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Buybacks Are Not Just an Accounting Trick
by Joseph Paul of AllianceBernstein,
As if on cue, news of record buyback authorizations earlier this year unleashed a torrent of media coverage denouncing them as nothing more than an accounting sleight of hand. We think the reaction has been pretty extreme.
Supply-Side Yellenomics Is (Slowly) Losing Its Grip on Markets
by Tony Crescenzi of PIMCO,
Should investors worry about the possibility that the Federal Reserve might raise interest rates this year? How about the negative economic consequences of the rally in the U.S. dollar? “Hawkish” Fed mistakes?
U.S. and Canada: Continued Recovery With Some Potential for Headwinds
by Ed Devlin, Mike Cudzil of PIMCO,
?Each quarter, PIMCO investment professionals from around the world gather in Newport Beach to discuss the firm’s outlook for the global economy and financial markets. In the following interview, portfolio managers Ed Devlin and Mike Cudzil discuss PIMCO’s cyclical outlook for Canada and the U.S..
The 'Perfect Storm'
This month's Absolute Return Letter is about the highly unusual set of circumstances which have underpinned the equity bull market of the last 35 years. Not one of the factors we identify did exceptionally well - they all did and, between them, they created the perfect breeding ground for exceptional equity performance. So far so good.
Unfortunately a reality check is required as it is exceedingly unlikely that those circumstances will be repeated in our lifetime. We should prepare for more modest returns ahead.
Behind Arnott's Strategy for PIMCO's All Asset Funds
by John Coumarianos,
If you thought a stretch of subpar performance would shake a fund manager's confidence, you'd be wrong in the case of Rob Arnott. Through Research Affiliates, his Newport Beach firm most famous for its fundamental indexing strategies, Arnott manages PIMCO's All Asset funds. These include PIMCO All Asset (PAAIX) and PIMCO All Asset All Authority (PAUIX).
A Q1 Letter to Clients: Ben Bernanke on Interest Rates
by Dan Richards,
Every quarter since 2008, I have posted a template for a client letter. This letter can be used as a starting point to provide an overview of the period that just ended and thoughts looking forward. This quarter's letter addresses questions from clients about why interest rates are so low and when they are likely to rise.
How to Profit When Rates Rise: Negative Duration Bond Strategies
by Bradley Krom of WisdomTree, Inc.,
As the debate rages surrounding the timing of the first Federal Reserve (Fed) rate hike, we continue to discuss the potential tradeoffs surrounding this inevitable shift in policy. While some investors may be content to ride out the waning bull market in bonds, others may seek to position more tactically.
Weighing the Week Ahead: Correction Looming?
After a week loaded with economic data there are plenty of fresh economic worries. In addition, the Fed seems ready to act in spite of some weak data. This means that good news is (finally) good news, and bad news will be bad. For economic and market skeptics, it signals a market shift that they see as long overdue.
Improving Growth Should Eventually Push Equities Higher
On the heels of a somewhat rough first quarter, many investors are questioning the state of economic growth and wondering if equities still hold value. Our view is that an improving global economy should (eventually) allow for a renewed upturn in earnings prospects, and in equity markets. As such, we believe investors should remain patient.
Weighing the Week Ahead: Correction Looming?
No one has a good, verifiable, real-time track record at predicting small corrections. Meanwhile, many investors get sidelined because they read an article or saw a chart suggesting that “the big one” was right ahead. Some people have been waiting for years for the correction so that they can get back in the stock market. Even when the correction finally comes they will be losers – and that assumes the ability to pull the trigger when things look bad!
The ECB's QE program: Don't judge a book...
The European Central Bank’s (the ECB’s) historic quantitative easing (QE) program, which commenced operations on Monday, March 9, is a unique animal. Despite the temptation for onlookers to draw similarities, the program is not quite like the rounds of easing undertaken by other major central banks since the end of the global financial crisis.
Convertibles Address Multiple Investor Needs
I began investing in convertible securities during the 1970s, and since then, I’ve seen an exciting evolution of the asset class—from little-known securities to a global asset class totaling approximately $342 billion USD today, including issues from household-name companies worldwide. Clearly, what began as an “alternative investment” has become much more mainstream.
Finding an Oasis in a Bond Liquidity Drought
Let’s not mince words: Liquidity is draining out of global corporate bond markets, and we doubt it’s coming back. But that doesn’t mean investors have to take their chips and go home. In fact, with the right approach, less liquid markets can offer some attractive opportunities.
That’s So Overrated: How Credit Ratings Do Damage
by Jeff Skoglund of AllianceBernstein,
Credit rating agencies are a capital-markets fixture; the ratings they assign to the debt of corporations and governments are widely used by investors as a standard measure of credit risk. But agency credit ratings aren’t perfect—and shouldn’t be a substitute for investors doing their own analysis.
For Canadian Pension Funds, It’s Time to Go Global
by Erin Bigley of AllianceBernstein,
Pension funds in Canada have long relied on a simple fixed-income strategy: buy Canadian. And for a long time, this worked wonders. But times are changing, and our research suggests that swapping a Canada-only approach for a more globalized portfolio will provide better risk-adjusted returns in the future.
Well, you know this is a bull market [in government bonds]!
by Team of GaveKal Capital,
Those familiar with "Reminiscences of a Stock Operator" will recall several scenes in which young traders are gathered at a brokerage house exchanging ideas and contemplating every tick on the tape as if marked some monumental episode for owners of the stock. Then one of the young traders would ask a quiet veteran trader, who was sitting in the corner paying little or no attention the topic de jure, what he thought of the recent price action of some issue, to which the veteran would reply, “Well, you know this is a bull market”.
Will the UK Election Derail the Recovery?
While the economic outlook for the UK is not without risk, most notably if there is an extended period of political paralysis, the UK recovery is much better shape than during the last general election in 2010 and should stay its course. We believe the benign inflationary backdrop will aid economic growth that saw GDP gains of 0.6% for the final quarter of 2014. In an environment of subdued underlying inflationary pressures and sterling appreciating relative to its major trading partners, the Bank of England can afford to wait to tighten monetary policy.
Convertibles Address Multiple Investor Needs
I began investing in convertible securities during the 1970s, and since then, I’ve seen an exciting evolution of the asset class—from little-known securities to a global asset class totaling approximately $342 billion USD today, including issues from household-name companies worldwide. Clearly, what began as an “alternative investment” has become much more mainstream.
Duration: To Hedge or Not to Hedge?
Because duration tends to be an important component of the return profile in a bond portfolio, adjusting exposure rather than hedging it away may make sense for many investors. Low duration strategies may provide a level of interest-rate duration that provides a better trade-off between a full market beta (with interest-rate duration) and a fully duration-hedged beta.
Fit & Focused
by Mark R. Kiesel of PIMCO,
Many powerful forces are driving markets and asset prices; chief among them are global monetary policy, technicals and fundamentals.
We use rigorous top-down and bottom-up analysis to identify the best sectors and companies around the world.
We see opportunities in the U.S. (cyclical consumer and housing sectors), Europe (equities, bank capital securities, high yield bonds and corporate hybrids), China (property, technology and Macau) and Japan (cyclical industries, exporters and financials).
On My Radar: Going Forward with Great Purpose!
The Fed tried to talk down the dollar last Wednesday. Essentially firing a warning shot (downgrading estimates for growth, inflation and short-term interest rates). The ultra-low rates in Germany and Japan vs. the U.S. favor the dollar. Anything that points to the Fed raising rates enhances the attractiveness of U.S. bonds and attracts further capital flows.
Should Liquid Alts Be Part of the Core Allocation?
Many advisors may view alternative investments as diversifiers in portfolios: satellite investments added to a portfolio of stocks and bonds in an attempt to “hedge,” or counterbalance a specific risk the advisor believes is not completely addressed by the stock/bond core. For example, real assets such as gold and real estate are alternatives that may be added to portfolios for inflation protection because advisors expect real assets to rise in value with any overall increase in wages and prices.
Eating Our Seed Corn: The Causes of U.S. Economic Stagnation, and the Way Forward
by John Hussman of Hussman Funds,
The U.S. has become a nation preoccupied with eating its seed corn; placing consumption over investment, outsourcing its jobs, hollowing out its middle class, and accumulating increasing debt burdens to do so. What our nation needs most is to adopt fiscal policies that direct those seeds to productive soil, and to reject increasingly arbitrary monetary policies that encourage the nation to focus on what is paper instead of what is real.
Federal Funds Rate Expectations: It’s October 2014 All Over Again
by Bradley Krom of WisdomTree, Inc.,
After a series of stops and starts, comments from a variety of Fed speakers and a slight pickup in some U.S. economic data, the Fed took the opportunity to deliver a dovish surprise at its March 18 policy meeting.
Further Equity Gains Await Earnings Recovery
Downward pressure on U.S. equities returned last week, with the S&P 500 Index falling 2.2%. This marked the second-largest weekly downturn of the year and the fourth negative week in the last five. Some of the decline can be attributed to fading positive sentiment that came in the wake of the recent Federal Reserve meeting. Ongoing negative earnings forecasts have taken their toll as well. All market sectors were in negative territory last week, with financials, technology and industrials losing the most ground and consumer staples and energy holding up the best.
Should Liquid Alts Be Part of the Core Allocation?
Many advisors may view alternative investments as diversifiers in portfolios: satellite investments added to a portfolio of stocks and bonds in an attempt to “hedge,” or counterbalance a specific risk the advisor believes is not completely addressed by the stock/bond core. For example, real assets such as gold and real estate are alternatives that may be added to portfolios for inflation protection because advisors expect real assets to rise in value with any overall increase in wages and prices.
In US Small-Caps, Quality Is on Sale
by James MacGregor of AllianceBernstein,
Investors who wanted safety and certainty last year mostly shunned smaller-cap US stocks. As a result, many high-quality names are now on sale. With US growth likely to accelerate in 2015, we think these domestically oriented smaller-cap companies may turn out to be a real bargain.
Japanese 10-Year Rates Double in 2015, Rise Above German Bunds
by Bradley Krom of WisdomTree, Inc.,
Since reaching historic lows in mid-January, Japanese government bond (JGB)yields have doubled over the last several weeks. In the process, they have eclipsed German 10-year bund yields for the first time in over 20 years.
REITs in a Rising Interest-Rate Environment
Wilson Magee, director of global real estate and infrastructure securities, Franklin Real Asset Advisors®, believes this environment is causing many investors to search for alternative investments that can add an income-oriented asset to their portfolio as well as gain exposure to global economic growth potential. He outlines why he thinks it’s an opportune time for many investors to consider diversifying into global real estate through an actively managed investment vehicle.
Global Economic Overview: February 2015
by Team of Thomas White International,
The global economic outlook improved in February, helped by encouraging data from some of the largest countries as well as supportive monetary policy measures. Monthly job additions in the U.S. exceeded expectations in February, continuing the robust trend from last year. Though wages are yet to see meaningful growth, the strengthening labor market should help the U.S. economy sustain the current pace of expansion.
The Relationship of Suds and Bubbles
The proliferation of news, information, opinion and fact (which all come across in the same way) has had an overwhelming effect on the common investor and the instructional as well. Attempting to delineate the crowded trade from the minority viewpoint is a far greater task currently. Though this increased dissemination of information is beyond the recognition of the investor’s psyche, it does have a more pronounced positive impact.
Breaking Up is Hard to Do
by Anthony Valeri of LPL Financial,
The high-yield energy sector has kept pace with the broader high-yield bond market in 2015 even as oil prices weakened, a notable difference from 2014. Although we don’t believe the high-yield bond market will return to the June 2014 peak, the current yield spread may still represent good value given still strong corporate fundamentals and low defaults.
Rates and Bonds
by Heather Rupp of AdvisorShares,
So at long last we know whether the word “patient” stays or goes: it’s gone and Treasury yields have actually declined as a result. So far this year we have seen rates go from a 2015 low of 1.19% on the 5-year and 1.68% on the 10-year on February 2nd, and then spike a month later at 1.70% and 2.24%, respectively, on March 6th. So an over 50bps move in a month all over the worry about the word “patient” and whether rates will rise as early as June. Only for rates to fall after the statement was released and the key word removed.
The Dollar's Ripple Effect
by Burt White of LPL Financial,
In technical analysis, “intermarket analysis” looks at the way in which various markets interact. Intermarket analysis primarily looks at four market sectors: currencies, commodities, bonds, and stocks. From a technical analyst’s perspective, focusing our attention on only one market without considering what’s happening in the others leaves us in danger of missing vital directional clues and potential profits. The dollar, which has appreciated 24.4% since June 30, 2014 (as of March 19, 2015), has had an unusually strong intermarket effect of late.
Can ECB Policy Heal Europe’s Ills?
In this interview, Managing Directors Mike Amey, Andrew Bosomworth and Lorenzo Pagani discuss the conclusions from PIMCO’s quarterly Cyclical Forum in March 2015 and how they influence our European investment strategy. They also delve into the impact of the European Central Bank’s (ECB) balance sheet expansion on growth and inflation and reflect on Europe’s improving economic health.
A Relatively Dovish Fed Statement Helps Equities Recover Ground
Last week featured some disappointing economic data and further downward revisions of corporate earnings estimates, but investors focused heavily on last week’s Federal Reserve policy meeting. The Fed’s statement was more dovish than expected, and investors interpreted the comments as an indication that rate increases would not happen as soon as some anticipated.
March Economic Update
With the unemployment rate dropping to 5.5% in early March, the economy has reached the upper limits of the Federal Reserve’s estimate of long-run normal unemployment (5.2% - 5.5%). GDP growth remains stable, with a current estimate of 2.2% growth for the fourth quarter of 2014. The housing market recovery continues at a slow-but-steady pace, with prices rising twice as much as inflation during 2014 (+4.5%) according to the 20 city Case-Shiller Index. The most uncertain aspect of the economic recovery in the U.S. remains the consumer.
Results 9,501–9,550
of 11,878 found.
