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No Way Out
by Michael Lewitt,
There aren't enough Steve Jobs and Mark Zuckerbergs to innovate our way out of the Everest of debt we have built for ourselves (and will continue to build for the foreseeable future). The good news (a purely relative evaluation) is that astute investors will find enormous opportunities in today's markets as they increasingly reflect unsustainable fiscal and monetary imbalances.
Borking the Budget
by Michael Lewitt,
It now appears that the obstreperous approach that succeeded in the Bork nomination fight is being applied to the federal budget. Instead of treating this subject with objectivity and reason, both parties have borrowed the tactics that their most radical elements have historically applied to social issues like abortion.
What to Tell Clients Today - Ten Tips for Effective Client Communication
by Dan Richards,
Given the recent market tumult, many advisors know they should be communicating with clients, but hesitate because of uncertainty about what to say and apprehension about making things worse rather than better. Here are five general guidelines for client communication in turbulent markets and five tips for crafting the message that you send today.
Strategies for a Rising Rate Environment
Shortening the duration of a fixed-income portfolio is often considered the default option, but it is not the only way to hedge against a potential rise in interest rates. This article provides investors with a framework to analyze and implement a range of fixed-income strategies, and highlights various investment considerations that should carefully be taken into account.
Does Government Intervention in Financial Markets Slow Economic Growth?
by Michael Edesess,
As we saw with the Dodd-Frank legislation and the Consumer Financial Protection Bureau, the question underlying the debate over financial regulation is whether it stifles economic growth. Leo F. Goodstadt's book, Reluctant Regulators, provides useful insights from the experiences of Hong Kong and China. It also causes us to ponder whether our measurement of economic growth is fundamentally flawed.
Reducing Risk through Value-Oriented Tactical Strategies
Conventional wisdom was that the best way to reduce portfolio risk is to adopt a diversified long-term strategic asset allocation. That paradigm was challenged - deservedly so - following the 2008 financial crisis. Fortunately, an improved paradigm has emerged: Investors should combine long-term strategic allocations with a value-oriented tactical rebalancing strategy.
How to Build a Low-Risk High-Income Portfolio
by Geoff Considine,
Prominent investors, including Bill Gross and Warren Buffett, now say that the yields on long-term government debt do not justify the risks. But is this perception correct? I offer a way to answer that question - and to construct a low-risk high-income portfolio - using the prices of put options to derive the true risk levels of various asset classes.
My Breakfast with Dave
by Robert Huebscher,
A month ago, one of the most closely followed market observers, Gluskin Sheff's David Rosenberg, moved his Breakfast with Dave commentaries behind a pay-wall, ending an era of free access to his insights. Last Friday, however, he presented his views publicly to an audience of 500 advisors and investors, your author included.
Martin Barnes - How Safe is the Equity Market?
by Robert Huebscher,
When members of the Federal Reserve Board seek counsel on tough issues, one of the economists to whom they turn first is Martin Barnes. Speaking publicly last week, Barnes addressed two themes in the US economy and markets: the potential for a sustained bear market in equities and the likelihood of higher taxes. These two distinct questions are both critically important to investors.
Been Down So Long It Looks Like Up To Me
by Michael Lewitt,
"The budget crisis is a crisis of leadership," writes Michael Lewitt in the latest issue of the HCM Market letter. "There is no intellectual mystery involved in cutting the budget - entitlement spending must be reduced through the adoption of tighter eligibility standards... The markets will also have to evaluate whether Congress and the Obama administration can make any meaningful progress on budget reform, which will mean tackling the entitlement issue. The failure to rein in federal deficits remains a profound threat to the dollar and interest rates."
A Trading System that Disproves Efficient Markets
by Erik McCurdy,
Efficient market adherents claim it is impossible to outperform the stock market over the long term. Although their principles are the foundation of modern investment theory, other compelling models, including the one I propose here, reveal that precisely the opposite is true, supporting the thesis that markets are highly inefficient.
Bruce Berkowitz on the Exceptional Value in the Financial Sector
by Robert Huebscher,
Fairholme's Bruce Berkowtiz, US stock-fund manager of the decade, discusses his large position in the financial sector and why he believes the big bets he is making do not amount to Russian roulette. He also comments on his recent nomination of former Florida Governor Charlie Crist to the board of St. Joes.
Refuting Meredith Whitney
by Robert Huebscher,
Wealthy investors, seeking safe tax-free income, have historically centered their portfolios on municipal bonds. The fiscal problems faced by many states and local governments, however, are leading many to question that strategy, none more vocally than the analyst Meredith Whitney, who predicted 'hundreds of billions' in municipal bond defaults in a recent 60 Minutes interview. We present the rebuttal to Whitney.
Reducing Portfolio Risk through Sustainable Investing
by Jon Quigley,
By incorporating a broad swath of extra-financial data as a risk factor and tilting a portfolio away from companies with poor environmental, social and governance policies, we can better reduce that portfolio's risk of extremely negative outcomes.
A Reading List for 2010
Updated for 2010 and in time for the holidays, here is the latest installment of my recommended books. I originally wrote this list in 2008 and again last year. I intend to keep adding to and revising it every year. It contains seven sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, Risk and Books for the Soul. The first three sections are presented below and the remaining four will be presented next week.
Four Critical Investment Themes for the Next Decade
by Robert Huebscher,
Four investment themes will dominate market behavior over the next decade, according to Martin Murenbeeld, the chief economist at DundeeWealth Economics, a Canadian investment manager and financial advisor. Investors, he said, would be wise to overweight gold and other commodities.
Why Warren Buffett is Optimistic: A Quarterly Letter to Send Clients
by Dan Richards,
Dan Richard's quarterly letter is designed to balance some of the extreme pessimism among many investors. Negative sentiment is understandable given the real challenges facing the U.S. and European economies, but is also a function of the overwhelmingly negative media coverage to which clients are exposed. To balance today's disproportionately negative views, you need hard facts.
Beggar Thy Neighbor, Beggar Thyself
by Michael Lewitt,
In the latest edition of the HCM Market Letter, Michael Lewitt argues that reported attempts by countries to devalue their currencies will only result in higher inflation and not economic growth. QE2 will similarly fail, and the necessary "heavy lifting" for the economy should be through fiscal, not monetary, policy. A continuation of Keynesian policies, as advocated by Paul Krugman, will also fail. Lewitt warns of dangers in ETFs and offers his investment recommendations.
Jeffrey Gundlach: No Double-Dip Recession ? but
by Robert Huebscher,
The economy won't suffer a double-dip recession, according to Jeffrey Gundlach. But that doesn't mean the DoubleLine co-founder, CEO and CIO expects strong economic growth. To the contrary, Gundlach said that we haven't yet recovered from the recession. "The people who are looking for robust and sustained growth are really kidding themselves," he said.
Late Summer Slumber?
by Liz Ann Sonders of Charles Schwab,
The stock market rallied nicely in July after reaching the bottom of its recent range. Incoming data remains mixed but indicates that the economic expansion continues. However, risks remain elevated. The Federal Reserve downgraded its view and is discussing how to combat possible deflation, while federal and state governments continue to grapple with budget issues. Chinese growth has slowed, but the stock market is providing some positive indicators. Central banks around the world are creating a muddied picture.
Is the Market Efficient?
by Adam Jared Apt,
After Marxism, no economic theory today may be as derided and despised as the hypothesis of market efficiency. The idea is often misunderstood, sometimes willfully. So what does "market efficiency" mean? In the latest installment of his series for the educated layman, Adam Jared Apt provides some answers.
Inflation Protection Investment Strategies
by Vern Sumnicht,
The value of the dollar is sure to erode, and investors will be left to grapple with the inflationary consequences. As Vern Sumnicht shows in this guest contribution, recent policies suggest steep inflation may be just around the corner. Fortunately, investors have some options to bolster their portfolios against the threat of inflation.
Jeff Gundlach: The US will 'Politely Default' on its Debt
by Robert Huebscher,
Jeff Gundlach's keynote address at last week's Morningstar conference documented the immensity of U.S. debt obligations and the lack of choices available for alleviating that burden. As he has stated in the past, he does not view inflation to be a threat in the capital markets today. He cited six options open to policy makers, but believes a seventh - some form of default - is most likely.
Europe: Value or Value Trap?
by Dan Trosch, CFA,
European equities seem much cheaper than in the US, says Dan Trosch of Fortigent in this guest contribution. Europe trades at a 26% Price to Book discount and a 20% Price to Cash Earnings discount to the US. Some European industries and stocks are deservedly cheap and value traps; other industries and stocks are attractive and will benefit from global growth in exports and other macro trends.
Ken Rogoff Expects Slow Growth and Sovereign Defaults
by Robert Huebscher,
Among the crush of analysis devoted to the financial crisis, perhaps none has been as influential as that of Kenneth Rogoff and Carmen Reinhart, co-authors of the book This Time is Different. Looking back at 800 years of data on emerging and developed economies, they showed that financial crises - and the recoveries from those crises - follow a highly predictable pattern, and the title of their book was a jab at those who suggest otherwise. Rogoff also spoke at the CFA conference.
Anthony Boeckh on the Great Reflation
by Robert Huebscher,
Tony Boeckh has been the guiding force behind Bank Credit Analyst, and in this interview he discusses his new book, The Great Reflation. Boeckh stakes out a deflationary forecast, and explains how the flow of liquidity in the financial system will determine asset class performance.
Unconventional Wisdom: An Interview with Robert Shiller
by John Heins,
"Few macroeconomic prognosticators have been as publicly right as Yale's Robert Shiller,whose first and second editions of the book Irrational Exuberance laid bare, with remarkable timing, the speculative bubbles forming first in the Internet-crazed stock market and next in residential real estate," writes the highly regarded newsletter Value Investor Insight in its preface to this interview with Shiller and excerpt from his latest book. Value Investor Insight, which bills itself as the "Leading Authority on Value Investing, offers a no-obligation, one-month free trial subscription.
Rational Deficit: An Interview with Dan Ariely
by John Heins,
Through creative research and clever articulation of his ideas, behavioral economist Dan Ariely has established himself as one of the brightest thinkers today on the subject of human decision-making, particularly with respect to influences of which we are largely unaware. In this wide-ranging interview with the investment newsletter Value Investor Insight, Ariely describes the unwitting biases that can lead to bad decisions and what investors can do to guard against them.
Budget Deficits: The Challenge Ahead in a Picture
by Asha Bangalore of Northern Trust,
Congressional Budget Office projections indicate federal outlays as a percentage of GDP will consistently exceed revenues even after the peak in outlays associated with the financial crisis and the recession. The fundamentals of the economy offer little hope for strong performance in the years ahead. A graying population and associated social costs will continue to add to projected outlays. Bangalore also comments on January's record low in the inventory-sales ratio, indicating strengthening demand.
Asset Allocation Perspective
Scott Wittman, Chief Investment Officer for American Century Investments, provides his quarterly review of macro-economic factors and trends which influence the tactical weighting decisions for American Century's asset allocation funds. In the article, Wittman reviews and comments on recent events, trends and expected short-term future changes in monetary, fiscal, industrial, trade, regulatory, political and financial macro economic factors. We thank them for their sponsorship. This is sponsored content.
Obama's Budget and Q409 GDP
GDP was better than most expected at the end of 2009, but in line with what credit markets and other forward looking indicators were saying last year. The proposed budget calls for a deficit of $1.56 trillion, a figure that is sure to stagger the imagination, create anxiety in many voters and taxpayers, and foster a fresh round of pundit bloviation. The authors explain why they think the budget is actually positive news for markets and the economy.
The Potemkin Market
by Michael Lewitt,
We are again privileged to publish the current issue of Michael Lewitt's newsletter, titled The Potemkin Market. Lewitt updates his forecast for the S&P 500, criticizes the current financial reform efforts and the ongoing GSE bailout and Fed Chairman Bernanke. Lewitt argues that risk is overpriced in many segments of the market.
A Market for Contrarians
by Robert Huebscher,
Along with Steve Leuthold, Rob Arnott, Doug Kass and DoubleLine co-founder Joe Galligan were among the speakers at Fortigent's conference. These three speakers' bearish sentiment extended across a wide range of asset classes, opening lots of possibilities for those who prefer contrarian bets.
John Cochrane on the Dangers of Current Economic Policies
by Dan Richards,
John Cochrane is a professor of finance at the University of Chicago and the incoming president of the American Finance Association. Cochrane is also author of the widely-circulated article, How did Paul Krugman get it so Wrong?. In this interview, Cochrane identifies the shortcomings and dangers of current economic policies.
The Next Black Swan? Underfunded Public Pensions
by Robert Huebscher,
The plights of California and other states reveal an ominous threat our economy faces: underfunded public pension liabilities. We examine the size and scope of this problem, focusing on whether the underlying assumptions used to calculate liabilities are realistic.
Federal Taxes & Municipal Bonds Historical & Current Perspective
With income tax increases seemingly around the corner given the budget deficit and a potentially very expensive federal health care plan, the spotlight has returned to municipal bonds and the power of tax-free income. Municipal portfolio managers at the Munder Funds identify the attractiveness of municipal bonds based on projected budget deficits, current spreads over treasuries, and macroeconomic trends. We thank them for their sponsorship.
Disheartened
by Michael Lewitt,
We are again privileged to publish an excerpt from Michael Lewitt's HCM Market Letter. In this issue, titled "Disheartened," Lewitt argues that the powers-that-be are making limited progress addressing the structural problems in the economy, and that the greatest challenge is to achieve budgetary discipline.
Asset Allocation Perspective from American Century Investments
Scott Wittman,Senior Vice President, Asset Allocation at American Century Investments reflects on the one-year anniversary of the near-meltdown by our financial system and provides perspective on what kind of recovery may be coming. We thank American Century Investments for their sponsorship.
Green Shoots and Head Fakes in Housing
by Robert Huebscher,
The greenest of all green shoots - the recent rise in housing prices - is little more than a mirage, according to Whitney Tilson, founder and CEO of T2 Partners, a New York-based hedge fund and mutual fund manager. "It's likely the news of home price stabilization will turn out to be the mother of all head fakes," Tilson said. He spoke to a group of financial analysts in Boston last week.
The Case Against Inflation
by Robert Huebscher,
Investors should expect extremely low inflation - just slightly above zero - for the indefinite future, according to Connie Everson, the Managing Director and co-founder of the Capital Markets Outlook Group, a Boston-based economic consulting firm that serves institutional investors throughout the world. Everson delivered her remarks to an audience of financial analysts in Boston last Thursday.
The 'Cash For Clunkers' Economy
by Michael Lewitt,
We are once again privileged to offer the latest edition of the HCM Market Letter, edited by Michael Lewitt, titled The 'Cash for Clunkers' Economy. Lewitt examines the drivers behind the current market rally, the health of the banking system and the housing industry, the the future for derivatives regulation. If you enjoy this newsletter, we encourage you to subscribe directly though the link provided with our article.
Paul Krugman on the Prospects for Recovery
by Eric Uhlfelder,
Nobel laureate economist Paul Krugman tells Eric Uhlfelder that massive government spending is essential for generating growth, but fears the first stimulus package will not be enough to keep the economy from slipping back into recession nor reducing unemployment.
Some Signs of Life and Hope for a New Recovery
Calamos Investments' co-CIOs John P. Calamos, Sr. and Nick P. Calamos discuss the current market climate, implications of Fed and government actions, and investment opportunities in the shorter- and longer-term. Global governmental policies have restored a degree of confidence in the financial markets and many key financial metrics are back to pre-Lehman levels. Many investment opportunities will be available in the future. We thank them for their sponsorship.
Results 3,651–3,700
of 3,702 found.
