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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.
The Key Issues in Today’s Muni Bond Market
Investing in high quality municipal bonds paying a predictable cash flow and returning your principal at the end of the investment is a well-trodden system for lifetime economic success. In this article we discuss some key issues in purchasing municipal bonds to help you make wise choices for your investing system.
The Great Stall of China
While China is without question the growth driver and the outperformer among Asian emerging markets, its clear the country is transitioning toward slower growth because of demographic factors and domestic rebalancing. In our view, China is entering a multiyear period of slower growth, but we consider its future growth robust and sustainable when compared with overall global gross domestic product (GDP) growth -- albeit below the annualized pace of more than 10% China experienced from 2001 to 2010.
Fund Flows Shift Dramatically This Year as Investors Embrace Risk
by Minyi Chen of AdvisorShares,
The Federal Reserve has been trying for almost five years to coax savers and investors into stocks by printing money to inflate the prices of assets in general and U.S. stocks in particular. The Fed finally seems to be succeeding. We are witnessing the biggest shift in fund flows since the crash of 2008.
Puerto Rico: Always the money owing
We have not recommended or purchased Puerto Rico bonds for 12 years. This is not because we thought that Puerto Rico would imminently default. Rather, we did not like the low ratings and the Commonwealths ubiquitous and growing debt. We view an investment in bonds as a way to control risk, not to make outsized returns.
Defining the EM Corporate Bond Opportunity
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.
Weekly Market Commentary
With most of the political wrangling and debate nearly over, one hopes, we are left to deal with the residue of their cacophony. Politically, Im not astute enough to try and unravel the truths and un-truths spoken during the government budget debate and shutdown. But as an economic scientist, the numbers reveal an extraordinary landscape of congruent trendlines, missed opportunities, and plausible strategies for safely navigating the next 3 months.
Glory Days: Could They Come Back for US Equities?
by Liz Ann Sonders of Charles Schwab,
A "great rotation" may not be underway by individual investors; even amid record-breaking outflows from bond funds this summer. But fund flow data do show some shift in preferences and highlight the sensitivity of investors to any rise in longer-term interest rates. A more interesting place to look is at the fiduciary community; that has decidedly shifted its attention away from traditional equities (and fixed income) over the past decade.
Bond Legend Dan Fuss on Rising Rates
by Robert Huebscher,
Having just celebrated his 80th birthday, Dan Fuss can claim a unique achievement ? his tenure in the fixed income markets has spanned a full market cycle, from the great bear market that began in the early 1950s through the equally great bull market that commenced in 1981. Fuss said today’s environment most closely resembles what he confronted in the late 1950s, when long-term rates were 3% and beginning their march upwards.
How Many Monkeys Does it Take to Find a Successful Strategy?
Give a monkey enough darts and she will eventually hit the bulls-eye on a dartboard. We wouldn’t dare consider that monkey an expert dart thrower, but investment professionals have been using essentially that same logic to assert that their strategies ? often called “smart betas” ? will outperform the market. New research exposes the faulty mathematics upon which such claims are based.
Rolling Returns: A Better Way to Measure Performance
Though calendar-year returns are among the more common measurements of a portfolio’s performance, rolling returns arguably offer a more compelling story. They provide a particularly robust analytical tool for evaluating manager performance, especially during volatile periods.
The Boys Are Back in Town
by Jeffrey Saut of Raymond James,
The boys are indeed back in town as Washington D.C. opened its doors for business as usual last week following a contentious debt ceiling debate and a 16-day shutdown of the government. This outcome had been anticipated in these letters for often-stated reasons, and just like when the fiscal cliff was averted, I now expect the media to turn its focus to the next Armageddon.
Looking Past the Politics: What Does the Market Need to Grow?
by Ron Sloan of Invesco Blog,
As the tone of the debt ceiling negotiations in Washington wavered over the past several days, equity markets rose and fell in kind. While lawmakers were able to come to a last-minute agreement to raise the debt ceiling and end the 16-day federal government shutdown, the key to putting the markets on a solid foundation for the longer term is for corporations to generate earnings growth through increased revenues.
Just Like Yesterday
In his latest essay, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, with help from Chetan Parikh, of Indias Capital Ideas Online, provides excerpts from and commentary on a 1971 speech by iconic investor David L. Babson. He begins by noting: "It is eerie how timely this speech, delivered 42 years ago, remains today."
Consumer Confidence Plunging Recession Ahead?
The stalemate in Washington continues, the government remains in partial shutdown and the debt ceiling looms on Thursday. A bipartisan deal to fund the government until January 15 and raise the debt limit until early February is working its way through the Senate and could be voted on later today or tomorrow. It is unlikely that the Senate bill will pass in the House, which is reportedly working on yet another bill (see link below) that is unlikely to pass in the Senate.
Trying To Beat The Market Is A Fool's Errand
by Chuck Carnevale of F.A.S.T. Graphs,
Proponents of indexing as the best investment strategy seemed to take great delight in reporting how the vast majority of professionally managed portfolios (mutual funds, separately managed accounts, hedge funds, ETFs, etc.) fail to outperform the S&P 500. Therefore, they argue, it is best not to even try. Investors should simply invest in index funds and forget about it.
Is Your Portfolio a Five-Tool Player?
In baseball a 5-Tool Player is one who has high-level abilities in these areas: hitting for power, hitting for average, running, fielding and throwing. 5-Tool Players are a special breed, and teams covet them. I have identified 5 tools a premier investment approach should have in order to be successful in our arena, the achievement of client goals and growth of advisory practices.
Move Along, Market: It's Only a Gaper's Delay
by Rick Golod of Invesco Blog,
After several days of stalemate between the White House and Congress, House Republicans have offered a six-week debt ceiling extension conditional on negotiating a package of fiscal concessions. The debt ceiling offer is straightforward, but the shutdown would continue until the fiscal concessions are agreed on. While this may dampen the economy and equity market, at least in the short run, I believe long-term investors should stay put and be patient.
Frustrating the Most People
A venerable sage once said, "The markets do whatever they have to do to frustrate the most people." For the long-duration investor, this means that you need to look at what people are invested in to determine where the frustration will come from. Thanks to the Associated Press, we know what the masses have done with their investments in the last five years.
Equity ETF Flows Send Bullish Signals
by Minyi Chen of AdvisorShares,
U.S. Equity ETFs gave up $4.3 billion in the week ended October 1, reversing a $3.4 billion inflow in the previous week. This weeks outflows signal low demand for stocks, a bullish short-term indicator from a contrarian perspective.
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.
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.
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 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.
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.
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.
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.
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.
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.
Results 2,951–3,000
of 3,362 found.
