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Europes Central Bank at Sea
My sense is that politicians will opt for a weak variant of greater fiscal union, but that, ultimately they will fail to execute it for the eurozone as we know it today. After some considerable volatility, a smaller and more robust currency union will emerge; and, importantly, Europe will avoid the euros demise and a total breakdown of the eurozone. No matter how you view it, the coming endgame will be neither simple, nor orderly. Had the ECB known this at the start of Europes debt crisis, it might have resisted taking so many risks with its balance sheet and reputation.
Terminator 3: Rise of the Machines
by Jeffrey Saut of Raymond James,
While people who live in glass houses should not throw rocks, I have to observe how the media has trotted out super-bear Robert Prechter at every major stock market low for the past decade. They featured him again last week. Combine such anecdotal gleanings with the aforementioned market valuation metrics and it suggests a downside inflection point may have been reached. And while the bottoming process should take weeks, many individual stocks have likely already bottomed.
Krugman's War Cry Won't Avert Depression
Mr. Krugman believes that we can grow our way out of this recession like we have in the past few. Unfortunately, we are dealing with a completely different animal. In every past recession the government under the guidance of Keynesians, decided to put off deleveraging in return for artificial growth. Well, that tab has come due. Since these economists keep trying to spend like its WWIII, we are moving inexorably closer to causing Great Depression II. If policymakers and economists fail to understand that the progenitor of a depression is debt, they will also be unable to provide a solution.
Weekly Aisa Update
by Robert J. Horrocks of Matthews Asia,
Italys government bond yields have been spiking as investor concerns threaten to become self-fulfilling prophecies that raise the specter of default in Italy and dismemberment of the euro. While, China is stepping more than a little lightly on the monetary brakes, along with other countries across Asia, over fears that inflation is getting out of control. And the markets response is to push up the price of U.S. bonds and sell down equities across the globe. Obviously, slowing growth is of far greater concern to investors than the opinion of the rating agencies.
A Winning Endgame
by Robert Huebscher,
Reducing our nation's debt burden is no longer only the rallying cry of Tea Partiers and fiscal conservatives. As the debate over the debt ceiling proved, it is now the goal of the president and many fellow Democrats. John Mauldin and Jonathan Tepper's book, Endgame, published earlier this year, makes a compelling argument as to why reducing the deficit is so critical and why we face a long, slow and ultimately painful period of deleveraging. I will explain their thesis and then provide the counterargument.
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.
An Economy at Stall Speed
The economy is at stall speed, it is quite possible well see further downward revisions to the already anemic growth numbers, and Congress and the President are dithering over the debt ceiling. It will not take much to push us into an outright recession. We can go a few days, I think, with the latter problem, but not too long or the markets will throw up.
Income Opportunities in Municipal Bonds and Stocks
by Robert Huebscher,
In this interview, Brian McMahon and Chris Ryon of Thornburg Investment Management assess the opportunities for income-oriented investors, particularly in the municipal bond market. They answer questions such as when a separate account is better than a fund, and why a barbell is inferior to a laddered portfolio.
Sector Insights - Focus: Materials & Processing
There has been a trend in the last decade for companies to increase in size through M&As, with a focus on removing competition, growing larger, and cutting costs to achieve economies of scale. In businesses that are commodity-oriented, scale is vital to success. This consolidation is occurring in part because it is becoming increasingly difficult to add economic value in this sector of the market. An agricultural revolution is underway, which is advantageous to many companies in the agricultural chain. Demand in the emerging world in particular is providing opportunities to grow revenues.
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.
Looking Past a Weak Q2
While some economists are reducing their projections for second half growth, we remain confident in a relatively strong rebound from a weak first half. We forecast that real GDP will grow at a 4% to 4.5% average annual rate in Q3 and Q4 2011. Productivity is strong, monetary policy is loose and fiscal policy is getting no worse. Jobless claims are falling again and auto production is set to surge. In addition, with full expensing allowed for tax purposes this year, record levels of both profits and cash will fuel growth in business investment.
Pacific Basin Market Overview ? June 2011
by Team of Nomura Asset Management,
Faced with the imminent withdrawal of the Fed?s QE2 policy, the ongoing sovereign debt woes in the Euro-zone, and concerns over a slowdown in China, the Asian equity markets were at best only able to range trade during the second quarter. The broad indices remained relatively flat, with the MSCI AC Asia Pacific Free Index declining by 0.50% while the MSCI AC Asia Pacific declined 0.87%. As the immediate concerns over the sovereign debt crisis in Europe subsided, a steady recovery in domestic production also helped to lift the Japanese market and trigger a late rebound in equity prices.
The Titanic Has Sailed
by Michael Lewitt,
It was entirely predictable that the U.S. equity market would rally on the news that Greek would not default this month, but it does little to convince me that the long-term outlook for European sovereign debt or the global economy has improved. Markets - particularly the equity markets - are trying to pretend that the global economy is experiencing a self-sustaining recovery. A hard look at the economic numbers would tell an objective observer that no such recovery is occurring.
The Diversified Portfolio Index
Investment rates of return that are average but consistent are the products of exceptional performance. Over longer time horizons, these returns become increasingly difficult to outperform. One such example is the Diversified Portfolio Index - a buy-and-hold strategy deployed across all major asset classes.
Investing Based on Jeremy Grantham's Forecast for Diminishing Resources
by Robert Huebscher,
In his most recent commentary, Jeremy Grantham became one of the first mainstream investment professionals to publicly forecast a world economy threatened by diminishing natural resources. A survey of our readers showed that an overwhelming majority agree with Grantham's views. But constructing a portfolio positioned to capitalize on those themes is exceedingly difficult.
The Greek Comedy
by Michael Lewitt,
It is no longer prudent to dismiss the possibility of a worst-case outcome for the Greek debt crisis. Greece is not only laying bare the flawed structure of the European Union, but the fragility of the global financial system. An interconnected and networked global economy cannot ignore problems on its so-called periphery because there is no longer any periphery. Derivatives and other counterparty relationships have seen to that.
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.
Bruce Berkowitz - Ignoring the Crowd on Financials
by Sam Parl,
Bruce Berkowitz has said that his deep value and contrarian investing style will not guarantee short-term results, but he promises his shareholders will be rewarded for their patience over the long term. Last week, he explained why some of his positions - especially those in the financial services sector - are among the best opportunities in the market.
The Consequences of Policy Failure
by Michael Lewitt,
Investment performance for the rest of the year will be determined by the macro-economic views of investment managers. While microeconomic factors are always extremely important in charting investment strategies, they are particularly important today as the U.S. and global economies continue to fight their way through the detritus of the global debt crisis. A compelling case can be made for weaker 2Q112 growth based on a combination of factors.
Emerging Europe: Economic Review May 2011
by Team of Thomas White International,
According to data from EuroStat, inflation in the Euro-zone touched a 30-month high of 2.8 percent in the month of April as prices of fuel, electricity, and housing continued to soar. In line with the broader trend, the inflation gauge in the 27-member European Union, which also includes Poland, the Czech Republic, and Hungary registered an annual 3.2 percent in April, a touch above the 3.1 percent recorded in March. Among the east European economies, the Czech Republic recorded the lowest rate of inflation during the month.
Advisor Perspectives Acquires dshort.com
Advisor Perspectives today announced that it has acquired the web site dshort.com. Featuring daily commentaries on market trends and key announcements of economic indicators, the dshort site has grown to be a leading source of analysis since its creation by Douglas Short in 2005.
New Challenges for the Endowment Model
by Robert Huebscher,
The multi-billion dollar endowments of elite institutions like Harvard, Yale, and Princeton are supposed to never be strapped for cash, but that's not how things played out during the financial crisis, when all those schools and many others were forced to raise liquidity under adverse market conditions. The endowment model, despite those failures, is still basically sound, according to Luis Viceira, but it needs several key improvements before institutions and individuals can rely on it.
The Smooth Illusion
by Michael Lewitt,
In retrospect, the Federal Reserve's interminable zero-interest policy and its quantitative easing programs are likely to be seen not only as ineffective but damaging to the prospects for sustainable long-term economic growth. A number of asset classes are beginning to exhibit bubble-like behavior, something that would be far less likely to occur were interest rates normalized.
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.
When You Can?t Say It Nicely ? But It Still Needs To Be Said
by Wendy J. Cook,
Perhaps because social media is so, well, social, I find it particularly painful to see someone go on a poorly rendered rant on the Internet. As Gilbert K. Chesterton says, 'A good novel tells us the truth about its hero; but a bad novel tells us the truth about its author.' How do you speak your mind about strongly help viewpoints without revealing a fool?
A Roadmap For The Coming Changes In Fed Policy
Last week?s FOMC statement, and Bernanke?s first press conference, were predictably anticlimactic. But they did confirm what the FOMC plans to do this summer, and what they currently think should be the next steps thereafter. Based on this apparent plan, market participants would be right to assume that Fed policy will continue, well after QE2 ends in June, to weigh on the Dollar and support the already elevated Euro, commodity prices, commodity currencies, etc? In other words, the Fed?s telegraphed trajectory would continue to contribute to the world?s biggest macro risks today.
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).
When to Bring up Referrals
by Dan Richards,
Advisors often ask me what should be the right frequency with which to raise referrals with clients. Some advisors are hesitant to introduce the topic of referrals at all. Balancing that reluctance, one advisor told me about a direct connection between how frequently he talks to clients about referrals and the chances that referrals will follow as a result - the more often he raises this, the more often referrals will follow.
Gary Shilling - Five Things that can Derail the Recovery
by Robert Huebscher,
Die-hard deflationists - those who foresee a continued bull market in bonds - are so few in number these days they could all share an elevator, according to Gary Shilling. One is Gluskin Sheff's David Rosenberg, whose views are considered elsewhere in this issue. But the loudest such voice belongs to Shilling himself, who has advocated for a long position in Treasury bonds continuously since 1980, a stance that has always proved prescient so far.
European Engines of Growth
Emerging countries in Europe are expected to outpace their developed counterparts over the next two years, with Latvia, Poland, Romania and Slovakia leading 2012 GDP growth, according to The World Bank. In its ?EU10 Regular Economic Report,? the organization expects Romania to lead the way with 2012 GDP growth of 4.4 percent followed by Slovakia?s projected growth of 4.3 percent. Poland?s GDP is anticipated to grow by 4 percent this year and 4.2 percent next year. As domestic demand recovers, Latvia is set to produce a GDP of 4 percent by 2012.
P/E: So Many Choices: Part 1
by Ed Easterling,
We're delighted to welcome Ed Easterling with this first installment of a two-part article on P/E ratios. Ed's books, Unexpected Returns and Probable Outcomes, have our unqualified endorsement for anyone trying to understand the complex and often puzzling relationship between the economy and the market.
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.
Rear View Mirrors
It was another positive quarter for U.S. equity investors. The market?s resilience in the face of the Fukushima earthquake, Middle East rebellions, and euro uncertainties was remarkable. The U.S. economy continued to demonstrate significant signs of recovery with new jobs in March and a 1% drop in the unemployment rate since November. While European markets were up 6.5% in dollar terms, Asian indices were down 2%. Bond market was mixed, with treasuries down and diversified indices flat. Oil prices were up over 16% while the dollar fell 6.4% relative to the euro but up 1.3% to the yen.
Gundlach: Treasuries will Rally When QE2 Ends
by Robert Huebscher,
The bonds that PIMCO's Bill Gross sold to take a 3% short position in the Treasury market may have found a buyer in Doubleline's Jeffrey Gundlach. In a conference call with investors last week, Gundlach said that Treasury prices would rise in the near term, once QE2 expires on June 30.
Mexico: Conquering its Challenges
Mexico has a wonderful combination of a dynamic economy with an active cultural scene. Just like other markets, Mexico?s stock market suffered a crash at the end of 2008 and the beginning of 2009, moving from the 2007 high of almost 32,473 points to an October 2008 low of 16,979 points, a huge decline. Since then it has climbed steadily, more than doubling to reach 38,600 points at the beginning of this year. The Mexican economy has mirrored the stock market. After a disastrous 6% contraction of the economy in 2009, Mexico grew by more than 5% last year and is expected to grow by 4% in 2011.
Been Down So Long It Looks Like Up To Me
by Michael Lewitt,
"The budget crisis is a crisis of leadership," writes Michael Lewitt in the latest issue of the HCM Market letter. "There is no intellectual mystery involved in cutting the budget - entitlement spending must be reduced through the adoption of tighter eligibility standards... The markets will also have to evaluate whether Congress and the Obama administration can make any meaningful progress on budget reform, which will mean tackling the entitlement issue. The failure to rein in federal deficits remains a profound threat to the dollar and interest rates."
Ten Trends that will Reshape the Fund Industry
by Robert Huebscher,
For advisors scouring among thousands of mutual funds, bargains and inefficiencies will be harder to find in coming years. Intense competition among funds for shelf space will not translate to lower fees, and the new class of broad asset allocation funds is unlikely to live up to its marketing promises. Those were among the surprising forecasts from Geoff Bobroff, with whom I met last week.
China Part II ? Looking Beyond Its Shores
China?s latest 5 Year Plan is focusing on growing the domestic economy with a focus on harmony. A lot of the foreign investments and the large capital inflows into the Chinese market have all been focused on tapping into one of the world?s largest consumer markets. However, what many are missing is that China is the world?s fifth largest investor in terms of outbound direct investment at about US$56.5 billion in 2009. Last December, China announced US$16 billion in deals in India and this year, Chinese officials pledged to purchase as much as 6 billion Euro worth of Spanish gov bonds.
Confessions of an Investor
Woody Brock is advocating a regime change. Throw away the generally accepted approach of two generations of investment ?experts? and start again, is Woody?s recommendation. As a practitioner, I certainly recognise the limitations of MPT and I agree that, in the wrong hands, it can be a dangerous tool, but there is also a discipline embedded in MPT which carries a great deal of value. And, in fairness to Woody, he does in fact agree that you can take the best from MPT and mix it with a good dose of ?common sense? and actually end up with a pretty robust investment methodology.
Wanted: Private Investors Seeking First Loss Exposure on RMBS
In a market where volatility is this high,even with the Fed removing trillions of dollars in duration from the markets via QE, just how are private obligors going to price trillions of dollars in first loss RMBS exposure in this imaginary private market that pro-reform elements in Congress have in mind? Fact is, when the Fed ends QE. market dependence upon the GSEs for liquidity support will grow. Like we said, raise the G fees and the conforming loan limit in the name of market forces, Congress needs to find some ways to increase the volume of mortgage loan refinancing and modifications.
Running on Empty
by Michael Lewitt,
Despite the increasing undercurrent of negative news creeping into the financial markets, the stock market remains strong. HCM expects equities to continue to perform well for the foreseeable future (i.e. through the end of June) although most of this letter will discuss the reasons why it shouldn't. In some ways, this market is a lot like Charlie Sheen. It pretends to have tiger blood and the powers of a warlock, but deep inside it is suffering from an addiction to a substance (i.e. debt) that will ultimately kill it.
Results 9,951–10,000
of 10,168 found.
