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Auto Focus: Voluntary Plans Morphing to Mandatory?
by Jon Vogler of Invesco,
The American private retirement system has historically been voluntary. Employers first decide whether theyre going to sponsor a plan and then select the plans features. But over the last several years, focus has intensified on two criticisms of the voluntary system.
Defining the EM Corporate Bond Opportunity
by Elisabeth Colleran, Peter Frick, Peter Marber, David Rolley, Edgardo Sternberg of Loomis, Sayles & Co.,
Finance is a numbers business. Investors study prices, yields, rates of return. However, when it comes to sizing up emerging markets, we think they should also pay attention to semantics. In the past, terming a country emerging made it synonymous with low credit quality and higher risk. But today, many emerging markets boast strong credit profiles while parts of the developed world buckle under heavy debt loads.
The Real Cause of Bank Failures
My favorite section money and investment is a shell compared to what it was like 20 years. Still, many times there are gems to be read. In February 2013 under the section Heard On The Street was a piece written by David Reilly entitled Too Big to Fail Casts a Very Long Shadow and it put real fear in me.
The Death Knell of Global Synchronized Trade
At Smead Capital Management, we believe the interest on September 18th in emerging markets, oil and gold are the last gasps of a dying trend. Our discipline demands that you must avoid popular investments and completely avoid investments attached to a perceived new era. We argue that the international investment markets reaction to Bernankes reprieve on September 18th is proof of a vision we have of the future.
What's easy about Quantitative Easing?
Recently you may have read or heard in the news about the possibility of the Federal Reserve (Fed) tapering its Quantitative Easing (QE) program. The topic can be so ingrained in the news cycle that few newscasters take the time to cover the details. So we thought wed spend a few minutes discussing the background and recent developments on the QE program, and why it matters to investors.
The Math is Pretty Straightforward...
by Blaine Rollins of 361 Capital,
Congress and the White House must be pretty fired up that D&D2 started filming last week. The new movie might be the only thing more stupid than our elected leaders failing to negotiate and reach a deal. Most everyone either wants to spend our tax dollars like drunken professional athletes or hold our economy and financial markets hostage via a government shutdown and failure to raise the debt ceiling.
Weak Credit Growth Main Reason for Lackluster Economic Recovery
by Minyi Chen of AdvisorShares,
The U.S. economy is a credit-based economy. Economic expansion is fueled mostly by borrowing and consuming rather than saving and investing. A continuous expansion of credit is needed for the economy to grow. The main reason the economic recovery has been so lackluster is that credit growth has remained weak despite the Federal Reserves continuing liquidity injections.
The Ultimate Income Portfolio Revisited
by Geoff Considine,
Rising interest rates will be unkind to income-generating assets and the investors who depend on them in retirement. My ultimate-income portfolio (UIP) provides a solution to this problem. It has reliably produced high income and low volatility with respect to the stock market, and its performance is likely to continue, even if rates rise further.
Fourth Quarter Outlook: A Turning Point?
It seems sometimes that the outlook for the global economy and the markets has been unchanged for years. Since the end of the recession, each year has commenced with forecasts that the United States economy would break out of its below-trend growth mode, only to see expectations dashed. Meanwhile, Europe has been mired in its own recession as it struggles with heavy post-crisis debt burdens. Growth has slowed in the emerging markets, ending the commodity boom of the first decade of this century.
The House at Main and Wall
by Justin Speer of Invesco Blog,
This four-part series tracks the recent US housing recovery and explains why investors should be both encouraged and cautious. Part 4 looks at pockets of investment opportunity on Main Street. Part 1 traced the recoverys trajectory against the backdrop of the overall US economy. Part 2 examined affordability and interest rates, while Part 3 discussed why homebuilders stocks may potentially be overvalued.
Inflow into Equity Funds in September Fourth-Highest Ever
by Minyi Chen of AdvisorShares,
Although the S&P 500 sits just below a record closing high, we think the path of least resistance for stock prices is higher. The Federal Reserve seems as determined as ever to inflate asset bubbles by funneling $85 billion per month in newly printed money to the primary dealers, and our demand indicators continue to turn more favorable for the intermediate term.
One Trick Pony: Whipping the GDP Donkey into a Stallion
The difficulty since 2012 has been that if you are not significantly overweight US equities, then your returns are less than stellar. Employing a diversified, risk-averse investment strategy in 2013 has in hindsight been the wrong thing to do, given that every other asset class is negative year-to-date, while US stocks are up double digits. The combination of the Feds Zero Interest Rate Policy and the artificial bubble in Treasury bonds has forced conservative investors into riskier positions in order to find risk-adjusted returns.
Thank You!
by Jeffrey Saut of Raymond James,
Thank you Franklin Templeton for allowing me to speak at your world headquarters in San Mateo, California last week. I had the privilege of meeting John Templeton on a number of occasions and it is heartwarming to see your organization carrying on with Sir Johns impeccable traditions. Thanks to all the portfolio managers (PMs) that met with me in the San Francisco Bay area, as we swapped ideas and renewed friendships.
Why Retirees Should Choose DIAs over SPIAs
by Wade Pfau,
Retirement portfolios can be constructed from a mix of asset classes, including stocks, bonds and annuities. In the past, I’ve shown that retirees achieve some of the best outcomes by allocating a portion of those assets to SPIAs. In this column, I extend my analysis to show that DIAs work even better than SPIAs, by providing more liquidity and better longevity protection at a lower cost.
Credit Rating Agencies: Can They Get It Right? Part 3: Five Years After the Fall
by Michelle Shwarzman of Invesco Blog,
This three-part series takes a critical look at the growing role of credit rating agencies (CRAs) in the global financial system. This post reports on the United Nations General Assembly (UNGA) debate about the role of CRAs in the international financial system. Part 1 focused on the involvement of CRAs in recent financial and economic crises in the US and Europe, while Part 2 described post-crises attempts to reform CRAs.
Stock Funds' 5-Year Track Records Set to Double
Many investors focus on the previous five years annualized return when analyzing which mutual funds to buy. We also pay a good deal of attention to the 5-year performance number when analyzing mutual fund and ETF returns at Halbert Wealth Management. And currently the 5-year average returns for most equity mutual funds are not all that attractive.
Newsletter September 2013
SAY IT ISNT SO... Investment News headline Ex-J.P. Morgan broker: Firm pushed house funds. The story went on to report: Claims reps didnt get commission on trades of outside funds. A former J.P. Morgan broker has filed an arbitration claim alleging that the banks securities unit encouraged sales of proprietary funds by withholding commissions from brokers on trades of outside funds.
Investing for Real People
Investor goals are the same, but solutions have changed. Today, aiming to meet basic needs requires new solutions. Laser focus on investor goals will help uncover appropriate investment opportunities. Expanding the opportunity set beyond the usual suspects will be critical to long-term success.
The Debate on DFAs Research
by Various,
We received many responses to Michael Edesess article, Why DFAs New Research is Flawed, which appeared last week. We provide the responses from individuals who disagreed with Edesess findings, followed by Edesess response and then by responses in agreement with his findings.
Investing in Puerto Rico: What Investors Should Know
In recent quarters, investors have been on high alert about Puerto Ricos ailing financial situation. The concern was sparked by the US territorys ongoing recession, which has been characterized by high unemployment, $70 billion of total debt and a consecutive streak of annual budget deficits. Compounding investors fears were Detroits recent bankruptcy filing and Junes massive sell-off in the municipal bond market, which may have caused some weakness in Puerto Ricos debt.
Nothing But Bad Choices
by John Mauldin of Mauldin Economics,
Crises in government funding dont simply arrive on the doorstep unannounced. Their progress toward the eventual Bang! moment is there for all the world to see. The root cause is almost always the same: debt. And whether that debt is actually borrowed or is merely promised to the populace, when the market becomes worried that the ability of the government to fund its promises is suspect, then the end is near. Last week we began a series on what I think is an impending crisis in the unfunded pension liabilities of state and local governments in the United States.
What's Developing in Emerging Markets
Despite strong returns in United States equity markets, a different story has played out in the emerging markets. The MSCI Emerging Market Index, a proxy for emerging market equity returns, has fallen 9.94 percent year-to-date through Aug. 31, 2013. In contrast, the S&P 500, a proxy for U.S. equity markets, has risen 16.15 percent over that same span.
What's Happening to Bonds and Why?
by Mohamed El-Erian of PIMCO,
To say that bonds are under pressure would be an understatement. Over the last few months, sentiment about fixed income has flipped dramatically: from a favored investment destination that is deemed to benefit from exceptional support from central banks, to an asset class experiencing large outflows, negative returns and reduced standing as an anchor of a well-diversified asset allocation.
Raising the Bar on Target Date Due Diligence
Deeming whether target date fund investments are appropriate for a specific participant population is an arduous and imperfect task, made more complicated by a lack of full transparency. Fiduciaries should question whether the underlying securities of target date funds are appropriate to meet the retirement saving needs of plan participants. However, the question itself raises concern about what it would take to examine the funds in such detail.
The Suit?
by Jeffrey Saut of Raymond James,
Bernie Cornfeld, of IOS Fund fame, coined the phrase, Do you really want to be rich? At the time I was working as a stock broker, and writing investment strategy for E.F.Hutton, having penned in December 1974 that, I recommend a gradual return to significant common stock accumulation (I still have that report). I also learned that you have to evaluate the risks, because sometimes when you go after the big bucks you lose. Then you end up with small change!
Reasons for Optimism in a Sloppy Third Quarter
by Ron Sloan of Invesco Blog,
Investors are anticipating the day that we transition from a market dominated by monetary stimulus to an earnings-driven market. The problem is that earnings arent cooperating yet. In my view, weve still got a sloppy third and maybe fourth quarter to get through, but I think 2014 will likely be a much better earnings market.
Weekly Market Review
The major US stock indexes fell once again last week, capping off the worst monthly performance of the S&P 500 in over a year. However, the index is only 4.69% below its all-time intraday high reached on August 2nd. While fear that the Fed would vote to start ending extraordinary stimulus measures at the next meeting late in September was the main reason cited for the decline, thin trading volume in August and especially the week before Labor day may have made led to increased volatility and price declines.
Seventh Inning Stretch
by William Gross of PIMCO,
They say that reality is whatever you wish it to be and I suppose that could be true. Just wish it, as Jiminy Cricket used to say, and it will come true. Realitys relativity came to mind the other day as I was opening a box of Cracker Jacks for an afternoon snack. Thats right I said Cracker Jacks! I cant count the number of people who have told me during the seventh inning stretch at a baseball game to make sure I sing Cracker Jack (without the S) because thats what the song says. I care not. No one ever says buy me some potato chip or some pea
Fixed Income - Where to Now?
by Chris Maxey, Ryan Davis of Fortigent,
Since the end of the Global Financial Crisis (GFC), investors moved aggressively into fixed income asset classes. They were quickly rewarded in the years following the crisis with a combination of falling interest rates and tighter credit spreads, which led to positive absolute returns. The easy money in fixed income is gone, however, and now is the time for careful asset class selection.
ProVise Bullets
For those in college during the 60s the time of sex, drugs, and rock n roll its hard to believe that marijuana has become legal. It is currently legal in some form in about 20 states and more are considering it, at least for medical purposes. Even Florida has strong proponents for the medical use of marijuana. There are always people who are trying to take advantage of the situation and this is no exception.
How to Find Value in Real Estate With Risk On, Risk Off Off Again
by Walter Stabell, III of Invesco Blog,
Recent trends, including falling stock correlations, have been strong indicators that the global economy is normalizing and the practice of risk on, risk off investing, in which investors enter and exit perceived riskier investments based on how they feel about the economy, is now off again after becoming a phenomenon in the post-financial crisis years.
Emerging Markets Feel the Ripples of Fed Tapering
by Sam Wardwell of Pioneer Investments,
Many Emerging Market currencies (notably those of India, Brazil and Indonesia) have been weak since the beginning of May. The declines accelerated sharply in recent weeks, leading to something approaching panic in several markets last week.
Could Clarity Confuse? The Industry Strikes Back
by Jon Vogler of Invesco Blog,
The intention of the Department of Labor (DOL) proposal to illustrate lifetime income streams on 401(k) statements is to clarify retirement income status for participants. But according to industry and trade groups, the requirement may have the opposite effect, creating more confusion than clarity.
Inflation Update
by Team of North Peak Asset Management,
As can be seen in the schematic above, most portfolios are effectively a bet on a low inflation environment due to their heavy reliance on mainstream equities and fixed income securities. In order to protect a portfolio from the damage that inflation can inflict, asset classes that are sensitive to increases in inflation need to be incorporated into the asset mix. These include Inflation Linked Bonds (TIPS), Precious Metals, Global Natural Resource equities and Commodities.
Float Research: Fund Outflows Surge Amid Bond Market Anxieties
by Minyi Chen of AdvisorShares,
Stock and bond funds have given up a net $32.4 billion in August thanks to strong outflows from ETFs and mutual finds alike. Read this investor insight by Minyi Chen, CFA, Chief Operating Officer of TrimTabs Investment Research and Portfolio Manager of AdvisorShares TrimTabs Float Shrink ETF (NYSE Arca: TTFS) to learn about the recent fund flow trends.
Float Research: Is Fed Starting to Lose Control of Bond Market?
by Minyi Chen of AdvisorShares,
Bond yields hit two-year highs as investors pull an additional $19.7 billion from bond funds in August. Read this investor insight by Minyi Chen, CFA, Chief Operating Officer of TrimTabs Investment Research and Portfolio Manager of AdvisorShares TrimTabs Float Shrink ETF (NYSE Arca: TTFS) to learn what concerns may arise in the coming months if this trend continues.
Hot Potato: Momentum As An Investment Strategy
by Ryan Larson of Research Affiliates,
Investors increasingly are attracted to momentum as a key ingredient in their portfolios. But how does momentum fare as a stand-alone strategy? In this issue of Fundamentals, we look at the pros and cons of this important risk factor.
Active ETF Market Share Update & Weekly Market Review
Last week, total AUM in all active ETFs fell by over $60.5 million. AUM in the Global Bond category fell by nearly $89 million both because of falling values for ETFs in the category and redemptions in certain ETFs. The Foreign Bond category had another bad week, ending almost $36 million below where it began. As in previous weeks, assets in Short Term Bond active ETFs increased, this time by almost $36.5 million.
The Big Secret Mutual Fund Companies Are Hiding
Do you know that most (if not all) mutual fund and ETF sponsors are keeping vital information about their funds secret from you? Well start todays E-Letter with a discussion about what that valuable information is and why fund companies dont want you to know about it.
What Triggers Would Make Japanese Equities Attractive?
by Mark Jason of Invesco Blog,
Through the second quarter of 2013, Japan remained Invesco International Growth Funds largest underweight versus the Custom International Growth Index because our EQV (earnings, quality and valuation) discipline criteria drive us toward high-quality companies at reasonable valuations, and those are scarce in Japan. Why? Because Prime Minister Shinzo Abes success is being priced in, and overcoming two decades lost to stagnation is difficult.
Attention Investors: Don't Fear Rising Rates; Fear Perpetually Low Rates
This months Insight will take a look at the performance of bonds during two previous inflationary periods, the 1940s and the 1970s, and illustrate two very different total return experiences. Through these examples, we will show that bond investors-- and by extension, any investor with a traditional balanced portfolio, should not fear rising rates as much as they should fear perpetually low rates.
What Role for Emerging Markets After the Sell-Off?
by Ramin Toloui of PIMCO,
While history suggests that the sell-off in emerging market bonds could ultimately offer attractive buying opportunities, it is important to anchor investment decisions firmly within a forward-looking economic and market outlook. Continuing vulnerabilities in global growth suggest there is fundamental value in EM bond yields at present valuations, as interest rate hikes priced into EM yield curves are unlikely to materialize in an environment of tentative growth.
Macro View...In Microwave Time (Part 2 of 2)
Todays blog post picks up where last weeks left off by updating the 13 key points for investors I laid out in an article in RIABiz.com on January 14 of this year. These were and are the most significant data and forces for investors to track today, to pursue long-term growth and sidestep major losses. As I did last week, I will also note whether I think each point is a positive or negative (or other) for investors now that we are about 3/5 of the way through 2013. The six areas covered last week were generally positive. Lets see about the final seven on the list
Envisioning the Planning Firm of the Future
by Bob Veres,
Virtually all advisors operate with a value proposition built on bettering their clients financial future through management of their assets. But trends in the workforce and capital markets will force advisors to rethink those assumptions and, if Richie Lee is right, the planning firm of the future will adapt a four-factor service model that places much greater emphasis on helping clients maximize their human capital.
Fight Over the Fed: Why So Ugly?
by Michelle Shwarzman of Invesco Blog,
When President Barack Obama let it slip in a June interview that Federal Reserve (Fed) Chairman Ben Bernanke had already stayed a lot longer than he wanted or he was supposed to, the quest for the next Fed chair was underway. But few anticipated it would devolve into a fairly brutal brawl - by economist standards - between two extremely competent and capable PhD candidates: Fed Vice Chair Janet Yellen and former Treasury Secretary Larry Summers, who also served as Harvards president and chief White House economic advisor.
Lower Your Expectations for Future Return
by Cory Fulton of Mesirow Financial,
While equities are not priced particularly well and the current environment does not bode well for future long-term expected real returns, they are currently a better choice for investors relative to the alternative. Right now, any meaningful shifts in one direction or the other could be setting the investor up for additional disappointment. At this stage in the game, equities look to offer better prospects in the long-term. However, the time is not right to abandon your long-term investment plan in the face of the positive market headlines and lofty predictions emanating from Wall Street.
A Generational Selling Opportunity for the U.S. Long Bond
Because investors tend to extrapolate what their general experience in markets has been recently well into the future, its easy to see why investors are having a long-term love affair with bonds. Yet the data in this paper suggests that a crisis in long bonds is coming and, given this information, individual and institutional investors alike should reconsider the bond portion of their portfolios.
Results 2,951–3,000
of 3,332 found.
