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Why Quantitative Easing Didn?t Work
IN THIS ISSUE: 1. Why Fed?s Quantitative Easing (QE) Didn?t Work 2. Velocity of Money Plunged During Financial Crisis 3. Should Bernanke & Company Have Done More? 4. QE Was a Huge, Dangerous Experiment That Failed 5. Fed Begins to ?Taper? QE Purchases in January 6. Conclusions ? What Happens Next?
Leveraged Finance Outlook: Riding the Low Default Wave
Following strong performance in 2013, we expect low (1%-3%) defaults in leveraged finance markets this year. Issuance should remain healthy, and continued slow but steady growth in the U.S. economy should offer further stability to these companies. However, careful credit selection and monitoring of sector trends remain imperative. Investors with low tolerance for volatility and more interest rate sensitivity may emphasize loans, while investors with greater risk tolerance and a more benign outlook for rates may look to high yield.
Are Returns of Intermediate Bond Funds Persistent?
by Michael Edesess,
In the search for skillful managers, the most valued characteristic is persistence -- the ability of a manager to achieve superior returns consistently over time. Finding such managers is critical for fixed-income allocations, since the theoretical basis for indexing is weaker than it is for equities. Our study found, however, that persistence is elusive among a large sample of taxable bond funds.
Monthly Letter to Our Clients & Friends
Although the rest of America may need a manufacturing revival, mutual fund manufacturing is not in need of help, as the business has been growing continuously for three decades. Because of the sheer number of funds and the amount of investment dollars they control, there is a very high probability that we are buying new positions and selling existing positions to one or more mutual fund companies.
What Would a Stronger Dollar Mean for Global Markets?
As the world watches the progress of the US Federal Reserves tapering program, and anticipates the strengthening of the US dollar, Were often asked how this affects our view of international markets and risk. The short answer is that it doesnt. Were long-term, bottom-up stock pickers , so we;re primarily concerned with currency impacts on a company-by-company basis. However, there are some broad trends that are worth noting.
What Would a Stronger Dollar Mean for Global Markets?
As the world watches the progress of the US Federal Reserves (Feds) tapering program, and anticipates the strengthening of the US dollar, were often asked how this affects our view of the international market and risk. The short answer is that it doesnt. Were long-term, bottom-up stock pickers, so were primarily concerned with currency impacts on a company-by-company basis. However, there are some broad trends that are worth noting.
Why Majority of IFAs Struggle to Scale-Up Their Practice
by Rajat Dhar of Cogent Advisory,
With SEBI, the regulatory body coming up with wealth service guidelines for IFAs, it is evident that only those having larger scale of operations can adapt swiftly to the changing regulations and market conditions. But, large number of IFAs in India are finding it hard to scale up. This commentary outlines the generic reasons as to what stops IFAs to scale up their practices.
2013 Year-End Investment Commentary
by Team of Litman Gregory,
We find ourselves with a more sanguine big-picture view, at least over the nearer term, than we have had in some time. U.S. and global economic fundamentals gradually improved over the past year across a number of dimensions, and seem poised for continued improvement or at least stability in 2014. However, as we look ahead, the longer-term risks related to excessive global debt, subpar growth, and unprecedented government policy that we have worried about since the aftermath of the 2008 financial crisis still remain largely unresolved.
So Cruel: Pullback Could Become Correction
by Liz Ann Sonders of Charles Schwab,
For now, the EM tail is wagging the dog, but the US remains the worlds big dog and should ultimately get through the latest turmoil. "January Barometer" has sent mixed signals for the remainder of the year historically. More technical and sentiment recovery is likely needed before a market recovery is likely.
The Albatross of MPT Thinking
by Michael Edesess,
The January/February issue of the Financial Analysts Journal includes an article titled "My Top 10 Peeves" by Clifford Asness, who was trained in modern portfolio theory (MPT) and its underlying assumptions. Many of Asness peeves are directed at people who depart from the MPT worldview. In discussing his peeves, I will offer counter-arguments and explain why I think the MPT perspective is flawed.
Stocks for 2014: Fairly Valued Dividend Growth Stocks with an Emphasis on Dividends - Part 4
by Chuck Carnevale of F.A.S.T. Graphs,
I am a firm believer that common stock portfolios should be custom-designed to meet each unique individuals goals, objectives and risk tolerances. With that said, I believe it logically follows that in order to create a successful portfolio, the individual investor must first conduct some serious introspection to be sure that they truly "know thyself." Therefore, I believe the first, and perhaps most critical step, towards designing a successful equity portfolio is to ask your-self, and honestly answer several important questions.
Getting Comfortable With Volatility
Over the past few weeks, weve seen significant volatility in the markets, which has spooked some investors, but is also something we have become accustomed to. Markets generally (not only emerging markets) have become much more volatile during the last 20 years as a result of massive flows of money from not only institutional investors and long-only mutual funds but also hedge funds and high-frequency trading. We see such selloffs as potential opportunities to pick up bargains in select stocks if, in fact, the prices move low enough to draw our interest.
Looking Back at the Advisory Profession 20 Years from Now
by Bob Veres,
Ive powered up my time-travel hardware to take a clear look at the year 2034. Ive received budgetary approval to make a long-distance phone call into the future, and conduct a real interview with a successful advisor in that time period. Yes, it was expensive. But nothing is too good for our readers.
What Makes a Valid Benchmark?
Single-index benchmarks are widely used but seldom appropriate, because they dont reflect the investments nature and purpose. The advisor or his client who uses these benchmarks will incorrectly assess performance. As an alternative, blended benchmarks provide an appropriate reference for manager selection and performance attribution.
Winter Quarterly Commentary
John Kenneth Galbraith was a force in the fields of politics and economics. He wrote into his 90s, with many of his 48 books covering economic history, a subject we find to be the oft forgotten friend of investors. His work made it clear that economics is not a hard science which can be reduced to simple trustworthy mathematical equations. Galbraith constantly challenged the "conventional wisdom", and in fact pioneered the term. Galbraith came to dismiss the then, and still now, common notion that individuals and markets always act rationally...
Commodities: Is the Bear Market Near Its End?
by Scott Wolle of Invesco Blog,
On the surface, 2014 looks to be a tough year for commodities, as multi-year projects increase the flow of supplies to market even as demand has turned tepid, especially in emerging markets. However, a deeper look at the history of this asset class suggests that the outlook for commodities might turn around sooner than many expect.
Wealth Services at Banks Come Under Central Bank's Scanner
by Rajat Dhar of Cogent Advisory,
RBI, the central bank of India, made critical observations of way in which wealth services were being practised at banks. Also, the clear note was made with respect to the rising cases of misselling at banks. This market commentary covers the draft guidelines issued by RBi and tries to uncover the reason for the same and the way forward for the clients. This has been the first time ever that separate guidelines have come for banks and independent financial advisors or advisory firms in India; and this article covers the wealth services being offered by banks in India.
Upstream Companies Set to Benefit if US Allows Oil Exports
by Juan Hartsfield of Invesco Blog,
US crude oil production is booming, and controversy over possibly exporting some of this abundance has quickly heated up in early 2014. Most recently, Alaskas Lisa Murkowski, the top-ranking Republican on the Senate Energy Committee, spoke out on Jan. 7 in favor of easing US restrictions on oil exports, which were largely enacted in the 1970s when domestic energy was scarce and lines at the gasoline pump were long. The topic of crude exports is polarizing politically and, given the recent lack of collaboration in Washington, its poised to be a recurring headline for some time.
Rebalancing the U.S. Economy
Its happening again-a fourth quarter bounce in economic activity that extends into the first quarter and supports the view that growth really, finally, has started to accelerate. Such bounces have disappointed so far, although it does appear to be more than just hope this time.
Home (Finance) Repairs
Five years after the 2008 financial panic, there are still no concrete plans for what to do with the twin mortgage finance giants, Fannie Mae and Freddie Mac. The only consensus among Congress, the Obama administration, regulators and the banking industry is that no one knows what to do. No clear compelling vision for the federal governments role in residential mortgage finance has yet to be offered by a party to the debate.
The Diversification Obituary
by Chris Maxey, Ryan Davis of Fortigent,
According to some major media outlets, 2013 was the year diversification died. With the S&P 500 racing to a more than 30% gain (the largest since the late 90s), it seemed as though no other asset class truly mattered last year. While it is true domestic equities had a banner year, one-asset class portfolios will never be robust, and there is reason to believe 2013 is a prime example of why diversification is incredibly important.
David (Active Management) vs. Goliath (Passive Indexes)
Malcolm Gladwell is a fantastic writer and his new book, David and Goliath, got us thinking about his current thesis: David as a poster child for underdogs is a mistake. Gladwell contends that David had significant advantages over Goliath. In true Gladwellian form, he incorporates a myriad of disciplines to defend his thesis. And in true Smeadwellian fashion, we would like to add stock picking to the list of disciplines that strengthen Gladwells argument.
How to Use Bond Ladders in Retirement Portfolios
by Wade Pfau,
Should bonds be kept in mutual funds or purchased as individual securities and held to their maturity dates? The former option receives much far more attention, as managers compete in a performance-driven marketplace. But investing, especially for retirement, shouldnt be driven by maximizing risk-adjusted returns. Advisors must focus on securing a clients future spending needs. I will investigate the role of bond ladders in retirement and which ladder length is best for clients.
The Big Transition: A Letter to an Entrepreneur Friend
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, presents a letter he has written to friend, a senior executive at a successful public company in the internet sphere. The friend has realized that 90% of his personal worth is tied up in his company. He is considering diversifying. Mr. Sicarts letter posits that for his entrepreneur friend, the decision to diversify is not "primarily an investment question" but rather "a patrimonial question, which must be considered in a much longer time frame."
Municipal Bonds: Back to Basics in 2014
Municipal bonds faced some ups and downs in 2013, falling victim to Fed taper speculation and negative press that dogged Detroit and Puerto Rico and understandably scared off some investors. Sheila Amoroso and Rafael Costas, co-directors of our Municipal Bond Department, note that while there are still some issues to work through and even despite the sometimes-shocking headlines, not all news in the world of munis is bad news. They say investors need to get back to the basics and re-examine the reasons for investing in municipal bonds.
What Does US Tapering Mean for Asia?
by Paul Chan of Invesco Blog,
The US Federal Reserve (Fed) took its first step toward unwinding its unprecedented monetary stimulus. Beginning in January 2014, the Fed will reduce monthly asset purchases by $10 billion to $75 billion. The scale of the tapering was very much in line with market expectation. While timing may have surprised some investors, the market had already priced in the Feds imminent move.
The Risk Tolerance Paradox....And What You Can Do About It
The risk tolerance level many investors expect to achieve over the long-term rarely equals the same tolerance investors actually experience over shorter periods. This paper provides a brief introduction to this paradox, explores the main reason we think it exists, and introduces a risk management strategy that seeks to solve the problem.
Gary Shilling: Review and Forecast
Its that time of year again, when we begin to think of what the next one will bring. I will be doing my annual forecast issue next week, but my friend Gary Shilling has already done his and has graciously allowed me to use a shortened version of his letter as this weeks Thoughts from the Frontline. So without any further ado, lets jump right to Garys look at where we are and where were going.
Five Resolutions for 2014
by David Kelly of J.P. Morgan Funds,
Entering 2014, the global investment environment is as challenging as ever. After a super 2013 in returns, U.S. equities can no longer be considered inexpensive and yet still look attractive relative to the prospective returns on savings accounts and long-term bonds. Long-term bond yields are higher than a year ago but could still rise further as the Federal Reserve begins to reduce quantitative easing.
Is Your Inflation Protection Really Protecting You?
Many investors who own Treasury Inflation-Protection Securities (TIPS) and TIPS mutual funds don’t realize that they may be taking a significant amount of interest-rate risk in exchange for their inflation protection, which may result in losses when rates begin to rise rapidly. Shorter-maturity TIPS carry the same inflation adjustment as longer-term TIPS, but have less sensitivity to interest rates, which may be helpful in times of rising interest rates like what investors experienced in spring 2013.
Risks You Could Actually Do Something About
by Lori Heinel of OppenheimerFunds,
Lori Heinel, Head of Investment Products, discusses the role of protection* against certain risks in a portfolio.
* Protection is positioned as an investment goal. Investing in certain securities may help to hedge against certain risks, but does not imply any guarantee from loss. Mutual funds are subject to risk. Shares may gain or lose value.
Gundlach - Dont Plan on Tapering
by Robert Huebscher,
Investors face many concerns as the new year approaches, but a recurrence of Mays "taper tantrum" should not be high on their lists, according to DoubleLines Jeffrey Gundlach. With the majority of Fed governors staking a dovish position, "quantitative stimulus is likely to remain with us longer than people think," Gundlach said.
The Monster That Is Europe
This week, Geert Wilders and his Party for Freedom in the Netherlands and Marine Le Pen of the Front National (FN) of France held a press conference in The Hague to announce that they will be cooperating in the elections for the European Parliament next spring and hope to form a new eurosceptic bloc.
Debt Crisis Recovery: Bell Curves and Balance Sheets
by John Greenwood of Invesco Blog,
This three-part series examines the life cycle of a debt crisis and looks at where the US, UK and eurozone are in the recovery process. This second post looks at where the US stands in the deleveraging process. Part 1 explained the phases of a debt crisis, while Part 3 will focus on why the UK and eurozone lag the US in balance-sheet repair.
Hedged Dividend Investing: The Best Strategy You've Never Heard Of?
Our industrys challenge: How to deal with that via creation of intelligent investment strategies that allow advisors and their clients to follow through on their desire to skirt both the bond and stock bubbles of the future, while still striving for a competitive yield for their retirement portfolios.
One of the Most Notable Stories of the Year: Energy Renaissance in the U.S.A.
Only a few years ago, we were contemplating the supply constraints facing the petroleum industry, as many major oil fields around the world were facing a decline in production. Now, with the disruptive technology in shale oil and gas, we may be looking forward to decades of drilling.
Results 2,851–2,900
of 3,332 found.
