious on EM local currencies, as volatility is likely to persist.Spreads are appealing at current levels, with higher-quality industrials offering the most attractive risk/reward.
Currency Wars: A Case for the U.S. Dollar
In recent years, the U.S. dollar has tended to lose value when the global economy improves, as investors are more willing to take risks. We believe that pattern has changed and that the U.S. dollar will outperform the Japanese yen, the euro and the British pound over the medium term, even if the global economy continues to improve. In our view, current conditions justify a material deviation in currency exposure compared with certain global fixed income benchmarks, such as the Barclays Global Aggregate Bond Index.
Trampled By the Crowd? Logic Briefly Abandoned Creates Opportunity
The past two week slide in asset prices has caused a resurgence of doomsday pundits warning of impending calamity. The negative interpretation of Fed Chairman Bernankes comments regarding the U.S.economys future upgraded prospects is simply not logical. A careful review of what Bernanke said at his press conference was entirely consistent with what the Fed has said and done in the past.
The Fed's Dirty Little Secret: QE Does Not Work
Today I hope to dispel the myth that the Fed?s massive quantitative easing (QE) policy has driven long-term interest rates lower. I will argue that the opposite is true and demonstrate that the yield on the 10-year Treasury note has actually risen during QE-1, QE-2 and QE-3. This flies in the face of most market commentators.
The QE Lemon Has Been Squeezed Dry
by Tad Rivelle of TCW Asset Management,
Weve just witnessed the dress rehearsal for the end of the Feds Quantitative Easing (QE). Markets that had learned to stop worrying and love the financial repression have been given reasons to fear the interest rate cycle. For five years we have lived with a central bank that has used, or abused, a zero rate policy and QE to effectuate the Great Risk-On trade to cure the ills of the Great Recession.
Sock Puppet Kabuki; Nikkei Today Parallels Dot-Com Bust
by Peter Schiff of Euro Pacific Capital,
The Japanese stereotype of excessive courtesy is being confirmed by the actions of prime minster Shinzo Abe who is giving the world a free and timely lesson on the dangers of overly accommodative monetary policy. Whether or not we benefit from the tutorial (Japan will surely not) depends on our ability to understand what is currently happening there.
Strategies for the Retirement Red Zone
by Joe Tomlinson,
The retirement red zone is the critical years immediately before and after retirement, when financial plans are highly vulnerable to adverse market movements. In many previous articles, I have examined strategies to reduce risk after retirement, but here I will focus on the decade before retirement. Ill compare strategies that rely on traditional stock-bond portfolios with those using various types of annuity products.
How Not to Invest in Dividend Stocks: Seven Mistakes Investors Commonly Make
by David Ruff of Forward Management,
While investors may assume that dividend investing is relatively straightforward, they commonly make mistakes that may undercut the potential income and total return of their investments.
Stay the Course
by Douglas Hodge of PIMCO,
It is that time of the year again. As school schedules give way to summer vacations, many families will be packing up the SUV to head to one of this nations amazing national parks. Years ago, my young family traveled to Yellowstone National Park, home of Yogi Bear and Old Faithful. The requisite float trip down the Snake River was arranged and a good time was had by all a bit of spray but nothing too jarring. Only days later, I returned to the Snake River and had the ride of a lifetime.
The Price Your Clients Pay for Using Safe Withdrawal Rates
by David B. Loeper,
Safe-withdrawal rates (SWRs) are perhaps the most extensively studied topic in financial planning literature. But applying a single SWR-driven methodology to all clients neglects their unique and individual needs. A better approach is for advisors to assist clients in defining their ideal and acceptable goals and the relative priorities among them. Then they can demonstrate through Monte Carlo simulation the likelihood of the recommended plan becoming over- or under-funded relative to those goals.
And That's the Week That Was
by Ron Brounes of Brounes & Associates,
What is the Fed actually saying? The economy is recovering; the labor market is improving; short-term interest rates should remain low until at least 2015; the bond buying program will continue in its current form; any winding down (tapering) of purchases will be contingent on steady growth; the policymakers would be prepared to ramp up buying if conditions warrant. What have many investors been hearing/thinking?
On the Radar: Let's Get Fiscal
by Milton Ezrati of Lord Abbett,
This is the second in a three-part series on longer-term issues that could either sustain or stall the current equity rally once stock prices fully capture their current, still-attractive values. The first in this series took up the prospective policy change by the Federal Reserve. This discussion considers future fiscal developments.
Asia Brief: China's Energy Demand
China has the worlds largest unconventional gas reserves, but these so far remain untapped despite its growing demand for energy. China is now trying to follow the example of the US, and the government has set aggressive targets for unconventional gas production. As the demand for transportation fuels grow over the next decade, this gas could be a major contributor to meeting that need.
Austerity is a Four-Letter French Word
The France that I see as I look out from the bullet train today is far different from the France I see when I survey the economic data. Going from Marseilles to Paris, the countryside is magnificent. The farms are laid out as if by a landscape artist this is not the hurly-burly no-nonsense look of the Texas landscape. The mountains and forests that we glide through are glorious. It is a weekend of special music all over France, and last night in Marseilles the stages were alive and the crowds out in force.
Weekly Economic Commentary
by Team of Northern Trust,
Today, the relative health of banks around the world goes a long way toward explaining differences in economic fortunes. As policy-makers seek ways to improve growth, addressing structural issues in their financial systems may be more effective than monetary or fiscal stimulus.
Tapering the Taper Talk
by Peter Schiff of Euro Pacific Capital,
As usual the Federal Reserve media reaction machine has fallen for a poorly executed head fake. It has been fooled by this move many times in the past and for its efforts it has tackled nothing but air. Yet right on cue, it took the bait once more. Somehow the takeaway from Wednesdays release of the June Fed statement and the Bernanke press conference is that the Central bank is likely to begin scaling back, or "tapering," its $85 billion per month quantitative easing program sometime later this year, and that the program may be completely wound down by the middle of next year.
Searching for Super Small-Cap Companies Through the Macro Noise
by Chris Clark of The Royce Funds,
While market pundits tell us to worry about everything from currency concerns and environmental challenges to the ongoing threat of nuclear assault and resource depletion, these ominous obstacles and the endless possibilities of their potential fallout have a tendency to draw attention away from what we believe really matters: the companies that have the ability to survive, adapt, and grow stronger in the wake of uncertainty.
Changes in our Asset Allocation
We believe that valuations in publicly traded securities are stretched, and, although we have seen a move higher in interest rates and stocks have sold off from their high levels, investors are faced with choices that offer generally lower expected returns based on historic measures of return. Today, with the S&P 500 hitting 1650 and the yield on the 10 year US Treasury Note moving abruptly from 1.70% to 2.15%, there are generally two schools of thought on the minds of investors.
Pride: In the Name of the US Manufacturing/Energy Renaissance
by Liz Ann Sonders of Charles Schwab,
Manufacturing/energy renaissance in the United States is a long-term theme; not a short-term trade but its underway. The list of companies "reshoring" to the United States are powerful and growing. Can the United States become a global exporting powerhouse?
Fed Zombification
The enthusiasm of our culture for Zombies is estimated to contribute a tidy $5 billion dollar a year to GDP, and that doesnt even include the too-big-to-die zombie banks. In my opinion, the acute interest in zombies and horror (and escapism in general) says something about our countrys mental health.
Help Clients Fill the Income Void
Affluent investors all over the world just arent getting what they want from their income investments, according to Legg Masons recently released Global Income Survey. Yet there is good news: most say they want to become more knowledgeable about income investing, and theyre eager for financial professionals to point out fresh opportunities.
Three Time Bombs that Threaten Retirement Plans
by Dan Richards,
Three poorly understood developments threaten secure retirements ? without wishing to be alarmist, I will call them time bombs. These developments will change the retirement dynamic for many Americans: increasing lifespans, escalating medical costs as people age and safe withdrawal rates on savings dropping from historical levels.
Sloppy Markets Continue
by Bob Doll of Nuveen Asset Management,
Last week the S&P 500 declined 0.97%,1 while many global equity averages fell for the fourth week in a row. Early in the week, discussion of tapering by the Federal Reserve was a big headwind, as discomfort over a slower pace of policy accommodation rippled through global markets. Thursdays rally was driven by thoughts that tapering fears may be overdone. Markets were also helped by better employment and consumption data.
Recent Volatility in the Foreign Exchange Market and the Strengthening Yen
by Team of Nomura Asset Management,
There are two issues underlying the increased currency market volatility; depreciation of the Yen may have resulted in worldwide competitive devaluation and concern about early tapering of quantitative easing (QE) in the U.S. appears to have triggered currency depreciation for countries that are running current account deficits.
2013 Midyear Economic Update -- Another False Dawn?
by Paul Kasriel of The Econtrarian,
Weve seen this movie before since midyear 2009, havent we? The pace of economic activity begins to quicken and it looks as though a full-throated cyclical expansion might finally be at hand, only to have the economy slip back into the doldrums. Nominal private domestic spending on currently-produced goods and services grew in the first quarter at an annualized rate of 5.5% compared to 3.4% in the previous quarter. Consumer spending accelerated, housing sales picked up and business spending on equipment and software continued to grow at a healthy pace.
A Sweet Find on an African Adventure
The heart of Africa has been beating strong in recent years due to elevated commodity prices and resilient domestic demand, despite the global economic slowdown. Among the sub-Saharan African countries, Sierra Leone was the fastest growing country last year, according to the World Bank. Its economy experienced growth that is as rare today as Fancy Red diamonds. GDP increased a whopping 18 percent.
Global Small Cap Investing: Unconstrained Opportunities
by Blake Pontius of William Blair,
Equity asset allocations have become more global in recent years as investors have sought to reduce the long standing home country bias in their portfolios. Further propelling this trend has been the growing aversion to traditional asset class structures and indeed, conventional asset class definitions, in the aftermath of the 2008-2009 global fi nancial crisis. Against this backdrop, global equity strategies have continued to garner asset fl ows in Europe and have slowly begun to gain traction in the U.S. after years of tepid demand.
The Sustainability of Managed Futures Returns
by Robert Keck of 6800 Capital,
Many investors have begun to question the efficacy of an investment in managed futures given the most recent two years of negative performance for the industry as a whole at a time when U.S. equity prices have been achieving multi?year highs. The concern is not so much the magnitude of the losses incurred by the managed futures industry during this period; in many cases they are relatively small in comparison to the size of the drawdowns experienced by many other asset classes such as equities, real estate, fixed income, etc., during peak periods of market stress.
May Flowers Bring Best Equity Market Since 1997 as Bonds Wilt
The S&P 500 has opened 2013 with its best year-through-May return since 1997. U.S. Treasury prices, in contrast, plunged last month on talks of Fed tapering. Dont expect the reflation in bond yields to continue in the near term, as the Fed continues to struggle in its current war against deflation. Fundamental business activity not quantitative easing is the wellspring of sustained economic growth, creating lasting sales and profits. For investors, the two biggest self-defeating fears continue to be 1) the fear of buying equities and 2) the fear of buying bonds.
Crushing the Middle Class
by John Browne of Euro Pacific Capital,
Like a carefully memorized religious incantation, politicians and central bankers continually stress how their stimulus policies are designed to promote the interests and prosperity of the middle class. Cynical observers may note that this brave political stance may have something to do with gaining the support of the vast majority of voters who identify themselves as "middle class." However, the cumulative effect of their economic programs has achieved the opposite.
How Specialist Advisors Earn Twice as Much
by Dan Richards,
In any profession ? medicine, dentistry, law, accounting ? the average income for specialists is more than double that of generalists with the same years of experience. My experience with successful financial advisors who’ve built a niche practice confirms this, but first they had to overcome three common myths about developing a niche positioning.
Results 9,301–9,350
of 10,168 found.
