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Forget the Sept. '15 Fed Tightening -- There Has Been a Stealth Tightening Since Sept. '14
by Paul Kasriel of The Econtrarian,
The late, great Milton Friedman used to preach that you don’t assess the degree of monetary policy restriction or accommodation by the level and movement of interest rates but rather by the behavior of monetary quantities. For Friedman, the monetary quantity by which he judged the stance of monetary policy was some definition of the money supply – currency and some of the deposit liabilities of the banking system.
Panic Is Not a Strategy—Nor Is Greed
by Liz Ann Sonders of Charles Schwab,
Admittedly, the development of a long-term strategic asset allocation plan isn't the hard part—it's sticking to it that often becomes the real challenge. Adding to underperforming asset classes and trimming outperforming asset classes goes against the emotions of fear and greed that often drive investment decision making. But if we learn from our mistakes, use our brains over our hearts and look to our portfolios as rebalancing guides, we can expect a more successful investing future and maybe even get a free lunch along the way.
Feeling Old Yet? Incoming College Freshmen Have Always Known Google
I use Google every day, and yet I still marvel at how amazing a tool it is. Part of this amazement stems from the fact that most of my life was spent in the dark ages before the search giant changed human knowledge forever. I appreciate it in a way 19th-century, transcontinental travelers must have appreciated steam locomotives’ ability to shave days and weeks from their covered-wagon travel time. Except Google is more like a rocket ship than a locomotive.
12 Attractive Fast-Growing Dividend Growth Stocks for High Total Return
by Chuck Carnevale of F.A.S.T. Graphs,
The current market environment is presenting many challenges to the conservative retired investor in need of current income. Interest rates are near all-time lows and the valuations of many blue-chip dividend growth stocks have become extended. Consequently, it is becoming very difficult to find quality investment opportunities that can provide safety through sound valuation, attractive yield and the potential to fight inflation.
Why a 500-Point Sell-off Isn’t “Massive”
While I was training early this morning, I was forced to endure two hours of CNBC’s seemingly permanent headline across the bottom of the screen that screamed that the markets were heading for a “massive sell off.” At the time, the Dow Jones Industrial Average futures were down about 500 points. When the markets opened at 9:30, the Dow did open down about 500 points (thereafter it actually was down about 1,000 points) before bouncing back to its opening levels.
What Investors Must Know About China
The latest story scaring investors witless (TM OldProf Euphemism) is the collapse of the Chinese economy. It has become an element of Wall Street Truthiness. The Chinese are lying about their data, masking the true story. “All of the data” support this according to the commentators, led by pundit-in-chief Jim Cramer and the rest of the gang at CNBC. How about some much-needed objectivity?
Options and Volatility Strategies -- Describing Liquid Alts
Some equity funds may add option hedges in an effort to dampen portfolio volatility, generate alpha, and reduce tail risk. Option hedges provide a vehicle for potential alpha, allowing tactical managers to express multi-dimensional views on security price, volatility, and time. Systematic option strategies—which include covered-call, collar, put-writing, and more-complicated strategies—allow managers to potentially exploit the nonlinear characteristics of option payoffs to shape the return distribution.
The Use and Abuse of Dividend Strategies
I will look at the underlying justification for a dividend-based strategy and at how the most popular funds have performed recently. I will then discuss the criteria that investors should use to construct the best dividend-oriented portfolio, and which mutual fund best meets those criteria.
Long/Short Equity and Equity Market Neutral – Describing Liquid Alts
Equity long/short strategies construct portfolios consisting of both long and short positions in equity securities and equity-linked derivatives but maintain an overall long bias with significant positive correlation to the overall equity market.
On My Radar: China’s Surprise – Power To The Dollar
“Something is deeply wrong if an economy is not growing, because it means these natural processes are impeded. That is why around the world, since the Dark Ages, lack of growth has been a signal of political oppression or instability. Absent such sickness, growth occurs.”– Adam Posen, “Debate: The Case for Slower Growth”
The High Yield ETFs: Market Size, Money Flows, and Liquidity
by Heather Rupp of AdvisorShares,
The entire U.S. fixed income market (municipals, Treasuries, mortgages, corporates, federal agency bonds, money market, and asset back securities) totals $39.2 trillion. Of this, corporate credit is about $8 trillion. The high yield bond market is a growing piece of that corporate debt piece, now at $1.8 trillion, and accounts for over 20% of total corporate bonds outstanding. If you add in high yield floating rate loans, that total high yield debt number moves to over 30% of corporate debt.
The Tortoise Wins Again?
The narrow trading range for US stocks continues, but there are some concerning signs such as seasonality and technical issues that make us a bit more cautious in the near term. We don’t think the bull market is in danger of ending, but there could certainly be a pullback and we don’t believe investors need to be in a great hurry to put money to work. In the immediate aftermath, China’s move on its currency rattled markets, but we don’t think it’s the start of a currency war, and hope that this is part of a herky-jerky path to freer markets.
Caveat Emptor (“Let the buyer beware”) of Index Funds
by Gary Stroik of WBI Investments,
Imagine a very nice family living in a very nice neighborhood in an especially beautiful and very nice home. They have lived there for a little over seven years now, and have been very happy. A few years ago they invested in finishing the basement, turning it into a beautiful family space with an entertainment center, exercise equipment, and separate room for the furnace and hot water heater. They even added a pair of sump pumps to protect their investment. Because their home made up a big part of their family wealth, they paid for homeowners’ insurance every month.
Clear Evidence that Demand for ETFs is High and that Appetite is Being Met
by Bryce Coward of GaveKal Capital,
We all read about it in the news, but ETFs really are becoming the preferred investment vehicle for the investing public. The evidence is clear; both in terms of number of funds and net assets ETF growth is outpacing mutual fund growth by a wide margin.
The Case for Hedge Fund Strategies in a Rising-Rate Environment
by Dr. Sudhir Krishnamurthi, Ronald van der Wouden, Kenneth LaPlace of Wells Fargo Asset Management,
Dr. Sudhir Krishnamurthi, Ronald van der Wouden, and Kenneth LaPlace from The Rock Creek Group, LP explain why hedge funds may outperform traditional fixed-income investments in a rising-rate environment.
Price-Insensitive Sellers
In a new quarterly letter to GMO's institutional clients, co-head of asset allocation Ben Inker examines the impact on a range of global asset classes of "price-insensitive market participants" who may "buy assets for reasons other than the expected returns those assets may deliver."
Are Managed-Payout Funds Better than Annuities?
by Joe Tomlinson,
Managed-payout funds promise to meet retirees’ need for sustainable lifetime income without relying on annuities. To see whether this promise can be fulfilled, I’ll answer three questions: What’s the best design for such funds? How do they compare to annuities? Can retirees do even better by combining managed-payout funds and annuities?
Screens vs. Windows: Why Choosing a Fund Manager Requires Both
by Tracy Fielder of Invesco Blog,
Choosing the right fund manager is an important decision for investors, and many rely on data screens to help them sift through mountains of performance numbers. But screens alone don’t tell you the whole story. To get a clear view of how a fund might fit into your portfolio, you also need a window into the mind of the manager.
Does Your Muni Bond Fund Own Puerto Rico’s Bad Debt?
While the media and investors are focused on Greece, Puerto Rico is having a debt meltdown of its own. The U.S. territory owes lenders over $70 billion, $5.4 billion of which is due in the next 12 months. But without some form of debt restructuring, says Governor Alejandro García Padilla, it will be unable to meet its obligations. Countless municipal bond fund investors—many of them unaware they have exposure to the Caribbean island—could be affected.
Don’t Let the Noise Keep You Up at Night
Three subjects have concerned the markets recently: a Greek debt default and possible exit from the European Union (Grexit), the Federal Reserve’s (the Fed’s) normalization of interest rate policy and potential bond market illiquidity following a rise in interest rates. The first two are binary outcomes, which have been debated in the marketplace for years. While discussing these possible outcomes ad nauseam may be a palliative to some, in our view it doesn’t really provide much meaningful, incremental information until more definitive actions are taken.
Are MLPs Waiting for Godot?
Like the absurdist play where two characters Vladimir and Estragon wait for a mysterious Godot who never shows up, investors in MLPs continue to wait for definitive answers to the "big questions" facing MLPs: when will interest rates rise and what will happen with future oil production and prices?
Summer Quarterly Commentary
Greece is much in the headlines again. As we stated in our Spring 2013 letter, “The European debt crisis will not be over until either: 1) the debt goes away (read: default or substantial inflation) or 2) these governments start producing actual surpluses with which to pay the debt down.” So far, every subsequent deal has failed to produce either of these two scenarios, and so each time news media builds up another weekend summit or referendum, the running joke around here is, “Don’t worry, it will all be resolved this weekend.”
Tocqueville Gold Strategy Investor Letter: Q2 2015
What is required to restore investor interest in gold? In our opinion, a prolonged bout of financial-market adversity would suffice. After all, the cornerstone of coordinated central-bank policy since 2008 has been the levitation of financial assets via Zero Interest-Rate Policy (ZIRP) and Quantitative Easing (QE) by forcing investors into risky assets. We believe that nothing would serve better to undermine confidence in central bankers than a bear market in bonds and equities. The roof above the dollar gold price has been built brick by brick from confidence in central bankers.
Bond Market Liquidity: Don’t Confuse Investment Risk With Systemic Risk
by Douglas Hodge of PIMCO,
It is not surprising that the subject of bond market liquidity has come under increasing focus among regulators, investors and the media. While banks are now better capitalized, the combination of post-crisis capital and liquidity regulations and a lower return environment has made them less able and less inclined to function as market makers. Although bank-oriented regulation has made the system more resilient and less levered, it has also had the practical effect of reducing liquidity in markets that have historically relied on banks to support trading, such as in the corporate bond market.
July 2015 Economic Update
The U.S. economy continues to plod its way forward at a slow and steady pace. Short-term setbacks seem to be the norm, but a general sense of an improving economy is seen through many sectors. The focus on month-to-month indicators has been de-emphasized recently by the scale of global headlines that seems to be driving markets and investor sentiment. Having a steady economic backdrop is very helpful during a period of global challenges.
The Opportunity in Municipal Closed-End Funds The Value in the 9th Inning of the Great Bond Rally
by Michael Lebowitz,
For the last five years, bond market experts have unfailingly and wrongly predicted a rise in interest rates. If the current rate-hike fears prove unfounded again, municipal-backed closed-end funds (M-CEFs) is an asset subclass likely to perform well. Here are eight such funds to consider.
Do The Gabelli Funds Add Value for Investors?
by Larry Swedroe,
Mario Gabelli is one of the highest paid executives in America, having earned $88.5 million in 2014 – more than the leaders of all other publicly traded asset-management firms. But have the investors in his mutual funds been as richly compensated when compared to what they would have earned in comparable, passively managed funds?
On My Radar: Black Widow Returns
“When it does happen, it’s usually not the first-derivative event that people are caught off guard by. They’re caught off guard by the second, third and fourth derivative events. It’s ‘Oh yeah, when interest rates go up, that happens.”– Gary Cohn, Goldman Sachs’ President and COO
How Much Bond Duration Could You Endure?
by Chuck Carnevale of F.A.S.T. Graphs,
In my most recent article titled “Designing a Retirement Portfolio That’s Just Right for You” I opined that a retirement portfolio should be designed to meet the individual investor’s specific goals, objectives and risk tolerances. I also suggested that the highest total return is not always the best approach because if the investor needs income to live off of, a focus on a consistent rising income stream makes more sense.
How to Understand Neuroscience to Gather More Assets
by Daniel Solin,
Brokers are largely successful in selling inferior or conflicted services because they have superior sales skills. Bridge this gap and level the playing field by understanding the role that neuroscience plays in the decision-making process.
Gundlach v. Yellen: Will the Fed Raise Rates?
by Robert Huebscher,
On Friday, Fed Chairwoman Janet Yellen said that the nine-year wait for an interest-rate increase would likely end this year. Three days earlier, though, Jeffrey Gundlach said that a rate increase this year is unlikely, given the mix of bad news and uncertainty in the world markets. Which view prevails will be the focus of bond market participants in the months ahead.
Millennial Prosperity
Many media organizations and smart money managers are postulating that today’s 22-35 year old age group (millennials) might be the first generation since World War II to not marry, have children, buy cars and buy houses at high enough percentages to help us fully recover from the financial meltdown of 2007-09.
Designing a Retirement Portfolio That’s Just Right For You
by Chuck Carnevale of F.A.S.T. Graphs,
No one knows your own personal financial situation better than you do. Every individual possesses their own unique investment goals, objectives, needs and risk tolerances. At first glance this may seem simple and straightforward to the point of stating the obvious. However, I contend that the reality that individuals have different financial situations, goals and objectives is profoundly important as it relates to designing an appropriate retirement investment portfolio.
CIO Newsletter
by Ritesh Jain of Tata Asset Management,
In this edition of my newsletter, I have tried to address one of the most common questions that investors have been asking me these days; what to make of the noise surrounding us and how India is placed to weather this volatility. Let me tell you, it's not going to be a smooth ride. In the last 6 months, there has been too much going on worldwide.
A Greek Play
The second quarter of 2015 experienced heightened bond market volatility in anticipation of the Fed’s first rate increase as well as international equity volatility involving Greek debt and Chinese equities. Despite whipsawed volatility, the major domestic and international equity indices ended close to where they started.
Results 2,501–2,550
of 3,332 found.
