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Red Flags for Advisors - Communication Gaps with Affluent Clients
by Dan Richards,
When hard facts come to light that contradict your preconceptions, it's time to sit back and reassess your thinking. That's exactly what advisors should do following a new research study of Americans with at least $3 million in investments.
P/E: Future on the Horizon
by Ed Easterling,
Most people expect P/E to measure current valuation and to show historical patterns. But more features are available from some versions of P/E. The methodology behind the Crestmont P/E enables investors to anticipate the future. It may not precisely predict the market ten years away, but it frames within a relatively tight range the likely outcome. One component from determining the Crestmont P/E is a means to assess the future trend line for EPS using estimates of future economic growth (GDP).
Ethics Among Thieves
by Michael Edesess,
'Inside Job' is a thoroughgoing indictment of the financial industry that has its virtues but relies on some unsavory vices. On the one hand, through interviews, congressional testimony, and other video, the film exposes cronyism, corrupt ethics, and excessive power at the core of the financial industry. On the other, the movie at times unfortunately feels more like a polemic than a hard-hitting, fact-finding investigative reporting piece.
U.S. Dollar ? Review and Outlook
We believe that continued U.S. dollar weakness may be a consequence of the diverging monetary approaches central banks are taking around the globe. While many international central banks have been on a tightening path, raising rates (i.e. Australia, Brazil, Canada, China, India, Norway, Sweden, to name a few), the U.S. Federal Reserve has been conspicuous in its continued easing monetary policy stance. Indeed, while other central banks have been shrinking the size of their balance sheets, the U.S. Fed?s balance sheet continues to expand on the back of ongoing quantitative easing policies.
The Symptoms of Nuclear Hysteria
by John Downs of Euro Pacific Capital,
Imagine you invented a machine that revolutionized travel. Your invention could cut travel time and improve the ability for business to deliver freight efficiently. The invention would add trillions to global GDP. If released, it would be universally used and admired. However, based on the safety assessments, analysts predict that if used your invention would cause the deaths of 300,000 Americans per year and countless more around the globe. Would you still release it? If not, imagine a world without cars. Now, the bigger question: why isn't this same measure used when judging nuclear energy?
Letters to the Editor: GMWBs and the Permanent Portfolio
by Various,
A reader responds to our article, Understanding Variable Annuities with GMWBs, which appeared on March 1 and another reader responds to Geoff Considine's article, What Investors Should Fear in the Permanent Portfolio, which appeared on March 22.
What Investors Should Fear in the Permanent Portfolio
Over the last decade, the assets of the fund PRPFX have swelled from $50 million to more than $10 billion. The concept underlying that fund, Harry Browne's Permanent Portfolio (PP), has rewarded PRPFX investors with attractive risk-adjusted returns. Those investors, however, may want to rethink their exposure - especially if PRPFX is the core of a retirement-oriented strategy.
And That's the Week That Was...
by Ron Brounes of Brounes & Associates,
March Madness (basketball) could not have come at a better time. For weeks, folks have focused on developments in the Middle East as prospects for (some sort of) Democracy spread, but oil prices ballooned and investors fear Saudi Arabia may fall victim to revolution as well. Then, Japan pushed Libya to the backburner as fears of an economic slowdown (and nuclear radiation exposure) raised concerns across the globe. Markets reacted to the headline, often on mere speculation as no one knows how the global developments will play out.
Japan Default Risk
by Team of Bespoke Investment Group,
This piece examines 5-year credit default swap prices for Japanese sovereign debt. As shown, there has been a small increase in default risk in the days since the earthquake and tsunami hit, but default risk is still below levels it was at in May 2010 and February 2009. At the moment, it costs $95 per year to insure $10,000 worth of Japanese sovereign debt for five years. Japan remains at the low end of default risk compared to other countries around the globe. With the resilient country fighting to get back on track, investors don't appear to be worried about Japans financial problems.
Letters to the Editor and a Final Thought on VAs with GMWBs
by Various,
We received a record number of letters in response to Robert Huebscher?s article, Understanding Variable Annuities with GMWBs, and to Peng Chen?s response, The Real Flaws ? A response to 'Understanding Variable Annuities with GMWBs,' which were published last week. We also provide a final thought on this subject.
Taps for the Dollar
It now appears that the United States has finally succeeded in its efforts to destroy confidence in the U.S. dollar. Given the currency's reserve status, its ubiquity in financial markets, and the economic power and political position of the United States, this was no easy task. However, to get the job done Washington chose the right man: Fed Chairman Ben Bernanke. Thanks to Bernanke's herculean efforts, investors across the globe have now been fully weaned from their infantile belief that the U.S. dollar will remain the ultimate safe haven currency.
Understanding Variable Annuities with GMWBs
by Robert Huebscher,
It's very tempting: a variable annuity with minimum lifetime payout that can increase - but never decrease - based on market performance. That temptation comes in the form of an increasingly popular variable annuity rider known as a guaranteed minimum withdrawal benefit. We explain the flaws in a widely publicized study by Morningstar/Ibbotson, and provide our own analysis of the product.
Differentiated Change in the Middle East and North Africa
by Mohamed A. El-Erian of PIMCO,
For two months, developments in the Middle East and North Africa (MENA) have taken most by surprise. What started as an protest in Tunisia has developed into a regional phenomenon that has toppled regimes and is threatening others. Indeed, every day seems to bring an historical event that is changing the region and impacting the global economy. Governments across the globe have spent weeks playing catch up in the midst of unthinkable developments in MENA. They have organized emergency evacuations of citizens and constantly responded to realities on the ground, including the violence in Libya.
Pushed to Extremes
Among the economic havoc wrought by turmoil in the Mid East and severe weather around the globe has been the impact upon inflation and upward pressure on prices for raw (and core) materials. Today, most economists and market analysts fear that this confluence of factors could accelerate inflation in energy prices, foodstuffs, and industrial materials, thus undermining a nascent uptick in consumer spending, global trade, and consumer confidence.
Random Thoughts from the Lone Star State
by David A. Rosenberg of Gluskin Sheff,
I still consider this to be a bear market rally. With respect to the economy, the illusion of sustainable prosperity has done wonders for consumer spending in the U.S. The consumer has been an upside surprise and the ISM was a whopper too as these manufacturing indices have been in general around the globe. There are so many other headwinds out there. Dramatic cutbacks and tax hikes at the state and local government levels are in motion. Federal government austerity is next. The housing market has not yet stabilized.
Market Implications of the Turmoil in Egypt
by Kevin D. Mahn of Hennion & Walsh,
Here are the potential implications of the events in Egypt as we see them: 1)The risk of contagion in the Middle East and the civil, political and economic unrest that could result across the globe. 2) The energy commodities sector, specifically related to crude oil prices, but this time not based upon oil production but rather based upon the importance of the Suez Canal and Sumed Pipeline to oil transportation. 3)the travel sector - travel advisories that will likely be established in the affected countries.
Advisor Perspectives Announces First Venerated Voices Awards
Advisor Perspectives, a leading publisher serving financial advisors and the financial advisory community, today announced its first Venerated Voices? awards, recognizing the market commentators who were most frequently read by advisors during 2010. Awards were issued in three categories: The Top 25 Venerated Voices? by Firm, The Top 25 Venerated Voices? by Author and The Top 10 Venerated Voices? by Commentary.
Pricey Eats
From all accounts it appears that the world is in the early stages of a major leg up in food prices. The major macroeconomic trend will likely drive economic policy and the investment outlook for years to come. Although mainstream pundits like to focus on cyclical drivers like the weather, the real force behind the move is secular. The U.S. is leading the world in a pandemic of monetary inflation that is helping to cause commodity prices, food in particular, to skyrocket across the globe.
Chuck Royce on Fourth Quarter 2010
by Chuck Royce of The Royce Funds,
Why did the stock market have such a good year in 2010 amid the perception of so much economic trouble and uncertainty? Why do you think that small-caps across the globe outpaced large-cap stocks so decisively this past year, especially in the fourth quarter? Considering the performance edge small-cap stocks are enjoying, do you still see frequent leadership rotation between small-cap and large-cap stocks?
The Coming Decade of Sideways Markets
by Robert Huebscher,
'We are in the middle of a sideways market, and we still have another decade to go,' says Vitality Katsenelson. In this interview, Katsenelson shares his insights on the decade ahead and the many factors that may keep China from leading us out of the recession.
Something Michael Golub is Very Thankful For
by Michael Golub of The Golub Group,
If I have learned anything of value in my 45 years in this business to share with all the people I care about, it is that the next few years will prove to have been one of the best opportunities in history for investors to hold and/or to buy the largest, strongest, and best dividend paying blue-chip businesses.
Looking Back at a Year of Policy Mistakes
by Michael Lewitt,
As we approach the end of 2010, the global economy remains captive to a boom-and-bust cycle resulting from years of pro-cyclical monetary, fiscal and regulatory policies. With very limited exceptions, the same policies that contributed to the 2008 financial crisis remain in place. The only difference is that government balance sheets are far more leveraged than they were heading into that crisis.
Year-end Letter to Clients: Investment Advice from Winston Churchill
by Dan Richards,
For the past 18 months, my draft letters have been designed to balance some of the extreme pessimism among many investors with an objective, positive outlook - the draft year-end letter for 2010 continues with that goal. In it, I borrow from Winston Churchill's insight into the difference between optimists and pessimists.
Why Bubbles Inflate and How to Avoid Them
by Robert Huebscher,
In this interview, Meir Statman discusses the psychological underpinnings behind the creation of bubbles in the financial markets, why some bubbles are good and others are not, and how investors should frame their decisions when facing a potential bubble.
Making Your Case to Prospects
by Dan Richards,
Dan Richards contacted six advisors to see if they would be interested in working with a prospective client who had approached him. The responses from those advisors varied greatly, and revealed some very important lessons in what advisors need to do to attract new business.
How Modern Is Your Portfolio Theory?
by Direxion Funds,
After 58 Years, is there Another Way to Conquer the Efficient Frontier? In the past, active or "tactical" investment management referred to jumping in and out of stocks and bonds - market timing. With the introduction of sophisticated funds that help the masses harness the power of institutional managers and alternative asset classes and strategies, today, tactical management may help to renovate your portfolios - and help you retain and attract assets.
Investing $15 to Create an Unshakeable Client Bond
by Dan Richards,
Recently, Dan Richards hosted a roundtable lunch with a group of affluent investors. One attendee was a senior partner in a leading law firm and made a comment that revealed how his advisor turned a $15 investment into a lifelong client relationship.
Developed Markets and Capitalism in Crisis
by Robert Huebscher,
We are not in a globalized world today, according to Ian Bremmer. "The state is back," said the 40-year old president and founder of Eurasia Group, a political consulting firm. Both in the U.S. and throughout the world, governments are exerting their influence through regulation, trade restriction, subsidies, and bailouts, and are threatening the nature of free markets.
Quarterly Commentary
by Michael Golub of The Golub Group,
Volatility in the markets is a gift to investors. It doesn't hurt anyone unless they sell at points of weakness or buy at points of ebullience. Indeed, volatility can be the friend of the investor who understands the difference between price and value, and who has the courage to buy when the market signals fear and sell when the market signals complacency. Our job as investors is to take advantage of this knowledge: to recognize the difference between fact and fiction, truth and emotion, and to build conviction and exercise good judgment in the face of volatility.
The U.S. Oil Glut
by Team of Bespoke Investment Group,
Although U.S. oil inventories declined by 475,000 barrels in the latest week, the decline was less than the forecasted decline of 700,000 barrels. As shown in charts provided, oil inventories in the U.S. are currently right near their highest levels of the year relative to the historical average. Since oil stockpiles peaked earlier in the year, inventories have declined by 2 percent. In an average year, however, oil stockpiles are down 6 percent from their seasonal high by this time.
The Future of Oil
by Robert Huebscher,
No commodity impacts the global economy more than oil. When geopolitical threats loom, two questions often dominate discussion: Will the price of oil rise? And what will be the economic consequences? We review the key drivers of recent, current, and forecast oil prices, including a template for the necessary eventual alignment of supply and demand.
The $100 Million Nightmare
by Mark Matson,
About 20 years ago, the financial advisory industry began a mass exodus to what it believed was a promised land. Thousands of advisors from coast to coast switched from commissions to fee-based planning, aiming to gain $100 million of assets under management. In this guest contribution, Mark Matson discusses what went wrong with that transition, and how advisors can deal with the problems it created.
A Better Way to Invest in Gold
In the year since Geoff Considine last wrote about gold, underlying prices have risen 24%, leading to several important questions - including whether his advice of a year ago still holds today. We look closely at how a direct investment in GLD performed as compared to a bond-plus-call-option strategy, and which conditions favor each strategy.
The Riskiest Pension Assets (and the Implications for Muni Bonds)
by Robert Huebscher,
State finances are in trouble, in large part due to unfunded pension liabilities. To assess the depth of those problems, one can look at what is likely the riskiest component of states' pension assets - their exposure to alternative investments and, in particular, to private equity. We assess those risks and look at the larger question of whether unfunded liabilities can trigger municipal defaults.
Portfolio Strategy
by Bradley Turner of Chess Financial,
With most of the globe showing signs of economic recovery, and many developed countries facing heavy debt burdens, it is hard to imagine a future that does not include higher interest rates. Since bond prices move inversely to interest rates, most fixed-income investments will face a headwind sometime in the next few years. If this outlook for bonds is correct, it's likely that stocks will deliver better overall returns over the next 3-5 year market cycle. High-quality stocks offer the best risk-adjusted returns given their reasonable valuations and attractive dividends.
Martin Leibowitz's Failed Defense of the Endowment Model
by Michael Edesess,
The latest book from Martin Leibowitz, one of the most respected thinkers in the investment industry, attempts to justify the endowment model of investing. As Michael Edesess writes in this review, Leibowitz's defense is highly problematic, and that should concern any advisor utilizing a Yale-like strategy.
The Public Has Moved Out Of Stocks. Time For Wise Investors To Move In.
by Michael Golub of The Golub Group,
Today, we are at a point when the public is extremely pessimistic about the outlook for stocks, leading to very low public participation and the lowest valuations (when compared to bonds) in 60 years. The stock market is not about news. The stock market is about mass human behavior. We recommend you do what we are doing now, and buy the asset class for which public expectations are far too low ? blue chip high dividend paying stocks.
Deficits Monetary and Moral
by Michael Lewitt,
"The word 'deficit' has come to epitomize not only our economic dilemmas but also our moral and intellectual failures to address them in an era that should be boasting of new breakthroughs in the social and physical sciences," writes Michael Lewitt in the latest installment of his HCM Market Letter, Deficits Monetary and Moral. "Instead, our ability to solve complex problems is weighed down by flawed and corrupted government processes and the lack of courage to forthrightly change them."
Chronicle of the Quarter
by Bob Veres,
Bob Veres provides one of his Client Articles, which is a service for advisors to send to their clients; it's a daily blog about what it felt like to watch the market during the past fiscal quarter. It communicates several points: perhaps most importantly, that what seems clear in hindsight (the markets gave back their first quarter gains) is not at all clear as it is experienced.
Quarterly Commentary
by Michael Golub of The Golub Group,
Four main factors will help provide capital gains for blue-chip stocks over the next few years. The first is an over-inflated bond market, which will cause poor returns down the road. The second is a slow but steady return to an economy which has recovered to normal employment levels. The third is that corporations have more cash on their balance sheets than ever, and will use this cash to grow their businesses and hire new employees. The fourth is that due to cost-cutting and improved efficiency, leading corporations will show improved profitability, earnings and cash flow growth.
Three Questions on Behavioral Economics
by Dan Ariely of Predictably Irrational,
Unlike standard economics, behavioral economics does not assume that people are rational. Instead, behavioral economists start by figuring out how people actually behave, often in a controlled lab environment, and use this as a starting point. While the Chicago economists sometimes admit that people make mistakes, they claim that people make different types of mistakes that will eventually cancel each other out in the market. Behavioral economists argue that people will often make the same mistake, and that those individual mistakes can aggregate in the market.
A Crisper Solution
by Dan Ariely of Predictably Irrational,
There are all kinds of reasons why we eat badly, but some are more fixable than others if we only look at our behavior and uncover the nuanced forces guiding our actions. Instead of throwing the bag of grapes into the dark drawer in the bottom of the fridge, for example, we can put some grapes in a tray on the top shelf with some mixed greens and pecans, ready to grab and go. The rest of the grapes can be prewashed and stamped with a homemade expiration sticker. If we make plans to eat them within a few days and mark them as such, we are more likely to stick to our goals.
Results 4,251–4,300
of 4,353 found.
