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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.
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.
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.
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.
The Fed, Inflation, and the Perfect Storm in Gold Miners
Neither hopes of job creation nor fears of inflation (based on the massive expansion of the monetary base since late 2008) have thus far materialized. Total credit creation (i.e. money supply) during most of the last five years either shrank or barely grew despite massive growth in the monetary base. Nominal GDP (growth plus inflation) grows in response to total expansion of credit (both from the Fed and the banking system), not just the monetary base.
The Myth of the Most Efficient Market
Perception of the U.S. large cap value market is that its the most efficient in the world, and therefore the hardest category for managers to outperform the benchmark. As a result, index funds and ETFs have been gaining dramatic market share. Our latest whitepaper debunks conventional thinking with empirically-proven factors that have significantly outperformed in the U.S. large cap space.
The Truth Does Not Change According To Our Ability To Stomach It
by John Hussman of Hussman Funds,
The stock market is presently at valuations where not only cyclical but secular bear markets have started. A secular bear period comprises a series of cyclical bull-bear periods where valuations gradually work their way lower at each successive cyclical trough. The past 13 years of paltry overall total returns for the S&P 500 have unfortunately corrected very little of the excess in 2000, largely thanks to yet another round of Fed-enabled speculation. We should have learned how these episodes end.
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 first post explains the phases of a debt crisis. Part 2 will look at where the US stands in the deleveraging process, while Part 3 will focus on why the UK and eurozone lag the US in balance-sheet repair.
Why Investing in High Quality Companies is More Important Today than Ever
by Kendall Anderson of Anderson Griggs,
One of the first rules a new financial advisor learns is that success in the business has nothing to do with how well your clients do in creating or maintaining wealth. Success is measured by how much wealth the advisor creates for him or herself. The same rule extends beyond the local advisor to the great halls of institutional management.
Fixed Income Markets Slog Forward
by Chris Maxey, Ryan Davis of Fortigent,
The past five years have seen a dramatic influx of investor capital into corporate credit markets. As investors jumped into the market, there is growing concern that credit markets are nearing stretched valuations. Those concerns are likely premature, particularly with central bank intervention in place.
Active Share. Toward a Stock Picker’s Market?
Explore five groups of mutual funds-from stock pickers to moderately active to the closet indexers. Which categories produced the best risk-adjusted return 1990-2009? The more different the portfolio from its benchmarks, the greater the range of possible outcomes. Consider a tool like active share.
Investing in China? What You Should Know About Gaining Access to the Markets
Investors with exposure to China and those interested in gaining a foot into the country received some good news last month when it was announced that Chinas GDP grew by 7.8% in the third quarter. The news was a sigh of relief for investors as Chinas economy appears to have avoided the hard landing economists and investors had feared.
"Fixed" Income Investing is Broken
Back in June of this year, the Fixed Income (a.k.a. bond) market may have experienced the defining moment of this generation of investors. The yield on the 30-year U.S. Treasury bond moved above 3.50% for the first time since the summer of 2011. It stands at about 3.80% now. After many fake-outs, this could be the start of a long-term trajectory higher.
And That's The Week That Was
by Ron Brounes of Brounes & Associates,
Up, up, and away. Stocks surged for the sixth straight week, the S&P 500s longest such streak since February 2013, as institutional investors welcomed remarked from the future Fed Chair (?) and "mom and pops" finally decided to join in the fun (better late than never). Suddenly Dow 16k, Nasdaq 4k, and, heck, even S&P 2k are well within reach. What financial debacle?
Asset Class Allocation and Portfolios: Critique and Complication
by Adam Jared Apt,
In Part 1 of this essay, I explained that for asset class allocation to become an investment practice, it required a foundation of theory. And Modern Portfolio Theory was that foundation. But today, most financial journalists and investment advisors who proffer advice centered on asset class allocation are?if I may judge from their writings?oblivious of this. And why shouldn’t they be? Theory is abstract and difficult to apprehend.
October 2013 Market Commentary
The Feds decision in September to maintain its policy of asset purchases, better known as Quantitative Easing (QE), caught the broader market by surprise. Fed tapering of QE was broadly expected to begin in September. The Feds decision to delay the reduction of QE pushed back the date upon which anticipated tapering would begin. This resulted in a meaningful rally in Treasury bond prices in September. To the surprise of many media pundits calling for ever higher interest rates, US Treasury yields ended October at 2.55%, virtually unc
Ignoble Prizes and Appointments
by Jeremy Grantham of GMO,
Chief investment strategist Jeremy Grantham comments on this years Nobel Prize in economics and "the most laughable of all assumption-based theories, the Efficient Market Hypothesis"; candidates to succeed Chairman Bernanke at the Fed; the impact of commodity price rises and the housing bubble in the crash of 2008; and prospects for the U.S. equity market.
The Muddle-Through Economy and Grind-Higher Equity Market Continue
by Bob Doll of Nuveen Asset Management,
U.S. equities finished higher last week as the S&P 500 and Dow Jones Industrial Average closed at record highs, marking the sixth straight week of advances.1 Several macroeconomic themes are important as third quarter earnings season comes to an end. Fed Chairman nominee Janet Yellen spoke before the Senate in support of current monetary policy and suggested a similar path under her leadership. Economic data was mixed for the week, and any economic weakness continues to be perceived as supporting a delay in tapering. In turn, this can be seen as positive for equities.
Schwab Impact Conference 2013 - Finally! Some Good News from D.C.
Earlier this week my wife (who doubles as Sungardens Director of Operations) joined me for three days in Washington D.C. at the Schwab IMPACT conference for investment advisors. To me, this is the biggest show of the year in our industry and the Capital edition continued the traditional mix of new ideas, networking and a feeling at the end once described by David Letterman as Im tiredbut its a nice kind of tired. Here are some brief highlights and what I think the implications are (if any) for what we are doing for our clients now and in the times ahead.
The ECB Rate Cut - Too Little and Too Late
by John Greenwood of Invesco Blog,
The decision of the European Central Bank (ECB) last week to cut its main refinancing rate from 0.5% to 0.25% and the marginal lending facility from 1.00% to 0.75% is too little and too late -- and virtually irrelevant to financial markets. The decision came after published data showed the eurozone headline consumer price index slowing to 0.7% year-on-year in October. Of course the equity markets rallied temporarily in a knee-jerk reaction to the ECBs move, but by the end of the day most of the gains were lost.
Has Washington Drama Taken Its Toll On MLPs?
They did it! They blew it up! shouts Charlton Heston in the iconic ending scene of the film Planet of the Apes when he finds out he has been living on a post-nuclear war planet Earth. Americans are probably having some of the same feelings about our current world resulting from the ongoing political nuclear war raging in our nations capital.
Investing Megatrends: New Technology
This whitepaper discusses how: The Data Deluge we are experiencing is one of the worlds durable investment themes; Significant capital investments in data infrastructure provide structural support for this trend; Many companies can benefit from the collection, analysis, transmission and storage of data
That Was the Week That Was?!
by Jeffrey Saut of Raymond James,
That Was the Week That Was, informally TWTWTW or TW3, was a satirical comedy program on BBC television in 1962 and 1963. It was devised, produced, and directed by Ned Sherrin and presented by David Frost. An American version by the same name aired on NBC from 1964 to 1965, also featuring David Frost. And last week was just such a week for me.
Health Care: Rx for Growth and Defense
by Ted Samulowitz of Invesco Blog,
The Capital Asset Pricing Model, used to price risky securities, suggests growth and defensive investments are mutually exclusive because the more an asset can return, the higher its risk must be. But growth itself can provide defensive benefits when a secular growth story occurs regardless of the business cycle.
TIPS Post Modest Returns in Third Quarter
by Steve Percoco of Lark Research,
After a very rough second quarter, TIPS posted modest returns in the 2013 third quarter. By our calculations, TIPS gained 0.97% in the quarter, better than the 0.19% gain on comparable maturity straight Treasury securities. After the sharp second quarter sell-off, bargain hunters found value in the intermediate maturities for both TIPS and straight Treasurys.
Asset Allocation: Pie in the Face?
The typical approach to spreading ones assets in order to diversify and conquer, is to have the client complete a risk tolerance questionnaire. That survey is important not only to establish guidelines for how the assets will be managed, but also because some form of it is required by securities regulators to make sure advisors know who their clients are. The magical conclusion usually includes a color pie chart, representing a variety of asset classes that are assumed to be a path toward asset growth and preservation of capital.
Float Research: Investors Pour $54.2 Billion into All Equity MFs and ETFs in October
by Minyi Chen of AdvisorShares,
ETF flows suggest stocks will have a tough time moving much higher. Inflows into leveraged short ETFs stopped in the past week, which is a cautionary sign from a contrarian perspective. Even more worrisome, investors are pouring money into equities. All equity mutual funds and ETFs received $54.2 billion in October, the third-largest inflow on record.
The Underperformance Culprit
Each year we are reminded of the fact that active management systemically underperforms the benchmark. The scorecards come in, and the tally is drilled back into our consciousness. But has the now long-tenured debate of active versus passive offered us much in the way of new perspective over the last several decades?
Why Worry About a Melt-Up?
by Liz Ann Sonders of Charles Schwab,
The risk of a melt-up in stocks is garnering more attention; and is something weve been discussing recently, too. Sentiment does appear stretched in the near-term and warns of a possible pullback. But there are few, if any, bubble-like conditions present and fundamentals ex-sentiment appear healthy.
Results 2,851–2,900
of 3,303 found.
