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Forecasting Bond Returns and Evaluating Bond Funds
While past performance is not a guarantee of future alpha, it sure is a hint ? the skills needed to generate alpha in a given market are likely to be as valuable in one period as in another. This principle is the basis of selecting active managers. How can we adapt it to bond funds, given the larger market forces at work?
Ted Williams, Ford F-150's, and Market Valuations
In late 2008 Lehman Brothers had just collapsed, AIG needed help from the US government and markets around the world were in a tailspin. Today, five short years later, we find it strange how the strength of the stock market defies a climate of declining earnings. With another quarter of corporate results behind us, equities continue to rally despite corporate earnings offering no material support, with many companies actually talking down their future growth prospects.
Debt Ceiling Debate Takes Center Stage as Government Shutdown Continues
It appears likely the first government shutdown since 1996 will not be resolved quickly. We believe Congress will seek to package reopening the government with a debt ceiling increase. Despite the brinksmanship, we dont expect to see a downgrade of U.S. government debt by the major ratings agencies.
The New Normalization of Fed Policy
by Tony Crescenzi of PIMCO,
The Fed is sending a message that the unwinding of its extraordinary accommodation will be done with great care and patience, and will take time - a long time. In delaying a taper, not only did the Fed show markets it has little tolerance for any tightening of financial conditions, it also strengthened its forward guidance considerably. The Feds decision to delay a taper will likely relieve some of the upward pressure on longer-term interest rates.
What Is The Correct Discount Rate To Use? Part 2B
by Chuck Carnevale of F.A.S.T. Graphs,
One of the most widely-accepted and utilized methods of valuing a business in todays world of modern finance is discounted cash flow (DCF) analysis. Obviously, in order to calculate valuation, practitioners must rely on mathematical formulas. However, the challenge with utilizing mathematical formulas to determine the net present value (NPV) of a future stream of income is in determining the proper inputs. Consequently, the accuracy of our result is subject to the principle garbage in garbage out.
The Fire Fueling Gold
For patient, long-term investors looking for a great portfolio diversifier, a moderate weighting in gold and gold stocks may be just the answer. And, today, when looking across the gold mining industry, you?ll find plenty of companies that have paid attractive dividends, many higher than the 5-year government yield.
Government Shutdown and Beyond
by Team of Neuberger Berman,
After months of eerie quiet in Washington, DC, fiscal conflicts have taken center stage, most prominently with the October 1 "shutdown" of U.S. government services. Markets are nervously watching if Congress can move past current wrangling to create a workable budget while navigating both the debt ceiling and shutdown-related fallout. In this issue of Strategic Spotlight, we consider how the budget debates could play out and the implications for investors.
Buying the Shutdown
Volatility from the government shutdown and other political developments in Washington D.C. will likely continue to rise. Despite this, the reduction in output from this will be short-term, and investors still have several attractive options for deploying capital across asset classes in the United States and globally.
Active ETF Market Share Update & Weekly Market Review
Last week, total AUM in all active ETFs fell by almost $40.9 million. Assets in the two largest categories Short Term Bond and Global Bond fell by $7.74 million and $10.156 respectively. In addition, the Foreign Bond category decreased by $36.33 million, while AUM in Currency active ETFs fell by almost $5.2 million.
ProVise Bullets
Effective October 1st, the health exchanges are open for business and enrollment can occur over the next 90 days. It will be interesting to see just how many people feel compelled to sign up under the individual mandate. While the premiums are not inexpensive for most of the eligible people, many will receive tax credits to help offset the cost. Nonetheless, others will find it a significant burden to the budget, and there is great debate over just how this will affect the economy long-term.
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.
Europe Pokes Its Head Out From the Shadows
by Chris Maxey, Ryan Davis of Fortigent,
With all the focus on affairs in the US, China and developing nations, Europe has largely been given a free pass in recent months. The lack of attention gave Europe the opportunity to fix some of its troubles, but challenges remain and are likely to surface in the weeks ahead.
Putin's Gambit
Earlier this month, President Obama found himself in a very difficult position regarding Syria. An ill-advised comment about making the use of chemical weapons a red line forced a response when the weapons were clearly used in Syria. The administration began moving toward a military response. However, support for military operations was lacking both domestically and internationally. The clearest signal of this opposition was the British Parliaments vote to prevent P.M. Cameron from authorizing military action in support of the expected U.S. military strike.
The Most Predictable Economic Crisis?
by Axel Merk of Merk Investments,
Forget about a government shutdown. The quibbling over concessions to keep the government funded distracts from what might be the most predictable economic crisis. We have problems that may affect everything from the value of the U.S. dollar to investors savings, but also to national security.
Congress Holds Equities Hostage
by Bob Doll of Nuveen Asset Management,
U.S. equity advances ended last week and the S&P 500 declined -1.0%.1 Markets appeared concerned about overbought conditions from a strong run up over the past three weeks and uneasy about Federal Reserve (Fed) monetary policy normalization as well as the credibility of its communication strategy. Other widespread reasons for the downturn included increased focus on the fiscal battles in Washington, D.C., heightened worries about a possible near-term government shutdown and the contentious debt ceiling debate.
You Never Know
Surprises come at any moment in the investing world, reinforcing the need to have both a long-term view and a balanced/diversified portfolio. We believe signs are pointing to better US and European growth, a near-term rebound in China, and some possible positive momentum building in Japan. But near-term fiscal policy risks abound. Investors that need to add to equity positions should use pullbacks to do so.
Calculating A Stock's Fair Value Based On Future Growth Expectations: Part 2A
by Chuck Carnevale of F.A.S.T. Graphs,
In part one of this two-part series I focused primarily on calculating the intrinsic value of a common stock based on an analysis and review of historical information and data. Although I strongly believe that there is much that investors can learn by studying the past, I even more strongly believe that since we can only invest in the future, that it is also implicit that we embrace a rational method of forecasting.
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.
How To Calculate The Intrinsic Value Of Your Common Stocks: Part 1
by Chuck Carnevale of F.A.S.T. Graphs,
Every investor in common stocks is faced with the challenge of knowing when to buy, sell or hold. Additionally, this challenge will be approached differently by the true investor than it would by a speculator. But since I know very little about speculation (trading or market timing), this article will be focused on assisting true investors desirous of a sound and reliable method that they can trust and implement when attempting to make these important buy, sell or hold investing decisions.
Surprise! No Tapering and More Budget Progress than Meets the Eye
by Sam Wardwell of Pioneer Investments,
On Monday, Larry Summers exited the pool of candidates for the next Federal Reserve (Fed) chairman. (Only the timing was really a surprise.) On Wednesday, the Fed didnt taper and de-emphasized several of the targets theyd set earlier. (Big surprise versus consensus - not central bank best practices). Municipal bond offerings by Puerto Rico, California, and Illinois were met with strong investor demand.
Has the Fed Lost Its Credibility?
by Chris Maxey, Ryan Davis of Fortigent,
Any economics student will tell you central banks must achieve three things to effectively implement monetary policy: (1) independence; (2) credibility; and (3) transparency.For most of the Feds history, the first two characteristics were arguably well attained.However, the group was never well known for clarity into its thinking.
Lehman Five Years LaterLessons and Threats
by Dean Curnutt of Macro Risk Advisors,
The five-year anniversary of the Lehman bankruptcy and onset of financial crisis is here and so too is the raft of opinion pieces around what caused the meltdown and how it is different this time.In a recent interview with Charlie Rose, when asked about the risk of another 2008 event, Morgan Stanley CEO James Gorman said, The probability of it happening again in our lifetime is as close to zero as I could imagine.
ENERGY MLPs: A Suitable and Sustainable Asset Class
Key Takeaways: MLPs have provided income with little correlation to other asset classes and little sensitivity to interest rates, commodity prices or economic cycles. The market for MLP stocks has expanded greatly and offers liquidity which appeals to long-term institutional investors. The renaissance in U.S. energy production is driving sustainable growth in the infrastructure that MLPs own and operate
The Brazil Conundrum
The last decade has been exceptionally good for emerging markets. Never before have so many countries grown so rapidly, and at the same time. The average growth rate from 2003 to 2012 was 13.1% for emerging markets, while the long-term average stands at 5.0%. This growth rate was partly due to mean reversion after sluggish growth periods in the 80s and 90s, when the average growth rate for the group stood at 3.5%.
Fed Inaction Lengthens Reflationary Economy
by Bob Doll of Nuveen Asset Management,
U.S. equities advanced last week as the S&P 500 increased 1.32%.1 The Federal Reserve (Fed) delivered a big surprise by leaving intact the current $85 billion monthly purchase program. The Committee appears nervous about the resiliency of the economy. Chairman Bernanke pointed to three factors for postponing tapering: 1) the need for more labor market data to be confident in the outlook, 2) a desire to assess the degree to which tighter financial conditions, particularly mortgage rates, are affecting the real economy and 3) an interest in gaining clarity on upcoming fiscal debates.̶
Rising Interest Rates Must End Soon
The yield on the benchmark 10-year U.S. Treasury bond has risen by more than 84 percent from May to early September, one of the most violent and rapid increases on record. This spike has caused severe convulsions in the bond market, leading many investors to wonder how long the torment can last.
“Risk-On” Resumes as Uncertainty Subsides
by Bob Doll of Nuveen Asset Management,
Equity markets rallied last week with the hope of a diplomatic solution to the crisis between Syria and the United States. The S&P 500 advanced 2.03% for the week.1 Broadly, the S&P 500 is in a churning phase after witnessing an all-time high of 1709 on August 2 and then stalling.1 We believe the market has been on hold while waiting for lower oil prices, progress on Syria, further global growth and successful Federal Reserve tapering.
Consumers Face An Economy at a Crossroads
by Chris Maxey, Ryan Davis of Fortigent,
As the Federal Reserve prepares to debate the merits of tapering its asset purchase program this week, a key area of the economy that will be closely analyzed by Bernanke and Co. is the health of the American consumer. There are tenuous signs that consumers are spending more, but attitudes towards the economic recovery are hardly encouraging. Consumers will find it difficult to stay the key cog of economic growth in the U.S., but at the very least, their participation in the recovery is imperative, and leaves much to be desired.
Tidbits Foreclosure, BK Signs and John Mauldin's Unrealistic Expectations
by Gregg Bienstock of Lumesis,
Some tidbits to start and then on to an outstanding guest commentary from the renowned John Mauldin. Our tidbits focus on Foreclosures and some insights around our review of some bankruptcy warning signs published by S&P Capital IQ. Our guest commentary, Unrealistic Expectations (I might have called it Unrealistic Assumptions), focuses on the daunting reality of underfunded pension plans.
Russia is Tough to Love, Easier to Hate, Hard for Investors to Ignore. Here's Why
Russian President Vladimir Putin created a stir recently when he shared his thoughts with Americans in an op-ed printed in The New York Times. According to The Times, very few pieces written by heads of state have been published by the paper and very few received the attention Putin attracted.
Waiting for Clarity From the Fed and Congress
by Team of Northern Trust,
U.S. economic growth averaged roughly 2.0% in the first half of the year and the average gain of real gross domestic product (GDP) during the entire 16-quarter economic recovery is 2.2%. Real GDP is projected to grow close to this trend in the second half of the year.
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!
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.
Will Rate Rise Derail Housing Recovery?
by Chris Maxey, Ryan Davis of Fortigent,
As the Federal Reserve grapples with when and how to unwind quantitative easing, interest rates climbed more than a point since the end of 2012. This caused mortgage rates to increase to their highest levels in two years last week, with the average conforming 30-year loan jumping to 4.58% from 4.40% the week prior. Rising financing costs is presenting a headwind for one of the biggest bright spots in the US economy over the past 12 months.
Policy Uncertainty on the Rise
Congress seems to be digging in and ramping up the rhetoric in advance of a possible government shutdown, a debt ceiling increase and a probable selection of a new Fed chair. We think it is likely policymakers will agree to a short-term deal to fund the government and avert a shutdown, and also cobble together a resolution on the debt ceiling, although neither is likely until the last minute. The Fed chair debate will likely continue to sway markets over the next few months, leading to greater uncertainty and greater market volatility.
Results 3,351–3,400
of 3,750 found.
