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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.
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.
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.
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.
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.
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.
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
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.
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.
Results 2,901–2,950
of 3,362 found.
