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Weekly Market Update
by Team of Castleton Partners,
In a week devoid of meaningful economic data, financial markets were once again led by intensifying geopolitical events. With stock indices across the globe recording losses of 1%-3% on the week, US ten year yields declined to a low of 2.35% on Fridaya new low for 2014 and the lowest such point since June 2013. Since the onset of the Ukraine crisis in February, and later followed by the Iraq/ ISIS and the Israel/ Gaza conflicts, global sovereign yields have declined to levels unthinkable at the turn of the year.
How to Hold Gold Financed in Euro
by Ade Odunsi of AdvisorShares,
We are often asked how US based investors can construct a long position in gold that is financed in a foreign. In the discussion below we show the components of trade that gives an investor long exposure to gold that is financed with European euro. A useful way to understand how the portfolio would be constructed is to look at the cash flows associated with a gold transaction. Looking first at a gold transaction that is funded in dollars we show a diagram of the associated cash flows.
Coming Down from a Rocky Mountain High?
It was a little after 6 AM as the plane rose from the tarmac of Denver International Airport Saturday morning. Out the windows on the right the sun was just peeking above the horizon. The warm glow of the early morning light washed quickly across the prairie. The land was golden and flat.
What Asset Class Rallied Last Week amid the Sell-Off?
Last Thursdays sell-off in U.S. stocks (the Dow was down 317 points, the S&P 500 Index was down nearly 2%) marked the biggest stock market decline in nearly four months. The S&P 500 Index closed at 1,930 after it broke its 50-day moving average for the first time since April.
Ten Reasons the Advisory Business is Unlike Any Other
by Bob Veres,
The business dynamics that an advisory firm faces are so fundamentally different that any small business owner, dropped into your executive chair, would feel like she had been transported to another planet. To see how exceptional your business climate really is, let's take a quick tour of some of the differences between an investment advisory firm and a typical member of the business landscape.
Use the Rule of Reciprocity to Gather AUM
by Dan Solin,
Advisors seeking to convert prospects into clients commonly overlook the rule of reciprocity. The rule states that a debt must be repaid. What's fascinating is how far people will go to pay what they perceive to be a "debt," even when they didn't incur that debt voluntarily.
US Stocks Make 31 Record Highs in 2014, But Investors Panic During 3% Selloff
US stocks as defined by the S&P 500 made 31 record highs in 2014, most recently on July24th. Through Friday afternoon, stocks declined 3.3%, which is to say less than the decline of 4.2% we saw in April of this year, and decline of 5.6% in January.
Dynamic and Durable Growth Part 2: The Enormous Implications of Shale Energy
by Erik Voss of Invesco Blog,
This is the second in a four-part series examining dynamic and durable growth themes that affect the US economy and may present opportunities for investors. The first post explored the biotech revolution, and the third and fourth posts will discuss the massive changes in mobility.
Transformation or Bust
by John Mauldin of Mauldin Economics,
China continues to be front and center on my list of concerns, even moreso than the latest Federal Reserve press release or fluctuation in the Dow (although you should pay attention). I believe China is the single biggest risk to world economic equilibrium, even larger than Japan or Europe. This week my young associate Worth Wray provides us with a keenly insightful essay on what is currently happening in China. I will admit to not having written about China very much in the past five years, primarily because, prior to Worths coming to work with me I really had no secure understanding o
Second Quarter 2014 Investment Commentary
by Team of Litman Gregory,
Overall, our macro view and assessment of the risks and returns across the major asset classes has not changed meaningfully since last quarter. We continue to see the U.S. and global economies on a slow path of recovery from the 2008 financial crisis. ... Despite our more positive fundamental outlook, we also continue to view the markets as too dependent on central bank largesse, too short-term focused, and too complacent about the risks and imbalances that remain in the global economy in the aftermath of the financial crisis.
Which Denomination of Gold is Your Parachute?
by Ade Odunsi of AdvisorShares,
We continue on the theme of gold as a defensive asset in this weeks discussion by examining the performance of gold priced in dollars (USD), European euro, British pound and Japanese yen through a number of different periods which were characterized by a sudden rise in investor risk aversion.
20 Predictions for 2039
by Dan Richards,
The shifts in the next 25 years will be just as substantial as those in the previous 25 years, and the most successful advisors will be those who are able to anticipate and adapt to these changes. Here are 20 predictions for what the financial-advising business will look like in 2039.
Strengthening the Euros Governance Structure?
by Andrew Bosomworth of PIMCO,
?Todays relative tranquillity in eurozone financial markets owes largely to the ECBs willingness to hold the single currency together. However, history suggests the eurozones citizens ultimately will have to choose between returning to a regime of flexible exchange rates or retaining the single currency and deepening political and fiscal integration.
Second Quarter Economic & Capital Market Summary
It seems there is a growing disconnect between what the financial markets are discounting and the reality of what is transpiring in the domestic and global economies. While economic growth has the potential to increase during the second half of the year we are not expecting a dramatic acceleration since there are still structural problems in the economy. The result is slow private credit expansion, a lack of fixed investment and a slow rate of business formation.
And That's The Week That Was
by Ron Brounes of Brounes & Associates,
More favorable earnings; more decent economic releases; more devastating global turmoil. Stocks were little changed during the week (though the S&P did move into record territory) as many investors went on much-deserved summer vacation. Hope they are well-rested because next week brings a new month, a vast array of key data, financial word from Big Oil and others, and hopefully progress on peaceful resolutions to the never-ending geopolitical conflicts.
What Are Gold Option Markets Telling Us?
by Ade Odunsi of AdvisorShares,
It is often a valuable exercise for investors to monitor the option market associated with the cash market as option markets may carry useful information about how the balance of supply and demand in the cash market is evolving over time. In this weeks note we review the history since January 2006 from when we have available data, of the markets relative preference to own gold calls (seeking to profit from rising gold prices) versus owning gold puts (seeking to profit from falling gold prices) and how this has related to the price action in the gold cash market.
How to Choose the Best Retirement Income Strategy
by Joe Tomlinson,
In the competition among retirement-planning methodologies, systematic withdrawals have been winning the battle against the essential-discretionary approach. But given today's low interest rates, the essential-discretionary approach may work better for many clients, especially if SPIAs are used.
The Opportunity in Unconventional Oil
Be it energy geopolitics or pipeline politicking, oil markets are clouded by noise that push prices up and down. In order to make long-term investments in the space the trick is to boil it down to the bare bones of the issue. Recently an article was published espousing that oil was headed to $75. It was an interesting notion but not one we would put much stock in for a variety of reasons, the most basic of which being supply.
A Farmland Investment Primer
by Julie Koeninger of GMO,
Farmland is a real asset that combines solid investment fundamentals with the potential for attractive cash yields, inflation hedging, and consistent returns from biological growth. Furthermore, farmland total returns tend to be uncorrelated with financial asset returns, offering genuine portfolio diversification for institutional investors.
Summer Essays
by Jeremy Grantham of GMO,
In a new quarterly letter to GMO's institutional clients, co-head of asset allocation Ben Inker uses the evolving Boston culinary landscape as a backdrop to examine the tendency of investors to pursue a "free lunch," when they should be looking for the "investing equivalent of an inexpensive and tasty food truck meal instead." In his section, chief investment strategist Jeremy Grantham looks back at investing mistakes made over his 47-year career, paying special attention to his formative investing years and the "painful lessons" learned therein.
Comparison of Rising Rates Strategies
by Yung Lim of AdvisorShares,
With the ultra low interest rate environment becoming more of a norm in many investors mind, complacency has driven portfolio managers to maintain the status quo and stick to traditional duration and asset allocation targets. Recent history of bond market behavior has also supported this view. On a forward looking basis, however, the important questions center around how risk/return profiles change under rising interest rate environments and what investors should consider in evaluating the risk of their current portfolio mix.
Why We Favor Owning Gold in Euro Terms
by Ade Odunsi of AdvisorShares,
In this discussion piece we discuss the rationale for why investors looking to buy gold as a defensive asset during these uncertain times should consider buying gold in euro terms. When an investor buys gold in dollars they are expressing the view that they expect the price of gold to increase relative to the dollar. Similarly when an investor buys gold in euro, they express the view that they expect the value of gold to increase relative to the euro.
The High Tide in China
One axiom that has been used over the last couple decades is that high tide lifts all boats; meaning that a rise in economic or market conditions will lift every component of an economy or market to some degree. While true, we deal with relative measurements when discussing returns comparable to a benchmark. So, while the high tide does lift all boats, if the boat is tethered too tightly, you may be higher than being beached, but you also could still be underwater.
Strategies for Income-Seeking Investors
Many income-seeking investors have traditionally centered their portfolios around government bonds, often failing to consider other asset classes. Ed Perks, executive vice president and director of portfolio management, Franklin Equity Group, believes equities can be a key part of an income-oriented portfolio, although individual stock selection is particularly important as valuations rise and interest rate dynamics may change.
Is Dow 17,000 Dangerously High? This Comprehensive Review May Surprise You!
by Chuck Carnevale of F.A.S.T. Graphs,
The Dow Jones Industrial Average recently closed above 17,000, a historical record and milestone. Consequently, the question at the forefront of every investors mind has understandably been raised. Has the market now become dangerously high and therefore destined for a crash? The truthful answer to this important question is that nobody can know for sure what the stock market might do over the short run.
The Internet is Brutally Efficient and Totally Agnostic
On my way home from work recently my progress was impinged by a group of protesters headed up 4th Avenue in downtown Seattle to the headquarters of the Gates Foundation. Bill and Melinda Gates are spending millions trying to figure out how to make the U.S. education system more efficient and successful. Some of their recommendations are thought to damage efforts by the most powerful teachers unions to protect the interests of teachers. The Gates Foundation wants to bring efficiency and seems to understand that they need to be agnostic in their approach.
The Moneyball of Quality Investing
Factor investing has rightfully gained adherents among investors seeking superior risk-adjusted returns. Our research reveals that quality is not a factor that reliably commands a premium in its own right. Nonetheless, value investing conditioned upon certain indicators of company quality is a promising strategy.
Health Care Sector Spurred by Population Growth and M&As
Recently I spoke with John Derrick, director of research here at U.S. Global, to pick his brain about what he thought was the most interesting sector right now. You might expect him to have said energy, perhaps because of the intensifying violence in Kurdistan Iraq, a major oil producer. But instead, he said that he had his eyes on health care.
Weekly Economic Commentary
by Team of Northern Trust,
The recovery which began in 2009 has been weak and uneven. Some have blamed scarring from the financial crisis: wounds to the balance sheets of households, banks, and governments are taking a long time to heal. Under this school of thought, returning to pre-crisis normalcy is simply a matter of time, with the mending promoted by accommodative monetary policy. If the strategy works, well eventually return to the 3% real growth that weve averaged over the past generation.
A Brief Note on Gold as a Defensive Asset
by Ade Odunsi of AdvisorShares,
In previous notes we have written about the defensive nature of gold relative to the broad equity market. Much of the discussion has focused on the low correlation and beta of gold versus equity markets. In fact, the ten year monthly returns of gold (priced in US dollar terms) and the S&P 500 show a correlation of zero with the beta of monthly gold returns versus S&P 500 returns also being essentially zero (0.1).
You Don’t Have to Love Soccer
by Brian Andrew of Cleary Gull,
The FIFA World Cup (for soccer aka football) is in full swing. There are 32 teams from around the world treating a world-wide audience of nearly 2 billion to a great show of sport. The teams are competing for $576 million in prize money. And while the U.S. will not likely make it to the final match, the tournament does offer some insight into diverse economies around the globe and why we should consider international investments as a pillar in any portfolio.
Italy: When Hope Is a Strategy
by John Mauldin of Mauldin Economics,
I came back from Italy this week, and one of my guilty pleasures was being able to sit down and watch the last three episodes, including the season finale, of Game of Thrones. For those readers who are not enthralled with the fantasy epic from HBO or have not read the first five books (will he ever finish?), author George R.R. Martin has written one of the most complex fantasy series ever, about a world where everyone is occupied with who will sit on the Iron Throne.
The Four Bureaucratic Horsemen of GM's Apocalypse
by Mariko Gordon,
Bureaucracy is more than just an annoyance; in the case of auto manufacturing, too much of it can cost lives. Today's article takes a look at GM's recently revealed internal bungling and offers four suggestions for avoiding these same types of errors in the running of your business or team.
Unconstrained Bond Investing in The New Neutral
by Mohit Mittal, Saumil Parikh of PIMCO,
At our recently concluded Secular Forum, PIMCO investment professionals from around the globe gathered in Newport Beach to discuss and debate the secular outlook for major world economies. With insight from guest speakers and new MBA/PhD hires, PIMCO coined the phrase The New Neutral to define its secular three- to five-year outlook for the world economies. In his most recent Investment Outlook, Bill Gross further elaborated on The New Neutral.
Some Gold Indicators to Watch
by Ade Odunsi of AdvisorShares,
With recent sharp falls in the price volatility of a wide range of assets including gold and the markets apparent insensitivity to macroeconomic news, many gold investors have shifted focus to some of the more widely watched gold technical indicators to see if they provide insight into the future direction of the gold price. In this weeks short discussion piece we look at the Gold Forward Offered Rate (GOFO), the US inflation adjusted (real) interest rate and the Gold/S&P500 ratio.
The Age of Transformation
by John Mauldin of Mauldin Economics,
Today I offer some musings on what Ive come to think of as the Age of Transformation (which I have been thinking about a lot while in Tuscany). I believe there are multiple and rapidly accelerating changes happening simultaneously (if you can think of 10 years as simultaneously) that are going to transform our social structures, our investment portfolios, and our personal futures. We have had such transformations in the past. The rise of the nation state, the steam engine, electricity, the advent of the social safety net, the personal computer, the internet, and the collapse of communis
The American Oil Weapon
In this report, we will begin with a basic analysis of the oil markets. From there, we will examine Russia's economic dependence on energy and offer a historical analysis of Saudi Arabia's decisions in 1985 and 1997 to retake oil market share and the impact these choices had on the Soviet economy. Using this historical parallel, we will offer an example of how the U.S. could drive down oil prices in a bid to undermine Russia's economy.
And That's The Week That Was...
by Ron Brounes of Brounes & Associates,
Let the summer partying begin. With the ECB alerting its Fed counterparts (and investors everywhere) that its policymakers will take whatever measures necessary to aid its economy and combat deflation, stocks again moved to record levels on key indexes and even the small-cappers recovered from the perpetual April slide and turned "in the black" for the year. The manufacturing and labor sectors appears to have put the winter storms behind them and even the consumer has shown signs of thawing out in time for the summer. Vacation anyone?
China Leads the World in Green Energy, Gaming and Gambling Markets
Last month, Xian Liang, co-portfolio manager of our China Region Fund (USCOX), attended the 19th CLSA China Forum in Beijing. There he and hundreds of other global attendees were given the opportunity to meet with representatives from Chinese corporations, some of which U.S. Global owns. Xian also managed to get a sense of how the nation?s recent changes in consumer behavior and governmental policy reforms might affect its investment outlook. Although China remains an emerging market, it has lately taken a number of considerable strides to position itself as one of the world?s most
Emerging Markets: PR is on the Upswing
by Nick Niziolek of Calamos Investments,
Since March, the tide has turned, and there has been a strong reversal in both news flows from and equity flows into EMs. Headlines have transitioned from "Currency Crisis" to "Modi Wins," and Russian equities have moved above the levels seen since before the Ukraine crisis began. Moreover, weve identified several near-term catalysts that could further support the equity breakout that is underway. Only in EM investing could a military coup be viewed as a potentially beneficial catalyst.
Mounting Momentum?
Although the stock market remains sluggish, with the potential for a correction elevated, the U.S. economy appears to be improving. There is probably no great rush to get into the stock market at this point, but maintaining a steady investing discipline in the face of what we think is a continuing secular bull market is key. Investors frustrated with the low yield environment should be careful about adding too much risk to a portfolio in search of higher yields.
Trends in Gold Option Volatility
by Ade Odunsi of AdvisorShares,
Liquidity in gold option trading has risen significantly over the last five years. Using the COMEX 100 ounce gold option contract as a proxy for the market, Year-to-Date Average Daily Volume has risen from approximately 30,000 contracts in May 2009 to 70,000 contracts (~ 217 metric tonnes) in May 2014. This period of growth in option use has coincided with the rapid rise in the gold price after the 2008 credit crisis and perhaps reflected a need from the growing number of gold investors for derivative contracts with which they could manage the risks inherent in their gold exposure.
In a Flash, China Looks Strong
If you want to know where the world economy is headed, there is one number that I believe investors should focus on: the HSBC China Manufacturing Purchasing Managers Index (PMI). On Thursday, the preliminary flash PMI for May came in at 49.7, beating Bloombergs consensus of 48.3.
Which Resource Areas Show Signs of Strength?
Global synchronized growth, as measured by the Global Purchasing Managers Index (PMI), remained stable or positive for the past 12 months until Japan reversed the momentum in April with a precipitous drop in its PMI. China is contributing modest growth but, fortunately, the U.S. and Europe are rebounding. This lack of consistent global momentum has created a short-term, volatile, hot and cold, stop-and-go sentiment. Global real GDP growth peaked in 2010 at 5.2 percent then slowed for the next three years to 3 percent.
Results 3,651–3,700
of 4,316 found.
