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Designing Balanced DC Menus: Considering Diversified Fixed Income Choices
by Stacy Schaus, Ying Gao of PIMCO,
Sponsors of defined contribution plans face a dual challenge: They must present investment options appropriate for plan members and design menus that encourage selection of well-structured portfolios. We believe that actively managed strategies designed to potentially reduce risks, invest globally and enhance yield relative to the index may improve diversification and lower concentration risk in fixed income offerings. Plan sponsors may consider a range of return and risk measures as they evaluate current and prospective fixed income offerings.
Echo-Mania at The Fed
Greetings from a thawed out Savannah! Q1 of 2014 will be remembered for a number of things, but the most prominent were the erratic weather patterns and arctic-blast temperatures that most of the country experienced. I missed writing my Q1 letter for the first time in ten years due to a nasty bout with pneumonia in mid-January. For those of you who have never had pneumonia, I do not recommend it!
Weekly Market Update
by Team of Castleton Partners,
US Treasury yields registered their largest weekly drop since early February, driven by dovish minutes from the March Federal Reserve Open Market Committee meeting and equity market weakness. With the technology stocks at the epicenter of the equity storm, major indices fell nearly 3% last week. As Q1 earning season begins in earnest this week, equity performance is very much expected to remain in the headlines. Reaching yields last seen in early March, five year notes were the best performer across the Treasury curve, falling 12 basis points on the week to yield 1.58%.
What's Next for Emerging Markets?
by Nathan Rowader of Forward Management,
Emerging markets (EM) have been an enduring growth story, but their recent stretch of underperformance and fears of a global economic slowdown are chilling investors enthusiasm. Pulled between opportunity and risk avoidance, many investors have been left uncertain as to what they should do next.
Proper Perspective
Getting caught up in the weeds is easy in this 24-hour news cycle where everyone is looking to make a splash, but successful investing requires staying above the fray. The U.S. economy is growing and equities appear fairly valued, Europe has issues to deal with but has come a long way from the depths, Japan may be working against itself but improvement has been seen, and the threat of a Chinese debacle at this point seems minimal.
Investment Success Often Depends On Choosing the Right Investment Horizon
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, reminds investors of the dangers of extrapolation, terming it "one of the worst biases of investing." Complicating matters is Sicart's contention that "possibly the second worst investment bias is our need to believe a good story."
Dare to be Great II
In September 2006, I wrote a memo entitled Dare to Be Great, with suggestions on how institutional investors might approach the goal of achieving superior investment results. Ive had some additional thoughts on the matter since then, meaning its time to return to it. Since fewer people were reading my memos in those days, Im going to start off repeating a bit of its content and go on from there.
Russia and the Baltics
The Ukrainian crisis and the Crimean annexation have been closely watched by the Baltic countries (Estonia, Latvia and Lithuania). For many, the recent developments are bringing recollections of the start of the Soviet Union. In this week?s report, we will explore the geopolitical atmosphere in the Baltic states after the Russian annexation of the Crimea, focusing on Estonia. We will start with a brief history of the relations between Russia and its Baltic neighbors. We will then take a look at what the local press is reporting, the reports coming out of Russia and the word on the street.
Master Limited Partnerships
Master Limited Partnerships (?MLPs?) are a unique asset class in the investment landscape. Historically, MLPs have been primarily owned by high net worth and retail investors due in part to the tax complexities. However, MLPs have started gaining traction over the past few years among institutional investors as they seek alternative sources of yield in our present low-yield world.
Adding Direct Mail Advertising to Your Marketing Mix
by Elizabeth Snyder,
Advisors rarely generate the positive activity necessary to make direct mail worthwhile and cost effective. But they have an opportunity to capitalize on direct mail as a marketing strategy, especially since it offers advantages over electronic marketing (such as email): Direct mail reaches people directly in their homes and provides physical documents that recipients can save and refer to later.
Moving Forward With the Normalization of Yields
by Scott Mather, Michael Story of PIMCO,
One response to yield normalization is to consider retaining core bonds and diversifying the specific risk factor of concern, in this case duration. In the past, global bonds have captured most of the upside but avoided a significant amount of the downside relative to domestic-only bonds. Generating capital gains from bonds in a rising yield environment requires defining concretely what yield normalization means ? where yields are going and when they will get there ? and setting these expectations against forward market pricing, country by country.
On Cruise Control
The first quarter was a relatively calm start to the year. The Dow was down 0.7%, the S&P up 1.3%, and the NASDAQ up 0.5%. International equities were nearly flat as well with the MSCI ACWI ex US down 0.1%. European equities were up 1.5% and Pacific equities were moderately negative, with the MSCI Pacific down 3.3% for the quarter. Emerging market equity indices were down 0.8% for the quarter, with China down 6.7%.
The Doubt of Appearances
Households have made significant progress mending their balance sheet in the post-crisis period. Assets have been boosted on the back of higher home values and stock prices, while liabilities have been trimmed, mostly mortgages, thanks in large part to widespread home foreclosures.
Investing for Retirement: The Defined Contribution Challenge
by Ben Inker and Martin Tarlie of GMO,
Target date funds are rapidly becoming the workhorse for DC plans. These funds have grown substantially in recent years, partly as a result of automatic enrollment made possible by the Pension Protection Act of 2006. By and large, current target date funds resemble the old investment advisor adage that stock weight should be about 110 minus a persons age. While this satisfies the common-sense intuition that, all things being equal, weight in stocks should go down as a person ages, there are a number of problems with this approach. In this paper we focus on two in particular.
ECRI Recession Watch: Weekly Update
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 133.6, unchanged last week (which was revised from 133.5). The WLI annualized growth indicator (WLIg) rose to 3.0 from last week?s 2.9.
Here are some notable developments since ECRI?s public recession call on September 30, 2011: 1) The S&P 500 is up 61.9% at yesterday?s close, fractionally off its record close on April 2nd. 2) the unemployment rate has dropped to 6.7%, and 3) Q4 GDP was revised upward to 2.6%.
Bob
by Bill Gross of PIMCO,
PIMCO recommends overweighting credit and to a lesser extent volatility and curve. Underweight duration. Although credit spreads are tight, they are not as compressed as interest rates, which are now in the process of normalization. While PIMCO agrees with Janet Yellen that such normalization will be a long time coming (the 12th of Never?), probabilities suggest that as the Fed completes its Taper, the 5?30 year bonds that it has been buying will have to be sold at higher yields to entice the private sector back in.
ProVise Bullets
by Team of ProVise Management Group,
During the Great Recession, America laid off two million factory workers and factory output fell 20 percent. Before the Great Recession, of course, manufacturing jobs were headed overseas. As we have slowly emerged from the Great Recession, its a little surprising to some that manufacturing has led the way, outpacing overall GDP growth. This year it looks like manufacturing could add 3.5 percent in growth. Is this just a replacement of jobs that were lost during the Great Recession?
Shifting Policy at the Fed: Good for Long-Term Growth, Bad for Cyclical Bubbles
by John Hussman of Hussman Funds,
The Fed is wisely and palpably moving away from the idea that more QE is automatically better for the economy, and has started to correctly question the effectiveness of QE, as well as its potential to worsen economic risks rather than remove them.
Americas: Regional Economic Review 4Q 2013
by Team of Thomas White International,
The outlook for the developed economies in North America remains healthy while the emerging economies of Latin America continue to face headwinds. Though recent data from the U.S. and Canada have indicated moderation in economic activity, most of the slowdown was likely caused by adverse weather conditions in the region.
Four Areas Revved Up for a Resources Boom
Commodity returns vary wildly, as experienced resource investors can attest and our popular periodic table illustrates. This inherent volatility can spell opportunity for the nimble investor who can look past the mainstream headlines to identify hot spots. Our global resources expert, Brian Hicks, CFA, identified four we believe are revved up for a resources boom.
What Has Been Fueling the Rise of Gold in 2014?
by Kevin Mahn of Hennion & Walsh,
Gold declined approximately 28% for the year of 2013, its worst annual performance since 1981 according toUSA Today. At that time, the downturn ended Golds own bull market run of 12 consecutive years as investors jumped on the back of this current bull market by piling into stock funds in 2013 and largely exiting bond funds.
And That's The Week That Was
by Ron Brounes of Brounes & Associates,
Well, apparently Janet Yellen has her own style, her own personality, her own mixed message. Just as Fed watchers had to get used to Bernanke in the aftermath of maestro Greenspan (does that name still apply after the financial crisis?), investors will need a few meeting to figure out the new Fed Chair. An early rebound was followed by a selloff which was followed by a rebound which was followed by a late-week selloff. Nicely done, Ms. Yellen (though Russia played a role as well).
Europe is a Land of Opportunity in 2014
by Kevin Mahn of Hennion & Walsh,
While we are forecasting a high, single-digit gain for the S&P 500 index over the course of 2014 at this time, we do still contend that U.S. stock market returns will likely be outpaced in 2014 by certain International ? Developed Country stock market returns (notably Europe) as regions such as the Eurozone continue to emerge from their own recession.
Stocks Rise as Economic Backdrop Slowly Improves
by Bob Doll of Nuveen Asset Management,
U.S. equities finished higher last week, with the S&P 500 increasing 1.4%. Ukraine seemed to be receding in investors? minds. Despite the volatility and sharp increase in bond yields on Wednesday, the hawkish takeaways from the FOMC meeting were not a lingering overhang.
Fed-Induced Speculation Does Not Create Wealth
by John Hussman of Hussman Funds,
Fed-induced speculation does not create wealth. It only changes the profile of returns over time. It redistributes wealth away from investors who are enticed to buy at rich valuations and hold the bag, and redistributes wealth toward the handful of investors both fortunate and wise enough to sell at rich valuations and wait for better opportunities.
Is the Fed Supporting the Equity Markets?
by Tom Riegert of Hatteras Funds,
The Federal Reserve?s unprecedented increase in reserves purchased through its quantitative easing programs has paralleled the performance of the equity markets to a startling degree. Has the Fed?s program been supporting the equity markets? We examine the strong correlation between the Fed?s balance sheet and the performance of the S&P 500 since end-2008, and ponder the effects the Fed?s long-awaited tapering will have on market volatility. Investors facing the uncertainty ahead could well find alternative investments a welcome addition to their portfolio.
A Kid?s Market?
by Jeffrey Saut of Raymond James,
The Great Winfield goes on to say, in Adam Smith?s classic book from 1967, ?The strength of my kids is that they?re too young to remember anything bad, and they are making so much money they feel invincible.? He rented kids with the idea that one day the music will stop (it partially did in 1969-1970 and completely did in 1973-1974) and all of them will be broke but one.
ProVise Bullets
by Team of ProVise Management Group,
On average, how much taxable income must you have to pay six figures of income taxes? In order to pay exactly $100,000 in federal income taxes, your 2013 taxable income must equal $376,047 on a married filing jointly basis. Twenty years ago, it took $312,363 to pay that much in taxes. In 2011, the top 10% of US taxpayers paid 68.3% of all federal income tax while in 1980 the top 10% paid 49.3%. It is estimated that for the tax year 2013 the government will receive approximately $3 trillion. (Sources: Tax Foundation; White House; Internal Revenue Service)
Fishing for Gold?
by Axel Merk of Merk Investments,
If interest rates are supposed to be on the rise, why has the price of gold gone up so much this year? Is it merely because it is bouncing back after a sharp decline in 2013? We have a closer look at the link between gold and interest rates to gauge how investors may want to approach the bait provided by the Fed.
Weekly Commentary & Outlook
Stocks were buffeted last week on the outcome in Ukraine (well founded), growing concern that the world does not know what happened to that missing Malaysian airliner, and of course, the ever-present worries about the global economy - especially in light of renewed concern over China, both its economy and its banking system.
Heating Up and Thawing Out
Concerns over growth and geopolitical issues have largely been set aside by investors in the United States, but complacency can be dangerous and another pullback in the near term could unfold if history holds. Investors should keep longer term goals in mind and remember that trying to time the market is an extremely difficult task. The weather is turning and economic data will be watched to see if recent softness was temporary or something more serious. We lean toward the former, but a retrenchment in bond yields would cause some concern about the potential for something more than weather.
A Matter of Odds: Not Everything That?s Supposed to Work, Works All the Time
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, explores the worth of quantitative analysis versus fundamental, and examines forecasts, consensus, and valuation as three ways of looking at the market for investment.
Deflationary Pressure and Tight Credit Facilities Weigh on Eurozone Recovery?
by Andrew Balls of PIMCO,
The eurozone is enjoying a broadly balanced resurgence in economic output and domestic demand. Deflation risk is real, and the European Central Bank?s asymmetric attitude toward its inflation target could contribute to a decline in inflation expectations. In the current climate, we continue to favour select regional credit exposure and look to generate attractive returns across European credit and asset-backed securities.
Reflections on Ukraine
Over the past five weeks there have been a number of significant events that have occurred in Ukraine. A president has fled, a revolutionary government is forming and Russia has taken de facto control over the Crimea. The events themselves are momentous but the broader effects are significant as well. In this report, we will offer three reflections?Putin?s Gambit, The U.S. Adrift and A Dangerous New World. Although any of these could be a topic in themselves, we will shorten these issues to offer a single journey through the current crisis. As always, we will conclude with market ramifications
The Goldilocks Conundrum: A Market Review
When we decided to ride the central bank liquidity wave in 2013, we knew there was a chance the market could have a pretty good year, but like most investors we were pleasantly surprised with the gains that the U.S. stock market delivered. Including dividends, the S&P 500 Index soared by 32%, well in excess of what even the most optimistic prognosticators envisioned at the start of the year.
U.S. Household Net Worth Hits New Record High
The Federal Reserve announced last Thursday that US household net worth reached a new record high by the end of last year ? at $80.7 trillion. The Fed said the new record was made possible largely due to vaulting stock prices, increased home values and Americans paying off more of their debts.
How Much Slack Is in the U.S. Economy? The Inflation Jury Should Decide
by Jeremie Banet of PIMCO,
The unemployment rate may not be a reliable indicator of output slack in the U.S. economy. We?ll know (with a lag) if the economy has reached the end of the cyclical downturn when inflation picks up. The Fed will have to choose between risking a hawkish mistake or being behind the curve, waiting to see inflation actually increase. We expect it will choose the latter.
Making Green from Gold, Palladium and Pollution
Gold is coming back with a vengeance, experiencing a clear recovery and grabbing the attention of market cynics. Analysts from Noruma Securities even upgraded its outlook for gold, expecting bullion to climb over the next three years, according to Barron's.
The Dollar's Long Term Decline
by Axel Merk of Merk Investments,
The cleanest of the dirty shirts doesn?t necessarily preserve your purchasing power. Sure, the U.S. dollar has beaten the Russian Ruble and some others of late, but when it comes to real competition, the U.S. dollar has taken a back seat. The U.S. dollar?s long-term decline may be firmly in place and investors may want to buckle up to get ready for the ride.
The US Economy - Back To The Slow Lane Again
Late last year, President Obama predicted that 2014 would see ?breakout growth? in the US economy. His optimism was not completely unwarranted since the economy grew by a healthy 4.1% (annual rate) in the 3Q of last year, driven largely by an unexpected surge in inventory rebuilding. Then in late January, the Commerce Department reported that the economy grew by a better than expected 3.2% in the 4Q.
Results 3,101–3,150
of 3,702 found.
