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Third Avenue Management Defends Its Pursuit of Alpha
by Larry Swedroe,
Bloomberg TV recently invited me onto their new show, Bloomberg GO, for a short debate on active versus passive investing with David Barse, the CEO of Third Avenue Management. Barse stated his funds had been able to beat their index benchmark. Let’s go to our trusty videotape to see if Third Avenue has, in fact, been delivering alpha.
The “Age” Age
by John Mauldin of Mauldin Economics,
As I mentioned in last week’s letter, I traveled to San Francisco last Monday with my friend Patrick Cox, who writes our Transformational Technology Alert newsletter. We had dinner with Dr. Mike West of Biotime and then spent the next morning at the Buck Institute for Research on Aging. Pat and I decided we would jointly report on what we learned.
Charting the Market's Course
This week we highlight seven key charts to watch that may determine the stock market’s near-term direction. The charts cover a wide range of topics including manufacturing sentiment, earnings, oil, and high-yield bonds. We believe these charts can help investors navigate the market’s course for the balance of 2015 and into 2016.
Asia Lens on Global ESG
by Vivek Tanneeru of Matthews Asia,
For Asia’s vast, newly minted middle classes, quality of life issues are increasingly becoming front and center. Governments and regulators are increasingly tackling Environmental, Social and Governance (ESG) issues and taking these problems more seriously. For investors looking to make investment decisions based upon ESG factors, Asia represents one of the best opportunities to gain exposure to companies that can make a long-term difference to the region and the world.
Zero Yields & The Debt Ceiling
by Anthony Valeri of LPL Financial,
The Treasury issued new three-month Treasury bills (T-bills) at 0% yield at auction last week and is on pace to do so again on October 13, 2015. Zero percent T-bill yields, or even lower, are not new, but 0% prevailing at an auction is unusual and made media headlines.
How NOT to Wipe Out with Momentum
Momentum investors are like the surfers we watch from beaches along the Pacific coast. Both must catch a wave. Both attempt to ride it as it breaks. But the ability to glide away smoothly before being caught inside the inevitable crash(ing wave) that follows is what determines success.
Retirees: The Risks, Dangers and Advantages of Reaching For Yield: Part 2B
by Chuck Carnevale of F.A.S.T. Graphs,
There is an undeniable fact that differentiates investing when in retirement versus investing while you are still working. When you are employed, you are working for your money. However, once a person truly enters their retirement years, the situation reverses itself. When in retirement you begin the stage in your life where your money must work for you. In my opinion, this changes the investing dynamic considerably.
South Africa’s Sporting and Economic Scorecard
Dubbed the “rainbow nation” after the end of apartheid in 1994, South Africa had much to be hopeful about. In 2010, it achieved heightened recognition among investors when it became the fifth member of the “BRICS” grouping of emerging market economies, along with Brazil, Russia, India and China. While its economy and demographics differ from other BRIC countries, it has one thing in common with Brazil, Russia and China: It has hosted major global sporting events over the years. South Africa hosted the FIFA World Cup five years ago, and it hosted and won the Rugby World Cup 20 years ago
4 Warnings And Why You Should Pay Attention
by Lance Roberts of Streettalk Live,
When I was growing up my father, probably much like yours, had pearls of wisdom that he would drop along the way. It wasn't until much later in life that I learned that such knowledge did not come from books, but through experience.
Bob Zenouzi Discusses Delaware’s Dividend Income Fund
by Robert Huebscher,
In this interview, Bob Zenouzi, manager of the Delaware Dividend Income Fund (DDIAX), discusses how he strives to provide investors with a yield that is competitive with fixed income, while achieving a premium yield to equities with better downside protection.
Smart Beta 2.0: A Disruptive Innovation
by Steven Vannelli of GaveKal Capital,
At the beginning of every major disruptive innovation, fear, uncertainty and doubt reign supreme. Consumers are fearful of the unknown, uncertain of the benefits and doubt the durability of the innovation. But, in the end, fear, uncertainty and doubt give way to confidence, understanding and acceptance. The fund management industry is on the cusp of a major disruptive innovation.
Why the Finance Industry is Destroying America’s Economy
by Michael Edesess,
According to a Harvard study, the percentage of GDP attributable to the financial industry tripled from 1950 to the 2000s. The percentage attributable to asset management alone increased by more than a factor of ten just since 1980. Has any of this increase improved the services rendered by the financial services industry to the real economy? If it hasn’t, why not? If the increase in activity has in fact been harmful rather than beneficial, what can be done about it?
Rainmakers
The onslaught of financial events in the past several months created massive confusion and uncertainty in the global financial markets. Much of the confusion revolves around economic factors - interest rates, currency, energy prices and growth policy. Several economic factors are influenced by policy makers and central banks. Our goal this month is to slice through the confusion and find direction for the remaining months of 2015.
China and the Fed
The third quarter of 2015 was marked by significant losses in capital values and an increase in volatility. The S&P 500 lost 7.55% in the quarter and 6.71% year-to-date; NASDAQ dropped 7.77% quarterly and 2.26% for the year; Dow Jones Industrial average declined 8.15% in the quarter and 8.68% year-to-date. The VIX fear measure closed the quarter at 24.50, an increase of 42.6% since the beginning of the quarter and 37.7% since the beginning of the year.
Weighing the Week Ahead: What is Behind the Recent Market Volatility?
The recent market volatility has led to a lot of head scratching. Even the Pundit-in-Chief seems to be struggling to make his daily morning and evening observations fit with observed reality. With a light economic calendar and earnings reports just getting started market observers will be asking:
What’s the cause of the market volatility?
Recession Probability Models - October 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.
Employment, GDP, and the Fed
by Scott Brown of Raymond James,
The September Employment Report was disappointing, but not horrible. Some of the recent softening in the pace of job growth may reflect seasonal issues. Stronger seasonal hiring in May and June should naturally lead to more seasonal layoffs in August and September. That is unlikely the only explanation. Concerns about global growth and financial market volatility may have made firms, especially smaller firms, reluctant to hire. Estimate of 3Q15 GDP have been declining, while underlying domestic demand have remained strong.
Describing Liquid Alts: Multi-Alternative
The multi-alternative fund sector attempts to achieve returns through exposure to an aggregated portfolio of different alternative investment strategies. Although some index providers use the multi-alternative label to describe a wide swath of investing strategies, the term probably is most accurately attached to liquid alternative funds of funds, funds utilizing multiple submanagers, and statistical factor replication strategies.
Does Wells Fargo Add Value for Investors?
by Larry Swedroe,
Assets in actively managed mutual funds have been a consistent source of revenue growth for Wall Street banks. But would investors have been better off in passively managed funds? I’ll answer that question for Wells Fargo and then for the group consisting of the four largest banks.
Evaluating Sustainable Competitive Advantages: Entry and Exit Barriers
This article is the first in a series discussing an assessment process for existence or absence of sustainable competitive advantages. In this article, we discuss the basic building blocks of an investment process designed to identify high-quality businesses: the entry and exit barriers.
The Real Burden of Low Interest Rates
Almost the entire world is concerned about the high levels of debt, should interest rates begin to rise again, but we are not. Don't get us wrong; a meaningful increase in debt service burdens could do substantial damage to a global economy so loaded with debt. We just don't think it is going to happen.
Economic growth and inflation are likely to stay comparatively low for many years to come, and so are interest rates, but that raises another question. What damage can very low interest rates for an extended period of time actually be expected to do?
Recent Volatility Signals a Market in Transition
CEO Chuck Royce and Co-CIO Francis Gannon talk about why they believe the decline for equities in 3Q15 is part of the market transitioning back to more historically typical performance patterns, why a rate hike could be positive for small-caps and stocks as a whole, how history reveals the importance of discipline, the necessity of diversification within the small-cap asset class, and more.
Forget “Active vs. Passive”: It’s All About Factors
We just love a good debate, and there seems to be quite a heated debate at the moment about the relative utility of passive versus active investing. Perhaps this debate is as timeless as investment management itself, but a flurry of recent studies may have finally armed passive advocates with enough ammunition to settle the argument once and for all.
Staley Cates on Why Active Management Wins in the Long Term
by Robert Huebscher,
Staley Cates is president and chief investment officer of Southeastern Asset Management, manager of the Longleaf funds. In this interview, he says, “the passive movement is not just a big trend. It is a bubble.” He explains why passive investing has made it hard for value investors to outperform.
The ‘It’s Not You, It’s Me’ Lesson for Advisors
by Dan Solin,
In a classic Seinfeld episode, George attempts to end a relationship by telling his partner, “It’s not you; it’s me.” George thinks he invented that phrase, but the concept of whether to focus on yourself or the other person has been the subject of academic research, and those findings carry an important lesson for advisors.
Balloons in Search of Needles
by John Mauldin of Mauldin Economics,
It would be hard to miss an analogy to the stock market. Everything’s peaceful and calm, you’re drinking some fabulous wine, eating some fantastic fresh game and fish, looking at all the beautiful animals as you drift easily with the current. Anybody can steer the boat in a bull market. Until the rapids hit and the bottom falls out.
In Search of the Phillips Curve
by Carl Tannenbaum of Northern Trust,
Macroeconomics students spend a good bit of class time learning about the Phillips curve, and it is probably etched permanently in their minds. The Phillips curve suggests that there is an inverse relationship between inflation and unemployment in the short run.
Fed Implications
by Burt White of LPL Financial,
The Federal Reserve’s (Fed) decision not to raise interest rates at its September 17 policy meeting was undoubtedly the biggest event of last week. Although not a big surprise, besides Donald Trump (and perhaps China), the Fed is all that anyone is talking about these days. This week we share some of our perspective on what the Fed’s decision may mean for the stock market and offer some investment ideas.
Applying the Sales Effectiveness Model to Your Firm
Over the years I have had the chance to work with countless financial advisory firms to help them increase their growth. While most do not want to “sell,” they would like additional assets coming in the door! This week’s column gives a peek into the assessment process I use.
Groundhog Day at the Fed
by Peter Schiff of Euro Pacific Capital,
Every dictator knows that a continuous state of emergency is the best means to justify tyrannical policies. The trick is to keep the emergency from breeding so much paranoia that routine activities come to a halt. It's best to make the threat external, intangible and ultimately, unverifiable. In Orwell's 1984 the preferred mantra was "We've always been at war with Eurasia," even though everyone knew it wasn't true. In its rate decision this week the Fed adopted a similar approach and conjured up an external threat to maintain a policy that is becoming increasingly absurd.
Empirical Finance: Meeting Fiduciary Standards Through Skepticism, not Cynicism
Michael Edesses is out with a scathing article lambasting the field of empirical finance. He draws inspiration from Harvey, Liu and Zhu’s (HLZ) recent article, entitled “…and the Cross Section of Expected Returns”, but extends HLZ’s conclusions to an absurd limit. In this article, we discuss why we embrace the framework of healthy skepticism described by HLZ, but in the context of a more optimistic and constructive view of empirical finance.
Duration Issues Related to Seasoned Residential Mortgage Backed Securities
Fixed income practitioners traditionally think of duration as a security’s first-order sensitivity to changes in interest rates. Thus, a duration of X years equates – roughly – to a change in price of X% for every 100bp move in rates. And since the discounting formula for bond prices has this “rate” factor in the denominator, an increase in rates represents a decrease in the bond’s price, and vice-versa. Simple, right? Maybe not!
It’s Someone Else’s Money
by Jeffrey Saut of Raymond James,
Indeed, due to expensive valuations, lack of revenue/earnings growth, slow GDP, China, politics, etc., the stock market had been in a virtual stalemate paralysis until the middle of July, having crossed above/below “go” so many times the only way to make money was to erect a toll gate at “go” (think the game Monopoly). And no wonder, frustration has reigned through the first six months of the year.
Investing for Income: Meeting the Challenges of a Low Yield Environment
For many investors, generating a high and sustainable income stream is challenging in the current secular landscape, which PIMCO calls The New Neutral. Over the next three to five years, we expect to see global economies converging to modest trend growth rates as central banks are constrained to set policy rates at levels well below those that prevailed before the financial crisis.
International Economic Week in Review For Sept. 7-11
by Hale Stewart,
There has been a slight but important shift in news coverage over the last few months. It started with the wild gyrations of the Chinese stock market, which, in retrospect, granted journalists permission to write more negative stories about the global economy. Since then, we’re seen more discussion about EM capital flight, the fiscal troubles of Brazil and the potential issues related to Russia. The news is hardly catastrophic; it simply represents the natural ripples flowing out from China’s attempt to change its economic model and the potential Fed rate hike coming down the pike.
Results 4,901–4,950
of 6,446 found.
