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Sustaining a Foundation, Stepping Up as Fiduciaries
by Seth Masters of AllianceBernstein,
Establishing a foundation can be a great way to pursue charitable objectives, but it often brings a host of fiduciary responsibilities that donors may feel ill-equipped to handle. In this hypothetical case study, a couple of entrepreneurs sought our advice on asset allocation.
Why We Believe Emerging-Markets Stocks are Attractive
by Rajat Jain of Litman Gregory,
There is certainly no arguing that over the short term, investing in emerging-markets stocks can be a bumpy ride. This is especially true if you invested in the asset class during the crisis-prone years of the late 1990s and early 2000s. When asked why we believe in investing in the asset class, we point to our overarching belief that emerging markets' macroeconomic fundamentals are much better now than they were during those crisis-prone years. In this update, we provide further background on our analysis.
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The previous installment in my series evaluating the performance of the market’s most prominent actively managed mutual fund families focused on Russell, one of the largest players in the world of investment consulting (where firms provide guidance to pension plans and other institutional investors, as well as to investment advisors, on picking the best active managers). Today, we’ll turn our attention to Russell’s largest competitor in the consulting field, SEI.
How Male Advisors Should Dress to Win Clients
by Dan Solin,
I have found the single most significant factor in increasing my clients’ closing ratio has been their willingness to substantially upgrade their wardrobe. In this article, I will discuss my experience with men. Next week, I will discuss dress for women.
For Japan, When GDP is so Close to the Zero Line, Inventories are the Dominant Swing Factor
by Bryce Coward of GaveKal Capital,
So Japan’s economy is back in technical recession…for the fourth time in five years (first chart). It’s likely that this unfortunate reality will be met with additional monetary ease, but that is a discussion for another day. Here we’d just like to make a very simple observation: when your GDP growth runs close to the zero bound, as it has in Japan, the inventory factor can be the make or break variable.
The Shadow Rate Casts Gloom
by Peter Schiff of Euro Pacific Capital,
Nearly 92% of economists surveyed this week by the Wall Street Journal expect that our eight-year experiment with unprecedented monetary easing from the Federal Reserve will come to an end at the next Fed meeting in December. Since we have had the monetary wind at our back for so many years, at least a few have begun to question our ability to make economic and financial gains against actual headwinds. But in reality, the tightening cycle that the forecasters are waiting for actually started last year. Sadly, the markets and the economy are already showing an inability to handle it.
How Fast and How High
by Anthony Valeri of LPL Financial,
We do not believe last week’s sell-off is the start of a spike in interest rates. In fact, the spike may have already occurred with the 10-year Treasury yield higher by nearly 0.4% since October 14, 2015. The 30-year Treasury yield has also undergone a significant adjustment [Figure 1]. Yields on both 10- and 30-year benchmark Treasury yields have broken above the September highs and are within striking distance of 2015 highs of 2.5% and 3.2%, respectively. From a technical perspective, a breach above these levels would be needed to sustain a breakout to new yield highs.
Life in a No Growth World and the Impact on Interest Rates
by Heather Rupp of AdvisorShares,
The recent Fed decision seems to provide no more clarity: they left the opening for a December hike but didn’t specifically commit to making a move then. So the question remains, when will the Fed begin raising rates and by how much? It is clear they want to start increasing rates in order to give themselves some flexibility if they need it down the road, all the while fulfilling their dual mandate. However, it seems the “data” for our “data dependent” Fed isn’t getting better globally.
Making the Most of a 401(k) Account
Taking advantage of your employer’s retirement savings plan is one of the most powerful and effective tools available to investors planning for retirement. But be wary of “setting and forgetting” the amount you contribute each year: It may not be enough to meet your goals.
Growth Will Pick Up
At first blush, the economy’s growth rate in the third quarter (+1.5%) suggests a significant slowing of activity after its solid performance in the second quarter. However, doubts should be set aside, as it was largely a reduction in inventories that held back overall gross domestic product (GDP) growth. In fact, final sales remained strong. Headline growth should pick up as firms increase inventories in the quarters ahead.
What To Expect From The Stock Market in 2016
by Urban Carmel of The Fat Pitch,
3Q financials have been predictably poor, and 4Q won't be much better. All else equal, 2016 should see a return to growth as the impact from lower oil and a higher dollar may become negligible. Especially for their rate of growth, S&P valuations are high. Even if sales and EPS growth start to pick up, valuations are likely to remain a considerable headwind to equity appreciation in 2016.
U.S. Debt To Hit $20 Trillion, Poverty Remains Rampant
As long-time clients and readers are well aware, the explosion in our national debt has been one of my continuing themes over the last 30+ years, under both Republican and Democrat presidents. So today’s discussion is not a political issue, and it should worry us all.
Do Growth Stocks Still Have Room to Run?
While growth and value stocks have historically traded off leadership roles, we do not think that a decisive shift towards value is in the works.
We think that investing in competitively advantaged innovators is extremely important and that the best defense against potentially disruptive changes is to invest in them.
While we are always interested in value investing opportunities, we see the overall picture as continuing to favor truly innovative growth.
The Most Critical Planning Assumption – and How to Choose it
by Joe Tomlinson,
Compared to the popular approach of assuming a point estimate for the equity-risk premium, an approach that admits we don’t know what number is may seem counterintuitive. But what has been truly crazy is assuming we know a precise number when the evidence clearly indicates that we don’t.
Crime in the Jobs Report
by John Mauldin of Mauldin Economics,
In today’s letter, we are going to look briefly at the latest employment numbers. Then we’ll explore some of the deeper, less understood facets of the employment data. For some of you this may be a lot of detail, but for those of us who think about employment (and you should, as it is THE ultimate driver for your business and investments), understanding how the numbers work and what they mean is important.
Prepare for a More Volatile Market Now
Q&A with Harin de Silva, President of Analytic Investors. He has seen his share of market selloffs over the years. Yet, with the end of the latest bull market likely nearing, he’s not worried about increased volatility—and investors don’t have to be either, he says.
December: Did the Fed Open the Door Wider for a Hike?
by Liz Ann Sonders of Charles Schwab,
The Federal Open Market Committee (FOMC) issued a more hawkish statement last week alongside its decision to keep interest rates unchanged. The forward guidance section of the statement was worded (emphasis mine) to focus on "whether it will be appropriate to raise the target range at the next meeting." And although it waxed more dovish on employment, it dropped the line from the prior meeting’s statement about global developments, which the FOMC had specifically cited as a reason to hold rates steady in September.
Recession Probability Models - November 2015
by Ted Kavadas of StratX, LLC,
There are a variety of economic models that are supposed to predict the probabilities of recession.
While I don’t agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.
Please note that each of these models is updated regularly, and the results of these – as well as other recession models – can fluctuate significantly.
Should FIFAA Be Red-Carded?
No, I haven’t gone bonkers – the focus of the Absolute Return Letter has not all of a sudden switched to football. Nor have I lost the ability to spell correctly, although I am sure that there are one or two like-minded readers out there who would also like to see the rear side of Sepp Blatter one final time.
Apples and Oranges: A Random Portfolio Case Study
This article was motivated by a provocative discussion with a thoughtful RIA. Let’s call him Harry.
Harry expressed some disappointment with the performance of Global Tactical Asset Allocation (GTAA) strategies over the past few years relative to some popular tactical U.S. sector rotation funds.
Uncertainties Holding the Market Hostage
by Byron Wien of Blackstone,
Before August 11, the popular perception was that the United States economy was growing at about a 2% annual rate and the Standard & Poor’s was locked in a trading range between 2040 and 2125. After the Chinese revalued the renminbi by 2%, the trading range was lowered to 1875–2025. Perhaps the key reason for the equity market’s inability to work its way higher is the belief that earnings for the index are likely to be flat in 2015 compared with last year (the view that we are in an earnings recession). The strong dollar and lower oil prices have contributed to this situation.
Have Commodities Reached an Inflection Point?
This week the Federal Reserve announced that it would delay the interest rate liftoff yet again, but while everyone seems concerned about nominal rates—the federal funds rate, in this case—real rates have already risen about 5 percent since August 2011. This “invisible” rate hike is much more impactful to commodity prices and emerging markets than a nominal rate hike, which is simply the “tip of the iceberg.”
Corporate Beige Book
by Burt White of LPL Financial,
According to our new Corporate Beige Book, China has been a popular subject of discussion among corporate management teams this earnings season. Similar to the Federal Reserve’s (Fed) Beige Book, a qualitative assessment of the U.S. economy and each of the 12 Fed districts, conference call transcripts for third quarter 2015 company earnings reports can be used to create a Corporate Beige Book—a window into corporate America.
The Weather Will Change for MLPs
The advantages and competitiveness of North American shale assets will only grow over time and we expect production to resume its increase at some point. We believe the recent sell off in MLPs is due to forced selling and a typical equity market cascade and overshoot, which has created a potentially attractive opportunity for investors to allocate to the asset class. Adapting Mark Twain to the MLP market, the reports of its demise are greatly exaggerated.
It's Darkest Before the Dawn – but Is the Time Now 1am or 5am?
It has been a pretty brutal summer for the energy markets. Brent oil fell from $65 in May to below $40, and the MSCI World Energy Index was down around 25% over the same period, leaving energy as the worst performing sector year-to-date and the most out-of-favour among all the portfolio manager surveys that we see. Long-dated Brent oil has also fallen; having started the year at $78 and traded in a fairly tight $75-$80 range until the end of June, it fell to a low point of just over $60, over 40% off its highs last year.
4Q 2015 Outlook: Key Issues Have Not Changed Much This Year
As the final quarter of 2015 begins, we are reminded of several topics of focus from the start of the year: concerns that global central bankers are stuck with their current monetary policies because the global economy now depends on them; market acceptance that higher U.S. interest rates are inevitable, even if they rise only slightly; and favorable prospects for U.S. consumers, who benefit from a stronger labor market and lower energy prices. If the topics sound familiar now, it is because little has changed in these areas while global risks have increased for several reasons.
On My Radar: I’m Rooting For Ray
There is a great deal of research around investor behavior. For example, our brains notice when a group provides an answer that is different from ours, the disparity is unpleasant. For many, aligning with the group is more rewarding for the brain than being independent and correct.
Dan Fuss: Rates Will Rise (and so will taxes)
by Robert Huebscher,
If there truly were a “bond king,” it would not be Bill Gross or Jeffrey Gundlach. It would be Dan Fuss, whose tenure in the fixed-income markets has spanned more than half a century. In a talk last week, Fuss warned investors to expect higher interest rates along with higher taxes.
Black Ice: Low-Volatility Investing in Theory and Practice
Equity investors have endured two extreme market downturns since the turn of the century. The broad U.S. market, represented by the S&P 500 Index, fell by 44% in the aftermath of the dot-com bubble and 51% in the great recession. These devastating experiences reawakened institutional and individual investors to the downside of market volatility and, for a while, prompted great interest in low-volatility investing.
An Important Rebalancing Milestone
by Andy Rothman of Matthews Asia,
Third quarter macroeconomic data shows that Chinese consumers shrugged off the A-share market fall, with a small acceleration in spending. While many headlines may declare that China’s 6.9% GDP growth was the slowest since 2009, it should be noted that this pace of growth was on a base that is about 300% bigger than it was a decade ago (when GDP growth was 10%), meaning that the incremental expansion in China’s economy this year is about 60% bigger than it was back in the day.
Five Bad Reasons For The Fed To Raise Rates Now And One Good Reason Not To
by Paul Kasriel of The Econtrarian,
A couple of days before the September 16-17 FOMC meeting, I happened to be listening to the NPR program, “On Point”, the subject of which was the appropriateness of a Fed policy interest rate increase at that time. Of the guests on the show, the principal advocate of Fed “lift-off” was a William Cohan, who had written an August 28 New York Times op-ed entitled “Show Some Spine, Federal Reserve”.
Where to Look for Outperforming Active Managers
by Bob Veres,
Not all stock-pickers are winners, and winning funds tend to be scattered all over the various sectors of the market. Is there a way to analyze the different segments of the global opportunity set, and determine the best places to look for those outperforming managers?
The Hinge
by John Hussman of Hussman Funds,
One of the central themes I’ve emphasized over the past year is the critical importance of using market internals as a gauge of investor risk-seeking and risk-aversion. Over the long-term, investment returns are driven by valuations – particularly on a 10-12 year horizon. Over shorter horizons, and more limited portions of the market cycle, the primary driver of investment returns is the preference of investors to seek or avoid risk.
Results 4,851–4,900
of 6,446 found.
