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Can you Beat SPIAs with Long-Term Bonds?
by Michael Edesess,
While single-premium income annuities (SPIAs) guarantee a specific income as long as the purchaser lives, their rates of return generally compare unfavorably with long-term bonds over normal life expectancies. This makes SPIAs look like the inferior investment, notwithstanding their value as longevity insurance. But considering the low level of interest rates and the potential for future volatility, SPIAs are still a good choice for many retirees.
Breaking Bad
by Michael Lewitt,
With our largest business and government institutions committing every conceivable act of legal or moral anomie, we have every right to ask who is going to protect the rest of us from those who have been entrusted with so much power and influence. The institutions that were supposed to be the lifeblood of our economy are the same institutions that inflicted the greatest harm on society. When the family has to be protected from the man who is supposed to protect the family, the family is in serious trouble.
Investing and the Euro Crisis
by David Kelly of J.P. Morgan Funds,
In the summer of 2012, the Euro Zone crisis continues to dominate financial markets as it has done over each of the past two summers. While the solution to the problem remains relatively straightforward, it requires a level of economic understanding, political courage and communication among policymakers that has been absent thus far. Without this, the crisis is likely to lurch forward with only a very slow and painful resolution.
Economic Insights: U.S. Exports: A Lower Gear, but Still Cruising
by Milton Ezrati of Lord Abbett,
The growth of exports at times has added as much as two percentage points to the overall pace of the economys expansion and is a major reason why American manufacturing has staged a comeback in recent years - a renaissance some have called it. But of late, with the dollar rising against both the euro and the yen, and with growth overseas slowing or, in Europes case, falling, questions have arisen about the sustainability of U.S. export strength.
European Summit - Something for Bulls and Bears
by Fred Copper of Columbia Management,
The European summit outcome was fascinating; it had something for everyone, both bulls and bears. The net result was a positive surprise with at least one major concession by Germany. In concurrent news, three of the four semifinalists in the Euro 2012 soccer tournament were PIGS (Portugal, Italy, Greece and Spain) and the other was Germany. Spain won the competition on Sunday, symbolic of the PIGS power within Europe it isnt all about Germany.
The Euro's Latest Reprieve
by Joseph Stiglitz of Project Syndicate,
Like an inmate on death row, the euro has received another last-minute stay of execution. The markets are celebrating, as they have after each of the many euro crisis summits until they come to understand that the fundamental problems have yet to be addressed.
An Ending Made For Gold
Over the past several months, the markets have tested investors conviction to gold. Since February, the price of the yellow metal has steadily stepped lower, rallying somewhat in May before falling again when Ben Bernanke disappointed by not providing the U.S. with more stimulus. Meanwhile, the dollar gained ground as global investors fled the euro.
Jeremy Grantham: US Stocks are Expensive and Bonds are Disgusting
by Robert Huebscher,
Jeremy Grantham, who has consistently identified overpricing in the US equity markets - he flagged both the Dot Com bubble and the irrational pricing that preceded the financial crisis, for instance - said last week that US stocks are 'a little expensive' and bonds are 'disgusting.' But his sternest warning to investors concerned the longer-term threat posed by global resource constraints.
And That's the Week That Was
by Ron Brounes of Brounes & Associates,
Ahthe doldrums of summer. Sure Greece just completed crucial elections that could have dramatic impact on the euro-zone and the global economy; AND Spain just saw its interest rates rise above the key seven percent level into traditional bailout territory; AND JP Morgan, of failed hedging fame, just received a major ratings downgrade by Moodys Investors Services; AND Facebook disappointed the investment world with its disastrous IPO, a comedy of errors for most everyone involved
A Busy Weekend in Europe
by Fred Copper of Columbia Management,
The headline story is the election in Greece. The initial market reaction to the vote result was positive, with the Euro and Asian markets up strongly. Apparently, the market is realizing that though a disorderly Greek exit scenario has been taken off the table, at least temporarily, by the majority given to pro-bailout parties, we are really just back to where we were before, between the rock of an economy in free-fall and the hard place of an unsupportable and expanding mountain of debt.
Retirement Floors and Implications for Evensky's Cash-Reserve Strategy
by Wade Pfau,
Does sensible retirement planning call for funding basic needs with less volatile assets and investing more aggressively for aspirational goals? Or, with client goals clearly defined and prioritized, does sensible planning call for a total returns approach? Multiple schools of thought have emerged, but there is not yet any consensus about what constitutes a proper retirement income floor. These lingering unresolved disagreements reinforce the benefits of Harold Evensky?s and Deena Katz? popular strategy.
The Tip of the Iceberg For Dividend Stocks
by Team of Columbia Management,
Post-crisis equity investors seek to lower portfolio volatility. Dividend stocks have provided higher returns with less risk compared with non-dividend payers. Baby boomers are retiring now with much smaller nest eggs than they had anticipated. They need reliable sources of income and growth. Cash-rich companies are in a position to pay and potentially grow dividends, while dividend payout ratios are historically low. Active managers leverage in-depth research to uncover promising opportunities among companies likely to initiate or raise dividends.
The Problems with Trying to Benchmark Unconstrained Portfolios
by Ken Solow,
Benchmarking unconstrained, 'go-anywhere' managers is difficult. Common methods to determine an appropriate benchmark - such as an ex-post regression of how the fund was invested - can obscure the actions of the manager. Is the only solution to simply select an arbitrary benchmark and proceed accordingly?
A Proven Strategy to Attract Multi-million Dollar Clients
by Dan Richards,
When it comes to attracting new clients, new and different approaches are critical. While some advisors are experimenting with social media to grow their business, a recent conversation reminded me that advisors can still learn from longstanding, proven approaches that have been employed by advisors with elite clients.
Kingdoms of the Blind
by Michael Lewitt,
Recent events offer a rare illustration of the combined effects of the failure of monetary, fiscal and regulatory policy to coordinate a meaningful response. Rising budget deficits, record low interest rates, J.P. Morgan's proprietary trading blunder and the botched Facebook IPO process speak to abject policy failures in virtually every aspect of finance. It's not even a question of not having learned our lessons; our collective policy intelligence actually appears to have diminished.
The Accidental Empire
by George Soros of Project Syndicate,
Germany is likely to do what is necessary to preserve the euro but nothing more resulting in a German-dominated eurozone in which the divergence between creditor and debtor countries continues to widen. The EU would then become a German empire with a permanently depressed peripheral hinterland in need of constant transfer payments.
Waiting for Clarity and Action in the Euro Zone
Poor economic data and the collapse of a Spanish bank have kept the pressure on Europe and the financial markets, but we believe Greece will stay in the euro and the European Union. U.S. investors should know that Germany is pro-Europe and recognizes the need for growth, not just fiscal austerity. It is also important to point out that ECB policy has been supportive, but they do not want to do the job of the government. U.S. investors should look to high-quality dividend-paying stocks in this uncertain environment...
Gaming the Odds of a Greek Euro Exit With and Without Contagion
A key question on trader's minds is who will win the June 17th Greece election and whether it results in a Greek exit of the eurozone. Deutsche Bank gives it assessment in a report called Probability weighting EUR views on Greece. Under a variety of assumptions, the market pricing looks consistent with: a) significant odds in favor of Greece remaining part of the EUR zone and EUR/USD trading between 1.25 and 1.30; and, b) a worst case Greek exit global contagion scenario taking EUR/USD to 1.10, but not to levels as low as parity.
What Does a Dividend Tax Hike Mean for Dividend-paying Stocks?
by Steve Chun,
The Bush tax cuts are due to expire at the end of this year, but owners of dividend-paying
stocks need not be afraid. Historically, changes in tax regimes have had little
effect on the value of the aggregate stock market. Historical data show that even
vulnerable asset sub-classes - high-yield stocks, for example - have not lost value
long-term as a result of similar tax increases.
The Bargains in Europe's Great Oversell
by Bob Veres,
When was the last time we saw negative headlines drive valuations as low as they
have in Europe? Evermore's David Marcus, who succeeded Michael Price as manager
of the Mutual European Fund, says this period of obsession with Greek debt, bank
restructuring and single-digit P/Es may be known as The Great Oversell.
What History Tells Us about a Potential Greek Exit
by David Schawel,
Greece's future is less certain given the recent elections. Is an exit now possible or probable? What would an exit from the euro look like, and how would it be accomplished? Some historical examples give us a clue to the repercussions.
Facebook IPO Not a Flop; Underwriters Priced it Right
by John Buckingham of AFAM,
he social media giant ended its first day of trading up a measly 23 cents, or 0.6% from its $38 offering price, and technical difficulties at Nasdaq delayed the opening of trading and impacted market activity throughout the day, I give kudos to the underwriters for actually pricing the deal as best they could to match the relatively limited supply to the unprecedented demand. Certainly, Facebook could eventually grow into its lofty valuation, but it is eye-opening to think the disappointing first day of trading still left the company with a $100 billion+ market capitalization.
Keep Your Portfolio Rolling Along With Canadian National Railway
by Team of F.A.S.T. Graphs,
We believe at its current quotation CNI offers dividend growth investors an above-average total return at below levels of risk. Although the company only offers a market average dividend rate, we would expect its dividend to grow commensurate with its above-average expected earnings growth. We consider this a high quality dividend growth stock that is ideally suited for the long-term buy and hold conservative investor. As always, we recommend you conduct your own thorough due diligence.
Ponzi's Children
by Michael Lewitt,
Europe, whose economic condition is nothing less than terminal, is about to receive what physicians refer to as a 'zetz' of morphine in the form of M. Hollande. A 'zetz' is the final dose that doctors give to dying patients to hasten their passage to the afterlife. In Europe's case, however, the medicine is not going to be painless, and its administration is not based on mercy but on resentment and stupidity.
An Attack on Paul Krugman
by Michael Edesess,
A foundational principle of modern economics is that the creation of credit leads to economic growth. That precept underlies need for quantitative easing, and it is central to the question of what role monetary policy can and should play in stimulating a faster recovery from the Great Recession. It is also the subject of a debate between one of the world's most prominent economic scholars, Paul Krugman, and a feisty Australian economist, Steve Keen.
Lacy Hunt on Debt, Austerity and Recovery
by Robert Huebscher,
Global economies are experiencing unsustainable debt disequilibrium, according to Lacy Hunt. Economic textbooks preach that equilibrium, rather than transition, should be the predominant condition. But our attempts to reduce our indebtedness by taking on more ? and less productive ? debt are weakening our economy and creating unstable conditions.
McDonald's Back In Value, Above Average Growth And Yield
by Team of F.A.S.T. Graphs,
McDonald's represents an excellent choice for the prudent dividend growth investor seeking both capital appreciation, and above-average current yield and the opportunity to grow both in the future. With its recent pull-back, McDonald's is priced at the upper end of our valuation corridor. Therefore, although the company is not cheap, we do consider it a sound long-term investment at these levels. Furthermore, we would suggest that if the stock continued to drop from these levels, the prudent investor could use the lower price as an opportunity to average down their cost basis.
Dividends: A Timeless Component of Equity Return
With interest rates at historic lows and many dividend-paying stocks boasting yields comparable to or higher than US Treasurys, it is no wonder that dividends have recently been at the forefront of many investors' minds. But dividends have a long history as a significant component of total return, and today's buzz is just the most recent chapter.
Can You Make Great Sushi Out of Crappy Fish?
by Mariko Gordon,
What does it take for a tiny sushi restaurant in Tokyo to earn a Michelin three-star rating? The answer offers insights for stock-picking (really!). Here are seven suggestions for determining which analysts are most worthy of your attention.
Southern Co: A Solid Dividend Choice Worth Waiting For
by Team of F.A.S.T. Graphs,
We believe that Southern Company represents an extremely high-quality option for the investors seeking a high level of current income with an opportunity to grow moderately. However, we believe the current valuation is a little extended. Although Southern Co's current stock price is currently within our corridor of value, it is at the high end. Therefore, we would be more comfortable in recommending Southern Company if the PE ratio were a couple of points lower. On the other hand, Southern Company is an extremely high-quality and stable utility that may be worth waiting for.
How Big is Almost?
For decades the fondest wish of the finance professoriate has been to prove that money managers who believe they earn alpha are kidding themselves and their customers. The latest attempt, titled Active Portfolio Management and Positive Alphas: Fact or Fantasy? is the work of Cornells Robert A. Jarrow, a prestigious name in mathematical finance. Jarrow, based on some previous work with Philip Protter, sets out to prove that the source of all (or nearly all) alpha must be a true arbitrage. Since true arbitrage is vanishingly rare, he then argues alpha must be as well.
The Asymmetric Value of Delaying Social Security Benefits
by Michael Kitces,
Despite a compelling body of research arguing that most retirees would benefit by delaying the onset of Social Security payments, the majority who are eligible still elect to begin receiving them as early as possible. But delaying Social Security benefits is one of the best triple-hedges available to any retiree - simultaneously protecting against poor returns, high inflation, and longevity.
Another Story of Too Much Debt: Investing During Unsustainable Economic Conditions
by Brian McAuley,
US-based investors cannot ignore the macro environment, and therefore must consider the consequences of our increasing indebtedness and its impact on capital markets. We can gain valuable insights into our fiscal problems from the housing bubble and the European sovereign debt crisis - lessons which every value investor should heed.
Dividends: A Timeless Component of Equity Return
With interest rates at historic lows and many dividend-paying stocks boasting yields comparable to or higher than US Treasurys, it is no wonder that dividends have recently been at the forefront of many investors minds. But dividends have a long history as a significant component of total return, and todays buzz is just the most recent chapter. Stripping away the noise, what should investors consider as they survey the universe of dividend paying companies? We believe dividend payments are poised to grow in 2012, likely faster than earningsper-share growth.
65+5+Dividends: The case for quality dividend stocks in the first five years of retirement
Retirees are living longer than ever before, and for many, outliving their money is a real concern. A good reason to consider quality large-cap dividend stocks in the early years of retirement - which have historically offered higher returns than fixed income with lower volatility than equities overall.
Middle East/Africa First Quarter 2012 Economic Review
by Team of Thomas White International,
While the Middle East and Africa (MEA) region continues to weigh the impact of the tumultuous Arab Spring uprisings, the area is facing against another challenge yet again. In addition to the existing domestic instability, a strained external environment (the Euro debt crisis) is proving to be a major threat to the regions trade, tourism, remittances and other exports receipts. According to the World Banks Global Economic Prospects report, the economic recovery seen in Morocco, Jordan and Tunisia in late 2011 is likely to stall in 2012.
European Debt Crisis Never Went Away
US stocks are having a big day today, with the Dow up just over 200 points. But there are problems lurking in Europe that could be quite negative for global equities over the next several weeks. There are fears that Spain and perhaps Italy will need more bailout loans in the weeks just ahead. Thats our topic for today. In December and January the ECB took the unprecedented step of loaning apprx. 1 trillion euros to European money center banks in an effort to buy some time for the banks to recapitalize. The loans had three year maturities, and the interest rate was an incredibly low 1%.
Emerging Market Brands: From Backstage to Center Stage
If the growth of the emerging market consumer class persists, it should translate into more clout for local consumer brands. The global emerging markets middle class is anticipated to grow from 430 million in 2000 to 1.2 billion by 2030.3 By some estimates, China and India are expected to account for two-thirds of the expansion in emerging markets.2 Its not a given, but such a large group of people with diverse tastes in consumer goods could be a boon to emerging brands over the long term.
Muppet Capers
by Michael Lewitt,
Investors enjoyed strong stock market and credit market gains during the first quarter of the year, but storm clouds may be forming on the horizon. Corporate profits have likely peaked. Stocks may be the best house in a bad neighborhood, but houses in that neighborhood appear to be fully priced for now. There are also some troubling signs in the bond markets, particularly the long end.
Equity Market Review & Outlook
Looking out to year-end, Congress and the White House will be required to act on a long list of expiring tax measures and a debt ceiling increase is necessary as well. As we saw in 2011, compromise is very difficult to achieve and the elections introduce another level of uncertainty. However, the markets current attractive valuation builds in some of these risks. Beyond our shores, there is always the possibility of disappointment in Chinas growth trajectory, and further serious challenges with weaker members of the euro zone should be anticipated.
Carlisle Companies Inc.: Accelerated Earnings Potential and a Growing Dividend
by Team of F.A.S.T. Graphs,
Carlisle Companies Inc. appears to be poised for accelerated earnings and dividend growth. Even though this company offers a below-market current yield, it is a Dividend Champion with 25 years of raising their dividend. On the other hand, the accelerated expected earnings growth should lead to a rapidly increasing future growth yield that could reward shareholders that are more concerned with future income than current. Investors seeking above-average capital appreciation, coupled with a dividend that could grow at above market rates might want to look deeper into Carlisle Companies Inc.
Flexible Strategies for Longevity Protection: Comparing Two Products
by Joe Tomlinson,
Products that guarantee income for life can be useful for retirement planning, but many clients also want flexibility and control over their investments. Two products that can meet these objectives are variable annuities with guaranteed lifetime withdrawal benefits (VA/GLWBs) and deferred income annuities (DIAs).
Paul Kasriel's Parting Thoughts on the Economy
by Robert Huebscher,
Paul Kasriel, the chief economist at Northern Trust, will retire at the end of this month. In this interview, he explains why he is optimistic about the prospects for the US economy and why supposed headwinds - from the price of oil to the housing market - pose much less of a threat than most people believe.
Pigs and Panics!
by Jeffrey Saut of Raymond James,
As stated, this is a key week for the equity markets and we continue to wait and see how the equity markets resolve themselves on a short-term basis, a trading stance we have been in for weeks. Meanwhile, for investors, I met with a portfolio manager last week whose investment style I think is suited for the current stock market climate. The investment style of Troy Shaver, PM of Dividend Asset Capital, sub-advisor to Goldman Sachs Rising Dividend Growth Fund (GSRAX/$15.05), is to invest in companies that increase their dividends by 10% per year on average for 10 years in a row.
If You Think All Utility Stocks Are The Same - Think Again
by Chuck Carnevale of F.A.S.T. Graphs,
Utility stocks, especially regulated utility stocks share certain characteristics that differentiate them from the typical dividend growth stock. On the plus side, utilities are thought of as predictable stocks with low volatility characteristics. Utility stocks also tend to provide a higher current yield than many dividend growth stocks. On the other hand, all of this consistency comes at a sacrifice of growth. Since the typical utility has a significant portion of their businesses regulated, their ability to grow earnings and dividends is restricted.
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