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Is Inflation Around the Next Corner? Then What?
by Pete Sorrentino of Huntington Funds,
As the Federal Reserve Board reiterates its intention to keep interest rates near zero into 2015, it appears that the markets and many investors are growing complacent about inflation. Ever since the Financial Crisis of 2007-08, "headline inflation," as measured by the Consumer Price Index (CPI), has stayed low so far. Although it has threatened to break out at times, economic weakness has restrained the price growth that underlies inflation.
Quarterly Commentary
In the macro sense, 2012 was the ultimate "kick the can"/"keep the lid on" year. The US elections validated the status quo, as prediction markets such as Intrade indicated they would throughout the entire year. In Europe, the most important event of the year was ECB head Mario Draghi's July statement that the ECB would do "whatever it takes" to keep the Euro-zone together, and the second half of the year was relatively quiet on that front.
The Economy: Worst Five Years Since the Depression
While the many facts and figures below are disappointing, even depressing, Americans need to know the truth about the real state of our economy and our union. Consider what follows as a rebuttal to President Obama's speech tonight. Feel free to forward this to as many people as you wish.
Sticking to a Long-Term Plan The Folly of a Short-Term Focus
by John Buckingham of AFAM,
It was an up and down week, though it managed to end in the black for just about all of the major market averages, save for the Dow Jones Industrial Average. Of course, the big headline on CNBC.com after Fridays close was, "Dow Logs First Weekly Loss in 2013." Thats fine by us, as we were happy with the 0.5% or so gains posted for the week across our four newsletter portfolios!
Too Active, Too Passive: Too Little Understanding
The wealth management and institutional consulting communities have allowed indexing to be called "passive" investing and stock-picking disciplines to be called active management. This implies a mindless approach to indexing and a great deal of busyness to stock picking. We at Smead Capital Management believe these labels are at the heart of a great deal of confusion about what works and what doesn't work in both equity mutual funds and separately managed accounts.
Comparing Advisors to Jim Cramer: Measuring your Professional Alpha
by Bob Veres,
Jim Cramer, Suze Orman and other so-called investment pundits and gurus are constantly telling consumers that they can do a great job of managing their portfolios on their own. Let's look at what the research has to say about the various investment performance benefits that advisors should be able to give their clients during the accumulation phase of their lives ? excess returns above what do-it-yourself investors could obtain on their own. I call those excess returns 'professional alpha.'
2013 Economic & Capital Market Outlook
It took our country 229 years to accumulate $8 trillion in federal debt. It only took the next eight years to double it to $16 trillion. History shows that when a country accumulates debt at this rapid pace, economic growth languishes. Not surprisingly, Congress is pursuing policies that attempt to inflate the economy. Five years after the Financial Crisis, we really havent fixed much. Instead, we've issued more debt in order to pay our bills and sustain a quality of life society cannot afford long term.
Rethinking IPOs
In the wake of the Facebook IPO last spring, and the ensuing public relations debacle, many investors have become more wary of newly minted stocks. Even before this event, the public perception regarding IPOs was heavily influenced by the IPOs of the late 1990s that helped fuel the dot-com bubble. For many, the primary motivation for investing in IPOs has been the potential to receive a short-term surge in price, irrespective of a stock's longer term potential for success or failure.
Is the Fed Doing the Right Thing?
by Mark Oelschlager of Oak Associates,
After a strong 2012, the stock market is off to a good start in 2013, rising more than 5% so far in January and currently riding an eight-day winning streak (the longest since 2004). Encouraging economic data has a lot to do with this. Unemployment claims are at a 5-year low, home sales and prices are up, and consumer credit and retail sales are growing. Research firm ISI says that the current level of unemployment claims is consistent with 4% real GDP growth for the first quarter, which would be an acceleration from the sluggish growth of recent years.
Truth vs. IgnoranceThe Impactful Investment Manager of Tomorrow
by Katy Sherrerd of Research Affiliates,
Ignorance in investing can have devastating consequences for individual portfolios and personal wealth. Too often, capital market participants have little knowledge of how markets work, how to make investment decisions, or how to manage their portfolios. This month's Fundamentals explains how investment managers can add value for their clients through insight and education combined with the quest for alpha.
The Year of the American Consumer
by Philip Tasho of TAMRO Capital,
It was an above-average year for stock returns across the domestic market cap spectrum. Ultimately, unconventional and accommodative monetary policy trumped investor concerns over fiscal policy, the Presidential election and weakness overseas. The Federal Reserve (the Fed) entered uncharted waters when it announced open-ended quantitative easing through the ongoing purchasing of government securities. Importantly, other central banks globally waded in by mimicking the Fed in word if not deed and the global liquidity cycle continued apace.
Gun Control & How To Play Upcoming Debt Battles
Ever since the tragedy on December 14 at Sandy Hook Elementary School in Newtown, Connecticut occurred when Adam Lanza senselessly murdered 26 people (20 children and six staff) and then himself there has been a growing cry from millions of Americans for some kind of new gun controls. And the current occupant of the White House is all too happy to oblige. Last week, the president unveiled the most sweeping new gun control laws since the so-called Brady Bill was passed in 1993, requiring background checks on firearm purchasers in the US. Obama's proposals go much further as I will discuss.
Keep Your Eye On The Ball - 2012 Year End Letter
by Team of Sloan Wealth Management,
The members of the Portfolio Management Team at Sloan Wealth Management (SWM) coach two baseball teams, two soccer teams, one T-ball team and one basketball team for our collective young children. Thus, we find ourselves stressing the basics. Learning the fundamentals of how to catch a pop-up will eliminate some of the fear of getting hit in the face. In 2012, we found many parallels to the capital markets as our portfolios posted high double digit returns in the face of fear.
Forecast 2013: Unsustainability and Transition
As we begin a new year, we again indulge ourselves in the annual rite of forecasting the year ahead. This year I want to look out a little further than just one year in order to think about the changes that are soon going to be forced on the developed world. We are all going to have to make a very agile adaptation to a new economic environment (and it is one that I will welcome). The transition will offer both crisis and loss for those mired in the current system, which must evolve or perish, and opportunity for those who can see the necessity for change and take advantage of the evolution.
Demographics and the Decline of Equity Mutual Funds
by Paul Franchi,
Until the last few years, mutual fund flows followed performance. Recently, however, money has flowed disproportionately into bond funds and out of US equity funds despite a strong rally in the equity markets. Changing demographics explain this shift, which has important implications for advisors and the mutual fund industry.
Winter Quarterly Commentary
While a last minute compromise may have been reached on taxes, it represents only a brief rest stop on a required road of repair. On the positive side, we should see less annual wrangling with tax rates having been made permanent, meaning they will not automatically change at some future date (but rather only when Congress feels like changing them), with many areas also sensibly indexed for inflation.
Invest In Equities: Your Future Self May Thank You
Investors have had an illusion about the stock market since the financial crisis. With the barrage of negative headlines and abhorrence toward risk, investors seemed to feel that equities would not improve going forward. This turned out to be a mistaken belief.
Finally, a Solution to the Income Investing Dilemma
There's an endangered species in the investment industry today and it goes by the name of "yield." With continued downward pressure from the Federal Reserve, both short-term and long-term interest rates have been held to artificially low levels. And each new announcement from the Fed seems to extend the outlook for low interest rates farther into the future.
Another Lost Year for Active Management
by Chris Maxey, Ryan Davis of Fortigent,
There is no doubt that 2012 will be remembered by many investors, for reasons both good and otherwise. One group less likely to remember the good of 2012 is active managers. Across the universe of hedge funds and mutual funds, relatively few were able to outperform their comparative benchmarks. This continues a long running trend of active managers lagging their less active counterparts and raises many questions about the efficacy of active management.
An Unconstrained Approach to Bond Market Investing
by Sabrina Callin, Lisa Kim of PIMCO,
Investors are increasingly focused on alternatives to traditional investment strategies. Unconstrained bond portfolio construction should be driven by an outcome-oriented goal, with strategies assessed on an individual risk/reward and correlation basis, and each investment in the portfolio evaluated rigorously for the expected risk and return as well as the potential impact of the correlation to other investments in the portfolio.
Taking Care of Business, DC-Style, to Avert the Fiscal Cliff
by Liz Ann Sonders of Charles Schwab,
No "grand bargain," but Congress got a deal done at the 13th hour to avert the fiscal cliff. The next two months will bring more DC wrangling and likely market angst, but we believe the outlook has brightened for the economy and market in 2013. The "wall of worry" is alive and well.
Getting the Most from Your Investment Committee
by Bob Veres,
Investment committees are a little bit like fingerprints: they come in all shapes and sizes, and no two are exactly alike in form or function. So advisory firms that have investment committees ? or are considering creating one ? can learn a lot from one another. My research has identified some best practices for this flexible management tool, by comparing notes among advisors on how they are managing their IC teams.
A Face-Off Between Passive and Active Investing
Exchange-traded funds continued to attract assets in 2012 while money has been exiting mutual funds. Still a majority of assets continue to be invested in actively managed products: As of the end of 2011, of the nearly $13 trillion invested in funds, index and exchange-traded funds comprise only about 8 percent, according to the Investment Company Institute.
The Next Generation of Income Guarantee Riders: Part 3 (The Income Phase)
by Wade Pfau,
In this third and final installment in my series on guarantee riders, I'll focus on the post-retirement income supported by income guarantee riders for variable annuities (VA/GLWBs), stand-alone living benefit riders (SALBs), and an unguaranteed portfolio of mutual funds. I'll highlight how differences among these products affect their end results, while also investigating what roles guarantees can most appropriately play in a retirement portfolio.
Nate Silver's Message for Financial Advisors
By now you are likely aware that Nate Silver of the New York Times correctly predicted the results for all 50 states (plus DC) in this year's presidential election and all but two Senate races. Silver's predictive capabilities across a range of disciplines have made him a near-deity among those whose livelihood depends on accurate forecasting - from poker players to counter-terrorism units. It's clear why: His methods work - at least in some cases. And their strengths and limitations carry important lessons for financial advisors.
Surprising Choices in the Search for Safety Near-Certain Loss of Purchasing Power versus Short-Term
Risk, in its many guises, is unavoidable, and investors today are taking on significant amounts of credit risk, duration, and leverage to obtain high yields from many presumably safe bonds. But certain types of risk are often mispriced. By overweighting one's portfolio to those sectors that currently offer attractive risk-adjusted returns, investors will be better positioned to meet their long-term goals.
How Well Does the Next Generation of Guarantee Riders Protect Your Income? Part 2 - Starting the Inc
by Wade Pfau,
Unlike traditional VA/GLWBs, the future payments from stand-alone income riders are tied to 10-year Treasury rates. That's bad news for retirees, who may find their future benefits compromised if interest rates remain at historically low levels - regardless of how the stock market performs.
The Downside to Socially Responsible Investing
by Robert Huebscher,
Who wouldn't want a cleaner environment or a more just society? We can all agree these are worthy goals. But it's an established fact that pursuing them through one's investing is costly; environmental-, social- and governance-based investing (ESG) does fine on a gross basis, but loses money net of fees. Now, a recently published paper argues that that ESG is basically a waste of time.
Emerging Markets: Maintaining Perspective
by Robert O. Abad,
In this Q&A, Western Asset Portfolio Manager Robert Abad discusses the latest dynamics and trends within emerging markets (EM). Although EM continue to demonstrate resiliency, Mr. Abad believes that given the amount of global uncertainty today, it is important that investors evaluate opportunities alongside a manager equipped to guide them through the risks and rewards of this evolving asset class.
Asset Location: Nine Tips to Create ?Tax Alpha?
by Glenn Frank,
With campaign season finally over, taxes are going to dominate the debate in Washington in the months ahead ? however things shake out at the polls today. It's going to be confusing; it's going to be uncertain. But many of the most critical questions advisors will ask can be answered with an analytical approach to deciding where to 'house' assets ? in taxable or tax-sheltered accounts.
The Next Generation of Income Guarantee Riders: Part 1 - The Deferral Phase
by Wade Pfau,
Clients no longer need to move their assets to a variable annuity with a rider to guarantee lifetime withdrawal benefits, thanks to the RetireOne stand-alone living benefit (SALB) rider from Aria Retirement Solutions, which can be applied to a portfolio of mutual funds and ETFs. Despite this enticing promise, however, the SALB may not offer as much downside protection as advisors and clients expect.
Building Portfolios that Beat their Benchmark: Measuring Nanometers with a Yardstick
by Bob Veres,
Using tools he co-developed with the Nobel-prize winning economist Bill Sharpe, one advisor has found that he can reliably outperform an appropriate benchmark. His work proves it is possible to build a portfolio knowledgably. You just need the right tools to get the job done.
Waiting for Treasuries to Reverse Course
by Chris Maxey, Ryan Davis of Fortigent,
In the years since the global financial crisis, investors have funneled money into fixed income securities. This year alone, more than $260 billion found its way into fixed income mutual funds. In an environment desperate for yield-oriented solutions, such demand is not surprising. What might be considered surprising, however, is investors' willingness to embrace such yield with extraordinary risk attached.
How to Change the Regulatory Debate - Before it's Too Late
by Bob Veres,
After almost a decade of lobbying, arguing, and posturing, the long fight on Capitol Hill over who will regulate RIAs and how to define 'fiduciary' is approaching a close. Within the next six months, there will no longer be any real excuse to put off a decision, and new players, both in Congress and at the SEC, will be eager to start fresh.
ETFs for Tax Planning
Exchange-traded funds are often regarded as more tax-efficient than traditional mutual funds largely due to the fact that many ETFs have been able to avoid the annual capital gains distributions that often frustrate investors in traditional mutual funds. As we progress toward the end of another tax year, many investment advisors are also finding ETFs to be effective tools for tax planning purposes.
Is Gluskin's David Rosenberg Right about Utilities?
by Geoff Considine,
They're not the sexiest property on the Monopoly board, but in today's market, there's plenty of evidence mounting that utilities are a great source of income. Indeed, Gluskin Sheff's David Rosenberg made the case for utilities in a recent commentary.
The Yin and Yang of 2012 Stock Markets Through September
by Ron Surz,
Despite investor concerns about the economy, stock markets delivered substantial returns in the year-to-date, with the S&P 500 returning more than 16% and Europe, Australasia, Far East (the EAFE index) delivering more than 10%. This growth has been in the face of investor withdrawals from equity mutual funds. So if mutual fund investors are selling, who is buying?
How to Build a Portfolio
by Adams Jared Apt,
This is the first of a set of three articles intended for the educated layman, in which I will combine the core ideas presented in my preceding articles into a comprehensive description of how to put together a portfolio. In this one, I'll explain what is often called Modern Portfolio Theory.
Jim Bianco ? Markets Will Benefit From Disastrous Fed Policy
by Robert Huebscher,
The Fed's quantitative easing policy will be 'disastrous,' according to Jim Bianco, but prices for riskier assets will rise over the near term as a result. In remarks last week, Bianco, the head of the Chicago-based economic research firm that bears his name, also gave the US economy a near-failing grade of C-, and warned that inflation will be 'problematic.'
The Future Of Money Market Funds
The Financial Crisis of 2008 has left its mark on the capital markets and the economy, and money market mutual funds are one of those areas that were affected. One of the pieces of unfinished business following the financial crisis is improved regulation of money market mutual funds.
Can Our Retirement System be Fixed?
by Robert Huebscher,
Google 'Teresa Ghilarducci' and you'll find countless references to her as the most dangerous woman in America. That dubious distinction stems from her 2008 book, When I'm Sixty-Four, in which she advocated replacing voluntary 401(k) plans with government-mandated savings accounts. Ghilarducci was attempting to address a problem that thus far has eluded solution, so it's important to consider her arguments, which have drawn praise from some quarters, too.
Who Benefits from High-Speed Trading?
by Michael Edesess,
Speed is a virtue in most competitive pursuits; the combination of speed and accuracy is almost always the ultimate advantage. No one knows this better than the purveyors of high-speed trading technology, who have profited mightily -not only by executing rapid-fire algorithmic trades, but also by exploiting the arcane rules that govern the stock exchanges. But at whose expense are they profiting, and how long is their advantage likely to persist?
The Game-Changer for Attracting Affluent Clients
by Dan Richards,
Until now I've been a skeptic on the value of social media for attracting affluent clients. You can use Facebook and Twitter to connect with investors in their 20's and 30's - but not the older, more prosperous clients advisors target. But last week, three separate conversations changed my mind on this.
High Yield and Low Risk: Finding the Best Closed-End Funds
by Geoff Considine,
Yield-starved investors have ventured into exotic - and often risky - assets, including hedge funds, non-traded REITs and private placements. But an asset class that has been around since 1893 offers a compelling combination of low risk and high income. A carefully selected portfolio of closed-end funds (CEFs) will yield 8% with less volatility than the S&P 500.
Results 3,101–3,150
of 3,303 found.
