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Third Avenue Management Defends Its Pursuit of Alpha
by Larry Swedroe,
Bloomberg TV recently invited me onto their new show, Bloomberg GO, for a short debate on active versus passive investing with David Barse, the CEO of Third Avenue Management. Barse stated his funds had been able to beat their index benchmark. Let’s go to our trusty videotape to see if Third Avenue has, in fact, been delivering alpha.
Third Quarter 2015 Economic & Capital Market Summary
On the one hand, the domestic economic story is playing out pretty much as we had thought. Economic growth is muddling along in the 2% area. The unemployment rate is low, but job growth is still limited to service sector jobs which pay lower wages. Inflation is barely rising as commodity prices continue to plunge and wage growth has been flat. The Federal Reserve is poised to raise interest rates, but has deferred making the first increase in over nine years under pressure from global economies who fear that an increase in short term interest rates will impair the fragile global growth.
Zero Yields & The Debt Ceiling
by Anthony Valeri of LPL Financial,
The Treasury issued new three-month Treasury bills (T-bills) at 0% yield at auction last week and is on pace to do so again on October 13, 2015. Zero percent T-bill yields, or even lower, are not new, but 0% prevailing at an auction is unusual and made media headlines.
Bob Zenouzi Discusses Delaware’s Dividend Income Fund
by Robert Huebscher,
In this interview, Bob Zenouzi, manager of the Delaware Dividend Income Fund (DDIAX), discusses how he strives to provide investors with a yield that is competitive with fixed income, while achieving a premium yield to equities with better downside protection.
Describing Liquid Alts Common Requirements under the Investment Company Act of 1940
Liquid alternative mutual funds have become a popular investment category, but they are not easily described by a single label. “Liquid alts” tend to exhibit risk, return, and regulatory characteristics unique to particular strategies.
Smart Beta 2.0: A Disruptive Innovation
by Steven Vannelli of GaveKal Capital,
At the beginning of every major disruptive innovation, fear, uncertainty and doubt reign supreme. Consumers are fearful of the unknown, uncertain of the benefits and doubt the durability of the innovation. But, in the end, fear, uncertainty and doubt give way to confidence, understanding and acceptance. The fund management industry is on the cusp of a major disruptive innovation.
How these 12 TPP Nations Could Forever Change Global Growth
The current members include Canada, the United States, Mexico, Peru, Chile, Japan, Vietnam, Malaysia, Brunei, Singapore, Australia and New Zealand.After nearly seven years of negotiations, the TPP promises to deliver unprecedented free and fair global trade among the 12 participant nations.
The Looming Risk in the Bond Market
by Robert Huebscher,
Lack of bond-market liquidity has been the focus of recent reporting in the financial media. But one of the first to warn about that danger was Michael Aronstein, who said last week that the risks are clearer than ever. Mutual fund investors face the greatest peril.
Does Wells Fargo Add Value for Investors?
by Larry Swedroe,
Assets in actively managed mutual funds have been a consistent source of revenue growth for Wall Street banks. But would investors have been better off in passively managed funds? I’ll answer that question for Wells Fargo and then for the group consisting of the four largest banks.
Recent Volatility Signals a Market in Transition
CEO Chuck Royce and Co-CIO Francis Gannon talk about why they believe the decline for equities in 3Q15 is part of the market transitioning back to more historically typical performance patterns, why a rate hike could be positive for small-caps and stocks as a whole, how history reveals the importance of discipline, the necessity of diversification within the small-cap asset class, and more.
Liquid Alternatives: Considerations for Portfolio Implementation
by Justin Blesy, Ashish Tiwari of PIMCO,
Since the financial crisis, investors have poured nearly half a trillion dollars into liquid alternative strategies – typically mutual funds and ETFs that deploy non-traditional strategies once reserved for large institutional investors.i These vehicles offer the potential for diversification, downside risk mitigation and attractive risk-adjusted returns with the transparency and daily liquidity many investors desire. Liquid alternatives have been a democratizing force for investors, and we believe today’s market environment arguably has only made them more attractive.
Forget “Active vs. Passive”: It’s All About Factors
We just love a good debate, and there seems to be quite a heated debate at the moment about the relative utility of passive versus active investing. Perhaps this debate is as timeless as investment management itself, but a flurry of recent studies may have finally armed passive advocates with enough ammunition to settle the argument once and for all.
Active Versus Passive – Understanding the Debate – Part 3
by Charles Batchelor of Cleary Gull,
Last season, the Green Bay Packers started the season 1-2. Some fans panicked, to put it mildly. Conspiracy theories surfaced for why Green Bay’s quarterback Aaron Rodgers didn’t seem to be playing well and most people formed an opinion on who was to blame. It was at this point, following the team’s second loss, Rodgers found himself being peppered with questions from reporters attempting to figure out what was “wrong” with him and/or the team. Rodgers’ response was, “R…E…L…A…X.”
Equities May Remain Trendless Until More Clarity Emerges
Sentiment was negative for most of last week, as investors focused on
continued uncertainty over Federal Reserve policy, slowing growth in China
and emerging markets and ongoing weakness in commodities. Stock prices
bounced on Friday following comments from Fed Chair Janet Yellen that a
rate increase was looking more likely in 2015. Nevertheless, equities finished
in negative territory, with the S&P 500 Index falling 1.4%. The health care, materials and industrials sectors came under pressure, while utilities, consumer
staples and financials finished higher.
It’s Not Easy
In 2011, as I was putting the finishing touches on my book The Most Important Thing, I was fortunate to have one of my occasional lunches with Charlie Munger. As it ended and I got up to go, he said something about investing that I keep going back to: “It’s not supposed to be easy. Anyone who finds it easy is stupid.”
Equity Funds: What You Should Know about Flows
by Milton Ezrati of Lord Abbett,
Current trends support the notion that U.S. stock valuations are far from overstretched. Prices up, prices down—the trends in mutual fund flows seem to continue unaltered. Money flows out of domestic U.S. equities and into foreign equities, hybrid funds, and bonds, regardless of how low yields fall or how well or poorly the stock market does.
The China Syndrome: Lessons from the A-Shares Bubble
by Jason Hsu of Research Affiliates,
The rapid rise and sharp decline of the A-shares market represents a massive redistribution of wealth, especially painful to uninformed investors who bought hot stocks near the peak. What should the Chinese government do now?
Choosing Common Stocks That Make Sense for Your Retirement Portfolio: Part 2
by Chuck Carnevale of F.A.S.T. Graphs,
Choosing the most appropriate stocks for the common stock portion of your retirement portfolio is vitally important. In part 1 of this series found here I presented the 6 broad categories of stocks (businesses) that renowned mutual fund manager Peter Lynch presented in his best-selling book "One Up On Wall Street." I contend that the 6 categories that Peter Lynch wrote about establish a solid foundation of understanding of what’s generally available in the common stock universe.
It’s Someone Else’s Money
by Jeffrey Saut of Raymond James,
Indeed, due to expensive valuations, lack of revenue/earnings growth, slow GDP, China, politics, etc., the stock market had been in a virtual stalemate paralysis until the middle of July, having crossed above/below “go” so many times the only way to make money was to erect a toll gate at “go” (think the game Monopoly). And no wonder, frustration has reigned through the first six months of the year.
Designing the Appropriate Common Stock Retirement Portfolio: Stock Selection Options Part 1
by Chuck Carnevale of F.A.S.T. Graphs,
What is the best way to design or construct a common stock portfolio? This is a question I am often asked and my short answer is always the same - it depends. The truth is, there is no perfect method or strategy for designing a stock portfolio that is right for every individual investor. However, there are principles of sound investing that every investor can follow and apply when designing a common stock portfolio that’s just right for them.
Active Versus Passive – Understanding the Debate
by Charles Batchelor of Cleary Gull,
The purpose of this series of blog posts is not to add to the already massive number of studies, whitepapers, presentations, academic papers, blogs, etc. that attempt to prove which overriding type of investment product, “active” or “passive,” is “better.” Furthermore, I am not going to give you my opinion on which product type is superior. Rather, my primary goals are to better define what is being debated, spend time on what I do not believe has been discussed nearly enough during the “active vs. passive” debate.
Closed End Funds versus Exchange Traded Funds
by Heather Rupp of AdvisorShares,
There are currently a number of fund-based options available to investors looking for yield. In addition to traditional open-ended mutual funds, investors are also turning toward closed end funds (CEFs) and exchange traded funds (ETFs) to generate yield, including in the high yield bond market. Both CEFs and ETFs have continuous trading and pricing throughout the day, making them very liquid options for investors. While CEFs tend to be actively managed, there are both index-based options and actively managed options in the ETF space.
Describing Liquid Alts: Alternative-Asset Beta (FX, Commodities, MLPs and beyond)
The alternative-asset beta family of related liquid alternative strategies invests in alternative assets such as foreign exchange, commodities, and energy infrastructure. Ideally, these investments will provide attractive risk-adjusted returns that are uncorrelated with traditional equity and fixed-income markets.
ETFs: “Like Handing an Arsonist a Match”
by Mark Oelschlager of Oak Associates,
The popularity of ETFs has grown among market participants who, in the aftermath of the financial crisis, want to be able to reduce market exposure or shift between sectors when they sense danger/opportunity. The recent correction has brought to light the role of ETFs in the market, and the volume statistics are mind-boggling. Innovation is generally good, but like many things in life, there is a downside, and we would argue the downside to using ETFs to engage in frequent portfolio repositioning is particularly steep.
Does Morgan Stanley Add Value For Investors?
by Larry Swedroe,
In the latest 10-year period, only 38% of Morgan Stanley’s mutual funds outperformed their analyst-assigned benchmarks. Thus, while the fees these funds have generated are among the few consistent bright spots of growth on Wall Street, there is still a question for investors: Have these actively managed mutual funds been good investment choices?
Curb Your Mind
With the recent events in China and Greece causing volatility in the global markets, we think it is more important than ever to take a moment to reflect on how capital markets function. People trade stocks; and an understanding of the human thought processes is at the foundation of markets. The recent gyration of the world’s markets reminds us how quickly greed can turn to fear and how investors can begin to make mistakes. We find that heightened emotions often lead to mistakes that can be easily avoided.
Defensive Expectations
by Roger Nusbaum of AdvisorShares,
Last week there was an article in the WSJ noting the performance struggles of one of the larger liquid alternative mutual funds. I am not going to link to the article or name the fund because any fund can do very well, attract a lot of assets, then do poorly and lose the assets which is the arc of this fund’s story but instead want to focus on avoid that sort of loop or at least recognizing the potential for that sort of loop so that no one is surprised if/when it happens.
August 2015 Commentary
by Joe Becker of Milliman FRM,
As August wound down and families enjoyed the last few lazy days of summer, financial markets clearly had another idea in mind. After trading in a relatively tight range for most of the summer, the last two weeks of August were marked by volatility, the likes of which haven’t been seen since 2011. We attribute this heightened volatility to the confluence of global macro conditions with technical factors.
DeVoe’s Unprovable but Highly Probable Theories
by Jeffrey Saut of Raymond James,
I don’t claim to be an economist, although I do have a degree in economics. Fortunately, I have forgotten most of the economics I learned at university. Also fortunate is that I work with one of the best economists on Wall Street in the form of Scott Brown, Ph.D., but I digress. For the past few months I have been suggesting the economy was doing better, which has brought about cat calls from many of the negative nabobs. My sense has been that GDP was growing by at least 3%.
Investors Should Not "Buy the Dip" Because Macro and Market Risks Remain Elevated
The global market meltdown is turning into a rout as investors who ignored the warning signs of overvaluation, weakening earnings/revenue trends, and deteriorating internal market dynamics may now be heading for the exits. As advisors and investors try to rationalize asset allocation and equity market exposure, they may deem it appropriate to stick with investments in countries with the strongest economies. Reasoning, stronger eco-markets should behave better than markets in countries with economies under pressure.
Risk Is Like the Air We Breathe
A couple of months ago I wrote an article about how risk, like death and taxes, is always with us. That was written as the market made new all-time highs, and I wanted to make it clear that such highs did not mean that risk was absent. Risk is always with us—like the air we breathe.
The Active-Passive Debate Revisited
by Bob Veres,
Asset flows to passively managed funds are surging. But, as often happens,
advisors are embracing a trend just as debunking information is arriving in
the marketplace. New research is showing that selecting above-average
active funds may not be the impossible task that the academic research has
suggested.
Doodles from an Eventful Summer
This month's Absolute Return Letter is a little different. It was a very eventful summer with many incidents impacting financial markets and we have compiled all these topics into one letter. China is, not surprisingly, a core subject. If the Chinese economy is slowing (and it is), we don't think China is in for a hard landing. If anyone is in the near term - and this may surprise you - we think the U.S. and the euro zone are far more likely candidates.
Results 2,451–2,500
of 3,332 found.
