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Bond Wars
by William Gross of PIMCO,
Adaptation is tantamount to survival in the physical world. So argued Darwin, at least, and I am not one to argue with most science and its interpretation of natural laws. Adaptation has been critical as well for the survival of countries during wartime, incidents of which I am drawn to like a bear to honey, especially when they concern WWI. Stick with me for a few paragraphs on this the following is not likely to be boring and almost certainly should be instructive.
Investment Advice Technology and How to Lose Money in the Coming Years
by Kendall Anderson of Anderson Griggs,
Adventures are good for my soul. They create wonderful memories, both of where I have been and all the effort it took to get there. All of us have memories, both good and not so good. I am a bit worried about the near term future.
Three Reasons Why Money Market Yields Are So Low
by Craig Bloodworth of Invesco Blog,
Im often asked why money market yields are so low today - even lower than they were a few months ago. My response generally begins with overnight repurchase agreements, or repo, which impact the price of term securities in the money market space.
Alternatives for Today's and Tomorrow's Market Challenges
Investors should consider alternative investment strategies, which could enhance diversification and the potential for alpha, or risk-adjusted returns, because returns from traditional asset classes in coming years may be lower and more volatile than those realized historically.
Why Tinkering Too Much with Your Portfolio Won't Pay Off
by Team of Knowledge @ Wharton,
When it comes to your investment portfolio, how much attention is too much -- and what constitutes too little? In a recent paper, Wharton finance professor Andrew B. Abel and two colleagues found that even when transaction costs are small, it makes more sense to act according to a schedule with surprisingly long intervals. Too much fussing, in other words, is counterproductive -- even if its cheap.
Weekly Commentary & Outlook
Throughout the 1980s, we heard talk from the investment community to go global, invest worldwide, perhaps driven by true globalization of corporate exchange and balance sheets, and perhaps also by the need by firms to create new products for their consumers to devour. Mutual funds, brokerages, and private equity companies alike saturated the media with product offerings from every corner of the globe and every possible market sector, including telecom, basic materials, energy and industrial development.
Investors Pull $17.5 Billion from Bond Mutual Funds in July
Investors keeping socking money into U.S. Equities while outflows from bond mutual funds continue. Read this investor insight by TrimTabs Asset Management to learn more about the recent fund flows and what other activity may be foretelling.
Who Let the Ferrari Out of the Garage?
by Blaine Rollins of 361 Capital,
With just three trading days left in the month, July is in the running for the title of least volatile month of the year, with the Standard & Poors 500-stock index averaging moves of just 0.39% this month through Thursdays close. That is lower than the 0.41% and 0.42% averages of January and March, respectively, when stocks were grinding slowly, but steadily higher.
Detroit Bankruptcy Not Indicative of Credit Trends
Detroit filed for bankruptcy on July 18, making it the largest municipality to file for bankruptcy, as well as the first time a states largest city has filed. While this is a historic event, its definitely not unexpected - Detroits declining finances date back to the 1960s. A 50-year trend is a pretty telling metric.
What's Wrong With Indexes?
It has been more than 35 years since the first broad market index funds debuted. At the time, they were a cutting edge strategy for core equity allocation. Today, index funds are a major part of 401(k) and other retirement plans, particularly ones tracking the Standard & Poors 500. But they have deep flaws.
Economic Value Approach to ROIC May Unearth Hidden Value
by Team of Jacob Asset Management,
Equity mutual fund managers employ a wide variety of investing approaches in an attempt to outperform the market, but very few stand out from the crowd. The approaches that do work over the long term tend to be very distinctive, focusing consistently on a specific methodology that is executed regardless of the market environment.
Average Gas Price Could Hit $4 by Labor Day... Or Not
With the recent jump in gasoline prices, several energy analysts are forecasting that prices at the pump will top $4 a gallon (national average) later this summer. On the other hand, some analysts feel that gas prices will only go up another 5-10 cents a gallon just ahead, and then move lower in the fall. Of course, no one knows for sure. Today, well take a look at whats driving gas prices higher.
Weekly Market Commentary
by Team of Tuttle Tactical Management,
Stocks continued to move up this week as money still has no other place to go. However, the rate of incline has slowed quite a bit causing the rally to look a little bit tired leaving the market vulnerable to a correction. That applies to a "normal" market, with "normal" asset classes, and places for traders to put money if they pull it out of stocks. One of the consequences of QE is we no longer have a "normal" market and there is nowhere else to go.
D-Day +1
by Jeffrey Saut of Raymond James,
I have termed last Friday (7/19/13) as D-Day because for the past few months my work has targeted that date as a potential turning point for the equity markets. Given the upside stampede, my sense was/is that turn would be to the downside for the first meaningful pullback of the year. In past missives I have elaborated on the reasons and clearly the media has listened.
Taper Protection: Where to Go when Rates Rise
I have fielded a number of questions from advisors about the effects of rising interest rates on real estate values. The negative effect of rising rates is predictable for fixed incomes, but real estate returns vary and are dependent on a number of factors. I will start with a historical analysis that demonstrates the strength of real estate returns during periods of rising rates. Then Ill outline the factors that drive changes in real estate values in a rising-interest-rate environment.
U.S. Equity Fund Inflow in July Seventh-Highest Monthly Inflow
Investors are piling into U.S. Stocks with July only a little half over. Read this investor insight by TrimTabs Asset Management to learn more about the recent uptick in U.S. Equities and other detailed supply and demand activity with the stock market at the start of Q3.
Closed-end Fund Review
Following a quarter in which the average closed-end fund was up 4.31%, the universe of 595 funds was lower by 5.60% on a share price total return basis during the second quarter (both figures from Morningstar). For many funds, most of the weakness occurred during the month of June (when the average fund was lower by 6.09% on a share price total return basis, according to Morningstar).
The Great Rotation Continues Forward...
by Blaine Rollins of 361 Capital,
Fed Chairman Ben Bernanke grabbed the mic on Wednesday and gave a performance that garnered a standing ovation from Stock, Bond, and Commodity investors. Only U.S. Dollar longs went home dragging their programs and spilling their popcorn. As a result, U.S. equity markets ended the week at all-time highs as stocks remained the darlings of the asset classes.
A Pivotal Point in the Markets
by Meggan Walsh of Invesco Blog,
Because the market is a forward-discounting mechanism, its not unusual for it to have led the economic recovery over the last four years. Today, I believe the market has already discounted a decent economy over the intermediate term and is approximately fairly valued. But thats not the whole story.
Commodities 2013 Halftime Report: A Time to Mine for Opportunity?
It was a challenging first half of the year for most commodities, with only two resources we track on our Periodic Table of Commodities Returns rising in value. Natural gas and oil rose 6.5 percent and 5 percent, respectively, while silver lost a third of its value and gold lost a quarter of its price from the beginning of the year.
Bond Yields Gone Wild?
With the Federal Reserves intention to taper its easing, yields have risen quickly, causing municipal bonds to experience their worst decline since September 2008. In the second quarter, the Barclays Capital Municipal Bond Index lost nearly 3 percent, with the long end of the yield curve receiving the biggest blow, as bonds maturing in 20 years fell more than 4 percent.
TIPS Get Hammered in the 2013 Second Quarter
by Stephen Percoco of Lark Research,
The beginning of the return to normalized interest rates took a big toll on straight Treasury securities in the 2013 second quarter, but TIPS got hit even harder. For the quarter, the average TIPS security lost 6.6%, worse than the average loss of 3.0% on comparable maturity Treasurys and by far the worst losses seen in the TIPS market since the 2008 financial crisis.
Retirement Portfolios: Fears over Rising Rates are Overblown
by Joe Tomlinson,
The second quarter saw increases in interest rates, losses in every category of bonds and investors abandoning fixed-income markets. The distress has been particularly acute among retirement investors who considered bond funds to be safe. But are fears of bond losses overblown? I will make the case that the rise in interest rates is actually good for retirement portfolios. To see this, one has to look beyond the quarterly statement losses and focus on overall retirement outcomes.
The Fed's Bind: Tapering, Timetables and Turmoil
There are striking parallels between the dramatic recent sell-off in U.S. Treasuries and the Great Bond Crash of 1994. But the summer of volatility now facing financial markets is no doomsday scenario. Instead, it puts the U.S. Federal Reserve in a bind. Higher interest rates will reduce housing affordability, which is especially troublesome since housing is the primary locomotive of U.S. economic growth.
Record Selling of Bond Funds: $79.8 Billion Pulled from Bond Mutual Funds and Exchange-Traded Funds
The biggest liquidity story is unfolding in the bond market, not the stock market. Investors are pulling record sums out of bond funds. Read this investor insight by TrimTabs Asset Management to learn more about the central banks influence on the markets as well as supply and demand activity with the stock market.
Widening the Search for Income: Beyond Traditional Bonds
by Team of Forward Management,
Multisector bond market strategies may provide an opportunity to capitalize on differences in relative value. A more refined and global approach may generate yield with dividend-paying stocks. Emerging market (EM) corporate bonds feature attractive fundamentals and have increased in popularity as an asset class.
Emerging Markets Debt Remains Fundamentally Strong
Junes massive bond sell-off, prompted by fears that the Federal Reserve would wind down its bond-buying program, has had a negative trickle-down effect on emerging market debt-dedicated assets, which were hit hard as part of the record $14.45 billion in outflows seen in the overall bond market for the week ending June 12.
Record Selling of Bond Funds: $79.8 Billion Pulled from Bond Mutual Funds and Exchange-Traded Funds
by Minyi Chen of AdvisorShares,
The biggest liquidity story is unfolding in the bond market, not the stock market. Investors are pulling record sums out of bond funds. Read this investor insight by TrimTabs Asset Management to learn more about the central banks influence on the markets as well as supply and demand activity with the stock market.
Let's Barbecue It...
by Blaine Rollins of 361 Capital,
Equity investors finished June with the first down month in 8 for the S&P500. Bond investors took a Tommy Boy two by four across the face. And yes, it did leave a mark. Two months ago the "Great Rotation" from bonds to equities was nowhere to be seen. Today the panic out of fixed income funds is happening at the highest levels seen since 2008. As we noted last week, inflection points in major rotations are volatile, scary, and unpleasant. This helps to explain the seven 100 basis point moves in the S&P500 in the month of June, which marks the most volatility in 12 months.
Investors Dump Emerging Markets Stocks
Investors sold off bond mutual funds and ETFs at a record pace in June, while equity sell-offs were much more limited, with almost all of the selling occurring in the emerging market space. Surprisingly, despite a decline in price, US and developed equity ETFs had inflows in June. And investors in leveraged ETFs turned aggressively bullish last week, despite the recent sell-off. Read this investor insight by TrimTabs Asset Management to learn why these signs should be unsettling for contrarians.
The Practical Application of Behavioral Finance
From the Dot-Com bubble onward, traditional investment models have repeatedly disappointed those who relied on them. When compared to mathematically based models, behavioral finance provides a superior foundation. Here is an alternative investment paradigm, grounded in behavioral finance, that is practical and effective over time periods that are relevant for a significant portion of investors.
Consider Convertibles in a Rising Rate Environment
by Walter Stabell III of Invesco Blog,
The recent mass exodus out of bonds in which investors pulled more than $18 billion from funds that invest in bonds over a two-week period ending June 12 may have left you searching for the best opportunities in the bond market.
All-Time Record Outflows from Bonds
Outflows of bonds arent just catching attention, they are setting new highs not seen since 2008. In contrast, stock buybacks are practically unchanged from the previous quarter. Read this investor insight by TrimTabs Asset Management to review timely fund flow activity that has taken place in the marketplace.
The Fed's Dirty Little Secret: QE Does Not Work
Today I hope to dispel the myth that the Fed?s massive quantitative easing (QE) policy has driven long-term interest rates lower. I will argue that the opposite is true and demonstrate that the yield on the 10-year Treasury note has actually risen during QE-1, QE-2 and QE-3. This flies in the face of most market commentators.
June 2013 Float Shrink Review
Sharing some commentary from our friends at TrimTabs, which summarizes a few changes in the investment landscape that may give you an indication of what to expect following Mays sell in May and go away trading adage. TrimTabs research focuses on fund flows and float shrink. They believe the market is heavily influenced by what people and institutions are doing with their dollars. You can read more about the research behind float shrink at AdvisorShares.com.
How Not to Invest in Dividend Stocks: Seven Mistakes Investors Commonly Make
by David Ruff of Forward Management,
While investors may assume that dividend investing is relatively straightforward, they commonly make mistakes that may undercut the potential income and total return of their investments.
Reframing Expectations
by Aaron Reynolds of Baird Advisors,
Even facing headwinds, bonds still serve important roles in a portfolio, including diversification and downside protection potential. As the heavy burden of total return falls on interest income, investors are being pulled toward higher-yield, higher-risk bond types. Investors can still benefit from the segmented bond market and the various strategies that are available. Expectations need to be reframed given the current environment of low yields and potential interest rate increases.
"Fixed" Income Investing Is Broken
Herb Brooks, who coached the 1980 Miracle on Ice U.S. Olympic Hockey Team to its unlikely win over the Soviet Union, included that quote as part of what I consider to be the best motivational speech in sports history. He was talking about his team and their Russian opponents. He might as well have been talking about bond investors on June 20, 2013.
Despite Interest Rate Concerns, Muni Volatility May Offer an Entry Point
by Jack Tierney of Invesco Blog,
As we approach the midway point of 2013, the capital markets have many concerns: the potential end of quantitative easing (QE3), the slow rate of economic growth, the stubbornly high unemployment rate and the sorry state of affairs in both federal and state government finances. I wont speculate on the eventual outcome of these issues, especially where politics is concerned. But I do think its valuable to look past the markets fear and search for areas where smart investors can take clear-eyed action and benefit in uncertain conditions.
Austerity is a Four-Letter French Word
The France that I see as I look out from the bullet train today is far different from the France I see when I survey the economic data. Going from Marseilles to Paris, the countryside is magnificent. The farms are laid out as if by a landscape artist this is not the hurly-burly no-nonsense look of the Texas landscape. The mountains and forests that we glide through are glorious. It is a weekend of special music all over France, and last night in Marseilles the stages were alive and the crowds out in force.
Taking Seniority: Looking to Bank Loans in Uncertain Markets
by Elizabeth (Beth) MacLean of PIMCO,
Bank loans are senior secured loans to non-investment-grade corporations. They are floating rate instruments, secured by the collateral of that company and senior in the capital structure. Bank loans can be a more defensive way for investors to move into the high yield space, due to the collateral and their senior position. While we have seen yield spreads tightening among loans, on a relative basis we do think loan valuations still look attractive. PIMCOs investment process helps us seek these attractive opportunities while managing risk.
Help Clients Fill the Income Void
Affluent investors all over the world just arent getting what they want from their income investments, according to Legg Masons recently released Global Income Survey. Yet there is good news: most say they want to become more knowledgeable about income investing, and theyre eager for financial professionals to point out fresh opportunities.
Newsletter June 2013
Do you remember hiding under the sheets listening to radio when your parents thought you were asleep? If so, I have an unbelievable collection of all the old-time radio shows we listened to when we were kids, if you have about six months? spare time. Find your favorite, click on it, and it lists literally hundreds of episodes you can re-live.
Results 3,001–3,050
of 3,332 found.
