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Summer Quarterly Commentary
Recently the Fed indicated it may begin returning control over market pricing and interest rates to Adam Smiths invisible hand... and borderline chaos erupted. The episode began mid-day May 22nd as Congress questioned Fed Chairman Bernanke and suddenly the cat was out of the bag and a paradigm shift ensued. Bond funds suffered some of their largest weekly redemptions on record. Rates spiked and markets swooned around the world through late June as investors assumed the worst.
You Thought It Was Hot Outside...
by Blaine Rollins of 361 Capital,
You thought it was hot outside? Wait until you see the weekly cash inflows into U.S. Equities...
Funds that hold only U.S. stocks gained $15.58 billion in new cash, the most since June 2008. ETFs that hold domestic equities attracted $12.45 billion of those gains.
Risk Communicates Signals that Something Important is at Stake
The equity markets hit new all-time highs again this past quarter. However, we believe this rally is largely due to Ben Bernanke?s policy of Quantitative Easing (QE) which presently equates to the purchase of $85 billion in U.S. government debt every month. Through the Federal Reserve?s policies our government has effectively printed trillions of dollars since the financial crisis began, arguably inflating a host of asset prices including the stock market.
Print the Legend
by Peter Schiff of Euro Pacific Capital,
The Trayvon Martin/George Zimmerman tragedy has become one of those transcendent events that dominates the national discourse and throws light on dimly lit aspects of our society. Obviously, the case touches most closely on issues of race relations, media culture, and the politicization of the justice system. It also reveals how preconceived emotional commitments to a narrative can consistently trump demonstrable facts. These tendencies are also present in the polarized discussion about the persistent weakness of the U.S. economy.
European Equities: Beyond the Headlines
Its fairly easy for investors to find reasons to shun European equities. While struggles in some Eurozone periphery countries continue to make eye-catching headlines, the broader story of Europe is far less fatalistic, according to Mutual Series Executive Vice President Philippe Brugere-Trelat, who manages the Mutual European Fund, Mutual Global Discovery Fund and Mutual International Fund. When it comes to Europe, he says one shouldnt throw out the baby with the bathwater, so to speak.
The Death of Disasterism
by Steven Vincent of BullBear Trading,
From late 2012 I have been gradually layering and developing the thesis that a secular bull market started in November of 2012 (with a possible revised start date of June 2012), ending the sideways secular bear market that started in 2000. Here are the basic components of that thesis through the last report.
Closed-end Fund Review
Following a quarter in which the average closed-end fund was up 4.31%, the universe of 595 funds was lower by 5.60% on a share price total return basis during the second quarter (both figures from Morningstar). For many funds, most of the weakness occurred during the month of June (when the average fund was lower by 6.09% on a share price total return basis, according to Morningstar).
Canadian Secular View: Into Darkness?
Many investors are buying Canadian federal government bonds, shorting Canadian bank stocks and selling Canadian dollars in anticipation of a prolonged downturn. While significant risks are clearly facing the Canadian economy, our baseline forecast does not justify positioning our portfolios for a prolonged Canadian downturn.
The Great Rotation Continues Forward...
by Blaine Rollins of 361 Capital,
Fed Chairman Ben Bernanke grabbed the mic on Wednesday and gave a performance that garnered a standing ovation from Stock, Bond, and Commodity investors. Only U.S. Dollar longs went home dragging their programs and spilling their popcorn. As a result, U.S. equity markets ended the week at all-time highs as stocks remained the darlings of the asset classes.
Commodities 2013 Halftime Report: A Time to Mine for Opportunity?
It was a challenging first half of the year for most commodities, with only two resources we track on our Periodic Table of Commodities Returns rising in value. Natural gas and oil rose 6.5 percent and 5 percent, respectively, while silver lost a third of its value and gold lost a quarter of its price from the beginning of the year.
ENERGY MLPs: A Suitable and Sustainable Asset Class
Greater capitalization. More liquidity. The energy MLP market has grown steadily, with good reason: our constant demand for energy. While oil prices go up and down, volume has stayed consistent. Production is increasing. And the infrastructure is needed to support it. Add some risk, and you’ve got an investment which could fit in a diversified portfolio.
Rosebud?!
by Jeffrey Saut of Raymond James,
Produced in 1941, the movie Citizen Kane is heralded as one of the best movies ever made. It was one of the first to depict the American Dream, and materialism, as less than desirable and therefore causes one to contemplate what actually constitutes a life? Indeed, as a child the central character, Charles Foster Kane, is living in rural Colorado in a boarding house run by his mother (Mary).
Obamacare and Stocks
For much of the past four years, we have felt like psychologists who constantly must help hypochondriacs over their fear of one thing after another. There is no reason to remind everyone of the list its been endless, but the stock market and the economy have moved consistently higher despite these fears.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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?
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.
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.
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.
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.
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.
But We Want Goldilocks-Like Growth
by Blaine Rollins of 361 Capital,
While the equity markets would enjoy a bit of the great rotation out of the 20+ year outperformance in bonds and into equities, the move in May has been too much, too quick for even equity investors to stomach. So while the Long Treasury ETF (TLT) fell -6.8% in May, the size of the move even scared investors in REITs (IYR), Junk Bonds (JNK/HYG), and Utilities (XLU).
The Risk of Government Policies and the Rationing of Retirement
by Jason Hsu of Research Affiliates,
In late April, a group of leading economists and investment practitioners assembled in La Jolla, California, for Research Affiliates 2013 Advisory Panel. Our theme this year touched on two topics that have been front-and-center in recent public debates: the risk of government intervention and the potential rationing of retirement.
Weekly Market Commentary
by Team of Tuttle Tactical Management,
Yesterday ended the streak of up Tuesdays in the market while last week saw an acceleration in the the "crush anything that pays any sort of yield" theme. Treasuries, high yield bonds, preferred shares, Utilities, REITs, etc. all got killed. At this point this just seems like the weird type of dislocation that happens sometimes in markets where money just doesnt want to go anywhere except under a mattress.
What's the Answer to Unprecedented Policies and Ultralow Rates?
So what?s the answer to unprecedented central bank policies that have been driving stocks higher and ultralow rates? I believe investors need to stick to a strategy that includes dividend-paying stocks that offer the opportunity for both income and growth.
Bifurcation Blues
Bifurcation. A very technical sounding word. It merely means ?a division into two parts?, which is what we are witnessing in many areas related to investment, both macro and micro. And it is exhibiting to value investors those areas to avoid and the most attractive to embrace. And giving rise to a wide range of disparate opinions among economic and investment professionals as to what outcomes are likely. Needless to say, we have our own strong views.
ING Fixed Income Perspectives May 2013
How do you like them apples? By pointing out some Excel blunders in the data of Harvard economists Reinhart and Rogoff, a UMass-Amherst grad student appears to have gotten their number and in the process discredited their seminal work touting the merits of austerity. Though Good Will Hunting fans may be amused to see a couple of Harvardians get their comeuppance, you don?t need the titular character?s wicked smarts to deduce that harsh government spending cuts may not be the best way to pick up your economy.
Cyprus and the Eurozone...Still Stuck in the Middle
The debt crisis in the Eurozone turned another chapter as Cyprus finally reached the point of requiring a bailout from the European Union. The wisdom of Gerry Raffertys hit song Stuck in the Middle with You which was written in 1973, rings true today as we watch the EU and the European Central Bank navigate the mess in Europe. With each attempt at containment, there appears some plot twist, the proposed Cyprus bank bailout is no exception. While the bailout of Cyprus and its banks is not large in size, only 10 billion, relative to the Cyprus economy, it is significant.
How to Turn the ECB Straggler into a Central Bank Pacemaker
by Myles Bradshaw of PIMCO,
In our opinion, the ECB will be most effective if it can design a programme that helps banks deleverage more quickly to stimulate growth in the real economy. To have a meaningful impact on Europes broken transmission mechanism, any ECB programme needs to not only lower the cost of credit, but also be regionally tailored or big enough to be effective. Long-term investors should remain focused on the quality of issuers balance sheets rather than simply taking more risk because of lower prospective returns.
A Cry for Help from Income Investors
Confronted with the stark realities of income investing now, affluent investors all over the world are rethinking their approach, notes Legg Mason’s just-released Global Income Survey. Yet the Survey also found income investors hungry for more knowledge and ideas -- creating opportunities for savvy financial advisors.
Developed Europe: Regional Economic Review 1Q 2013
by Team of Thomas White International,
After withdrawing into the background in late 2012, the Euro-zone sovereign debt crisis resurfaced in the first quarter with the Italian elections and Cyprus banking crisis. In late February, Italys national elections resulted in a fractured mandate, and Italians voted out the incumbent, the main architect of the countrys austerity and reforms agenda.
Capitalism and Democracy
In the Italian elections, the party that showed the strongest results was the Five Star Movement, led by the comedian Beppe Grillo. Despite this strong showing, the party failed to form a government and refused to participate in any coalitions. This decision not to participate in the political process has been exhibited by other protest groups, such as Occupy Wall Street, the Israeli Tent Movement, and the Spanish Indignant movement.
DC Plan Sponsors Should Look Further than Their Own Backyard
US defined contribution (DC) plan sponsors large and small are seeking ways to help plan participants achieve better outcomes. Over the last 30 years, compelling evidence has accumulated that suggests currency-hedged global bonds may be an important part of the solution.
Results 2,351–2,400
of 2,772 found.
